Dhaka businesses struggle with collapsed demand

Economic activities resumed on May 31 across the metropolis of 20 million people after a 66-day nationwide shutdown, but consumer demand has fallen to a fraction of what it used to be before the pandemic, with people not opening their wallets for anything unless it is very essential.

Although the industries that manufacture health products, groceries and some specialised items, such as bicycles, hair trimmers or washing machines, are witnessing a rise in demand, their contribution to the economy is very nominal.

Most businesses are struggling to come out of a vicious cycle that reduced their sales by 60%-90%.

The income shock

All formal employments – except for government jobs – are working under the spectre of job or pay cuts while more than six crore people employed informally had a tougher time with no or little income during the shutdown.

Despite the risk of getting infected with coronavirus, they are desperate to get back to work wherever they had been before the pandemic.

But in most cases their incomes have eroded away now.

Aminul, a small restaurant owner at Paltan Girls School Road in the capital, reopened his eatery last week after an 80-day break and is now struggling with a sales figure that is less than one-tenth of what it used to be before the pandemic. His daily sale used to range anywhere between Tk14,000-15,000 but now he is lucky if he can count Tk1,100 at the end of the day.

"It was tough to serve the long lunch queue before the virus hit; now no one is here, he said. "I need to support my family; otherwise, I would not open the shop," he said with frustration.

Shahidullah sells "Nakshi Katha", rurally made embroidered quilts, at a roadside shop in the capital's Bailey Road area. He sold only one piece on Saturday and two on Sunday instead of the 10-12 pieces per day before the pandemic.

"It seems that people are out of cash, they are spending only on essentials", said Shahidullah.

"I used to open my shop in the afternoons before the virus. Now I come here at 10 am. Still, I hardly have any sale," he added.

Like Aminul and Shahidullah, big shops, corporate showrooms and supply hubs are also facing the same slump in demand.

Helal Uddin, president of Bangladesh Shop Owners' Association, said the risks are real and people are also very worried about not having any remedy for Covid-19 yet. It is more than enough to discourage a consumer unless it is something essential to save life or meet daily needs.

Around 80% of the shops are opening their doors in the morning but customer traffic is thin. Hence, sales are too poor to even cover the costs of keeping the business open, according to the business leader.

"If you have some shirts and you are not a shopaholic, you would make do a few more days with the ones you have. If you have only two, and one is faded or torn, you might look for another one immediately. This is what the businesses are now experiencing." 

He estimates that among 30 lakh shops across the country, the majority are not making enough money to cover their costs. It is affecting the lives of over one crore people for sure.

"There are two reasons for the decline in demand. The first one is coronavirus fears which should go away after the pandemic, even though none of us knows when that time will come," said Helal Uddin.

But the second reason is scary, that is reduced-income and it should be addressed with priority, he added.

Dhaka's most ubiquitous and cheap transport, the rickshaws are few and far between now. Over one-third of the rickshaw pullers have left cities with no income for months.

Tens of thousands of transport sector workers are still struggling for daily wages, along with the workers in light engineering and micro, small and medium enterprises with their owners finding it hard to stay afloat in this economy.

Dulal Miah, who makes small repairs to motorcycles, a fast growing mode of transport in the city, and sells some common bike spares in the capital's Bongshal area, says his earning has dropped to less than half now.

"Unless it is very urgent, bike owners are not coming for servicing or replacement of parts. It is still tough for me to manage my shop rent, wages for three employees and then have enough for my family," he added.

Tens of thousands of ride-sharing bikers are out of work now and they are not spending on maintenance as well.  

Dulal now worries about paying tuition fees for his son and daughter.

The vicious cycle

Economists say one man's spending is income for another.

Losing income or facing an unsure future, people hold on to their money which in turn dampens the business of roadside shops like the ones run by Aminul and Shahidullah, and corporate manufacturers or traders who depend on them for retailing their products.

Corporates – who are facing a slump in demand – are also trying to cope with the challenges through cutting costs by reducing payroll expenses thus throwing their employees in financial uncertainties even if they are still in jobs with salaries or wages intact.

Even banks – once regarded as the most robust employers after the government – are coming up with pay-cut plans. 

The spillover

Tourism and hospitality, restaurants, medical care and education related businesses are suffering the most amid the pandemic.

In the first week of June, Ajmal Hossain opened his "Charui Vati Restaurant" at Motijheel in Dhaka. But he had to shut it down again because of poor sales.

Anwar Hossain, secretary general of Bangladesh Hotel Restaurant and Sweetmeat Workers' Federation, told The Business Standard that both coronavirus fear and financial hardship are resulting in low sales. Large restaurants are not reopening because of losses and thus tens of thousands of workers are without any income.

"You will find that at best 10% of medium or large restaurants reopened," said Hossain.

Shopping malls and markets have opened their doors with safety protocols in place, but sales have dropped by 70%-90%, depending on the business.

Big-ticket items are experiencing greater sales loss.

Selim H Rahman, chairman of Bangladesh Furniture Industries Owners' Association, told The Business Standard that during the two weeks of the partial reopening before the Eid-Ul-Fitr, his industry was selling only 12-15% percent of furniture compared to normal times. Now, it has come down to less than 10%.

"No one is moving house unless they are forced to, new furniture is out of the question for most people whose income has been hit," he added.

Cosmetics sellers at different shopping hubs in the capital said their sales have halved while footwear, clothing, and various accessories are witnessing a 90% decline in sales. 

Grocery sales are also on a downtrend, according to wholesalers at Karwan Bazar. 

Rafikul Islam, owner of Chandpur Store at Karwan Bazar's wholesale kitchen market, said there are no social programmes like weddings or family gatherings in this pandemic period, people are not buying grocery items as before.

Restaurant orders for groceries have dried up and his sale fell by one-third.

He estimates that 20%-25% of his regular customers are not in the city now.

Large industries

City and Meghna groups, two market leaders in essential commodities like oil, sugar or flour –are also experiencing a slump in demand after the reopening of the economy.

Mostofa Kamal, chairman of Meghna Group of Industries, said he is very concerned about the demand decline by 30% to 40%.

Manwar Hossain, president of Bangladesh Steel Manufacturers Association, said the steel industry sales figure is one-fourth of what it used to be a year ago.

Liakat Ali Bhuian, vice-president of the Real Estate and Housing Association of Bangladesh, told The Business standard that except some large companies, most of the real estate firms are struggling to keep their offices open as there is neither client visit, nor sale.

Less than 10% of the sales a year ago is now taking place, and those are mainly contracts signed earlier, he added.

New projects and even continuation of the existing ones have slowed down significantly because of a steep decline in demand, he said.