NEW DELHI — Amid fast-changing circumstances, Indian retail has slowly been opening after months of lockdown in most states across the country as a brutal second wave of COVID-19 seems to recede even as fears grow of another variant of the deadly virus.
But a side effect of the second wave is fast emerging: After more than a decade when the country’s almost $900 billion retail market was consumed by mall fever, high streets are seeing a resurgence.
Spurring the change is the drop in high street and local market rents, which are down by 10 to 15 percent in many of the top markets and streets nationwide.
“Leading retail brands have closed more than 120 lease deals at prominent high street markets across the country between April 2020 and May 2021,” Pankaj Renjhen, joint managing director and chief operating officer of Anarock Retail, a retail advisory consulting firm, told WWD. “Of the categories which closed high street leases, apparel had the largest share of deals with more than a 23 percent share, followed by food and beverage with a 15 percent share, and jewelry with 12 percent.”
The deal sizes ranged for areas as low as 400 square feet up to 35,000 square feet.
The top cities where leading brands expanded in this period include Bengaluru, Pune, Hyderabad, Delhi, Chennai, Mumbai and Gurgaon. The prominent Tier 2 and 3 cities include Lucknow, Ahmedabad, Chandigarh, Patiala, and smaller towns in Uttar Pradesh and Madhya Pradesh (Indore, Bhopal, Gwalior), he noted.
With stores closed over the last months, except for essential retailers, the losses have been adding up, according to retailers. COVID-19 has taken a huge toll — there have been more than 30 million cases in India and over 390,000 deaths from Jan. 3, 2020, to June 23, 2021, according to the World Health Organization, the second highest number of cases after the U.S.
As in other countries, the pandemic has had serious economic consequences. Consumer confidence fell to an all-time low in May, dropping from 53.1 percent in March to 48.5 percent in May. This is expected to hit the economy badly, with financial analysts now questioning the previously predicted 10.5 percent GDP growth for this year. Last financial year, which runs from April 1 to March 31, a 7.3 decline was the steepest ever for India.
“Losses in retail have been to the tune of $25 billion to $30 billion during April and May this year,” said Kumar Rajagopalan, chief executive officer of the Retailers Association of India.
In 2020, there was a 45 percent drop in sales from March to October. However, the festive season sparked a recovery, with sales returning to 93 percent of their pre-pandemic level in the first two months of 2021, Rajgopalan told WWD, citing figures from surveys by the association.
While in Mumbai, Bengaluru, Chennai and other major metro areas malls remain closed, in New Delhi they opened earlier this month, initially with an alternate day mandate, and then with restricted opening times, a limit to the number of customers in stores, and 50 percent occupancy for restaurants.
Wary consumers in the city are taking into consideration the fact that COVID-19 infections are now at less than 200 a day, down from the peak of almost 30,000 cases a day in April.
“Shops will be open seven days a week from 10 a.m. to 8 p.m.,” Delhi chief minister Arvind Kejriwal said earlier this week. “The relaxation will be on a trial basis for a week and strict action will be taken if the COVID-19 numbers rise.”
Malls in Delhi have spruced themselves up to welcome consumers — especially newly fitted ones like DLF Avenue in Saket, which spent 10 million rupees, or $135,000, for refitting and opened Feb. 1., 2020, just before the lockdown. Pushpa Bector, executive director of DLF Retail, said that sanitization measures were in place, and more than 10,000 DLF Retail staff have been vaccinated, ready to “accelerate another journey back to normalcy.” It is clear that brands are not running away totally from malls — Forever 21 opened at DLF Avenue in January, while Go Colors, a store focused on ethnic and Western pants, opened this week. A major focus on food and beverage is expected to draw consumers back in the longer run.
Noting the changing retail market, Anarocks’s Pankaj Renjhen said the number of retail players is likely to decline for a time, as well as the size of stores.
“Right now we’re talking about consolidation before we talk about growth. Growth will only be by capitalized retailers and bigger chains and well-capitalized retailers who have their business model in place,” he said.
Some retail chains are closing 40 percent of their stores.
“Nobody is talking about growth at the cost of losing money looking at the long term anymore — that story is completely out now. The shift from unorganized to organized [retail] has already been happening — COVID-19 is merely pushing it along and giving direction,” he said, emphasizing that the trend toward stand-alone shops would also continue to be driven by the greater consumer resilience in Tier 2 and Tier 3 cities. Indian retail has long been dominated by small, mom-and-pop shops which have limited the ability of leading global retailers, including Walmart, to penetrate the market.
“While the familiarity and location convenience of high street retail is a driving factor, the operations cost is more competitive for retailers in high streets in metros, too,” Renjhen noted.
Rent figures over these last few months support his point:
• In New Delhi, the country’s most expensive retail hub — Khan Market — saw a drop of between 8 and 17 percent in average monthly rents from April to June compared with the same period the previous year. The average monthly rentals were 1,000 to 1,100 rupees per square foot ($13.63 to $15). In the prestigious Greater Kailash M Block, rents dropped between 13 and 14 percent at about 300 to 350 rupees per square foot ($4 to $4.77 per square foot).
• Mumbai saw a decline of 5 to 10 percent in rents in key markets, with the present average monthly rents at Bandra Linking Road at about 750 to 900 rupees a square foot ($10.22 to $12.27) and at both Kala Ghoda and Fort area are around 450 to 500 rupees a square foot ($6.14 to $6.82).
• Bengaluru’s well-known Brigade Road saw a drop in rents of between 8 and 17 percent, with the average monthly rents between 250 and 275 rupees a square foot. ($3.40 to $3.75) At Indiranagar, the rents range between 225 and 250 rupees square feet ($3.06 to $3.40).