Article

South Indian high street retail gains traction

August 20, 2020 / By  

In mid-March 2020, malls, much like other public places, were compelled to lock down across the nation with the onset of COVID-19 in India. The lockdown posed a serious threat to an already suffering retail sector. As sales plunged between March and June 2020, so did the ability of most retailers to stay afloat, continue business and sustain in malls.

The situation forced mall tenants, especially the mid and affordable segment brands, to look for options beyond the status quo. Some of the available alternatives with them for the ‘next normal’ included:

  • Rental waiver for the lockdown period or discounted rents
  • Negotiation with mall management to agree upon a revenue-sharing model to pay rents
  • Vacate malls and opt for the e-commerce route in the short-to-medium term
  • Look beyond malls and opt for other brick-and-mortar options like high street retail as an interim solution, especially in cities where high street rents are lower than that of the malls

Based on numbers from the first half of 2020, it seems like retailers who were looking to continue business opted for options such as high street shops, especially in southern cities of India like Bengaluru, Chennai and Hyderabad (Figure 1). In other prime cities like Mumbai and Delhi, high street retail space remain an expensive accommodation option because of unavailability of developable land. In addition, most high streets are located in high-end neighbourhoods or colonial-era buildings, differentiating their characteristics entirely.

Figure 1: Retail absorption share – H12019 (inner ring) vs H12020 (outer ring)

Source: JLL Research, August 2020

What prompt retailers to choose high streets

In South India, brick and mortar retail characters are different vis-à-vis the rest of India, which might be the reason why they seem to fit perfectly as a favourable option for retailers during the pandemic. Some other possible reasons might be:

  • Mall rentals include add-ons like Common Area Maintenance (CAM) charges, parking charges etc. making sustenance an expensive affair.
  • Several high streets have been redeveloped by urban local bodies, providing free parking, improved street designs, placemaking initiatives, landscaping etc., enabling a scope for social distancing in an outdoor environment for shoppers.
  • Malls have multiple touchpoints at parking, elevators, food courts and other such common areas whereas single entry shopfronts on high streets enable retailers to practice caution like temperature checks, hand sanitisation and visitor registration while keeping touchpoints to a minimum.
  • Consumers are not looking for the movie-shopping-dining out experience at present and prefer retail outlets for necessary buying. High streets enable this option smoothly.
  • Malls in southern cities are at neighbourhood levels and have a limited catchment area – much like the high streets, making them substitutes in the current situation.
  • Decision making in malls often requires multiple retailers to be on the same page to implement policies. This can make decision making a long drawn process. However, strata ownership on high streets allows for one-on-one relations between owners and tenants, easing negotiations and enabling quicker decisions.

The future

There are significant uncertainties amidst the Covid pandemic, but once the pandemic comes to an end, it is expected that the majority of consumers will want to enjoy the shopping experience that malls provide. Malls can future proof business by focusing on specific customer groups in their catchment areas in the long run. For example. a mall on a IT hub corridor can focus more on the young professionals – involve co-working space providers as tenants, introduce experiential retail like weekend concerts, flea-market style shopping as well as mall-related mobile apps etc..

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