NEW DELHI — It has been a bittersweet start as malls were given the go-ahead to reopen last week after more than 10 weeks of lockdown.
For one thing, e-commerce players were allowed to reopen three weeks before and have been racing to meet increasing demand. Industry analysts observed that e-commerce firms saw sales equal to almost 70 to 80 percent of the levels seen at the same time last year.
For another, stand-alone stores and marketplaces were also given permission to open three weeks previously, with several caveats — alternate day openings in some cities (Delhi, Hyderabad), while others didn’t open at the same time (Mumbai, which only opened on June 5) — with every state making its own rules, including some that disallowed air conditioning and not more than four to five people in a store at one time.
Even worse for mall owners and consumers is that even as the country gradually reopens in a program called “Unlock 1.0,” the number of coronavirus cases continue to rise sharply in India, the third-fastest increase globally. The country now has the fourth-highest number of confirmed cases worldwide, something that mall owners, retailers and consumers are watching carefully as India’s $850 billion retail industry begins to revive.
It adds to the uncertainty that Delhi, Mumbai and Chennai — among the biggest centers of retail in India — continue to be among the top COVID-19 centers as well. In fact, Chennai recently shut down again from June 19 to 30 due to the increase in COVID-19 cases.
About 250 malls across the country opened early last week, leaving another almost 400 larger ones of more than 100,000 square feet in size to open more slowly, in part restrained by state governments or the demands of COVID-19 precautionary preparations, and in many cases requiring appointments or customer verification by the government issued COVID-19 tracking app Aarogya Setu.
Face shields, face masks, sanitizers and rules banning groups of people from wandering together didn’t quite stop consumers from heading to the malls in various cities. Although there was an eerie quiet in many, with less than 10 percent of normal traffic, those who turned out were ready to buy, with bigger ticket total spends, retailers said.
Select Citywalk in New Delhi, one of the most popular malls in the country, made up for the empty corridors with large signs welcoming customers back: “The city walks again…A new world where we don’t take friends for granted.”
Not all retailers have been ready to reopen — only about 50 percent opened their stores within the malls that opened last week as negotiations with mall owners for rent waivers and revenue sharing have gone on. Retailers are angry, demanding better terms after suffering from months of lost sales.
“It’s being a nightmare,” said designer Tarun Tahiliani, who has both stand-alone stores and is present in a number of multibrand boutiques. “There’s no clarity about rents from mall owners, landlords, and we have to keep supporting our staff along with a huge inventory that has to absorb the impact of changing seasons during the lockdown.”
Traders and small retailers are equally impacted.
“During the span of 60 days of national lockdown, the domestic trade has lost a business to the tune of about 9 lakh crore [9 trillion rupees, or $120 billion],” said Praveen Khandelwal, secretary general of the Confederation of All India Traders. “The traders are facing an acute financial crunch, and in the absence of any policy support from the government, they are worried about the future of their business.”
Not all states have opened malls either — while Bengaluru is faring well and Delhi has been opening slowly, Mumbai malls remain closed. But with new guidelines, stand-alone shops and markets have been allowed to open on alternate days in Mumbai beginning earlier this month, much later than other cities — with stores on one side of the road being closed each day. These have been allowed to open six days a week, to be closed on Sundays.
The situation has been similar in marketplaces; in New Delhi’s prestigious Khan market, which has the highest annual rent of about $243 a square foot, the 20th most expensive in the world, consumers have been struggling with the plethora of new rules.
Only four to five shoppers are allowed in at a time, and with morning temperatures at times approaching 100 degrees, waiting in line can be brutal. Sales staff stand near the door with sanitizers, but customers are scarce, plus the earlier rules of alternate day openings in New Delhi have caused confusion.
“Now the stores have started opening in multiple cities, 30 to 40 percent of high street stores are open for most retailers. In the last two to three weeks, sales are approximately 40 to 50 percent on a comparative month-by-month basis from 2019,” said Shubhranshu Pani, managing director of retail services at Jones Lang LaSalle. “Most retailers have an approximate 50 percent high street, 50 percent malls sort of a spread.”
Department store chains such as Westside, for example, have more than 70 out of 165 stores open across the country, and are pushing their e-commerce sales on the Tata Cliq site, where they sell exclusively. Others, like department store chain Shoppers Stop, have been exploring better ways to complete the omnichannel experience.
“But it is too early to really say whether these are pent-up purchases, the effects of the lockdown, relief purchases, or if the market is back on track. This depends on whether the sales keep growing or start declining in the coming weeks. We can’t really make that prediction now,” said Pani.
Trying to gauge consumer sentiment is especially important since high rents and inventory costs continue to be a major issue for brick-and-mortar retailers, and warehouse and delivery safety measures for e-commerce players are still being negotiated.
Abhishek Malhotra, partner at McKinsey & Company in India, stressed that pent-up demand should not be confused with real market growth.
“Obviously, there was a short-term jump of all the stuff that you could not buy, a lot of it was pent-up, replacement demand. It’s not back to what a normal year would have been, but the last two weeks of May and first week of June did see drastic increases in many categories. Every week has been a little better than the previous,” he said.
According to a recent survey by McKinsey of sentiment during the coronavirus crisis, China and India remain the most optimistic in terms of net consumer optimism, while Japan remains the least.
“If we look at India, we went into a very severe lockdown. But overall, because the number of cases and impact was low, even though people were in lockdown the optimism remained high for consumers from mid-March to early May. But the optimism in India has gone down drastically, from 52 percent in March to 42 percent at the end of May. This is mainly because of two big factors: Many more people have indicated that their incomes have come down — 70 percent of the people surveyed said their income is lower, while 65 percent said that their savings have come down,” Malhotra observed.
Around 40 percent of consumers have switched retailers and shopped new web sites, and many expect to continue to do so after the crisis, with a shift in categories being bought.
“The categories that grew included appliances, home goods, etc., which shifted to e-commerce, and e-commerce has grown drastically and will continue to grow. People have really been going for basic essentials. In pockets, we have seen some categories go up — apparel, discretionary categories — those have not come back, and big towns like Delhi and Bombay are still impacted and are still inching back up.
“Within these, some categories have grown faster; for example, leisure wear has gone up, kids’ apparel has come up, some innerwear has gone up. The biggest challenge for apparel and some of these categories is about the supply chain opening up,” he explained.
“A lot of stores are in malls, as those open this week, things will change. Even though there will be fear about going back to malls — I’m not saying they will not go — if 100 went, 80 might stay home, but 20 will go, and that’s a large number in India,” Malhotra said.
More than 85 percent of Indian retail is made up of smaller mom-and-pop stores. Global retail has grown substantially over the last 10 years — with brands like Japanese retailer Uniqlo opening three stores over the last year, H&M having more than 42 units in India, and Zara with more than 22, while others like Puma have more than 350 stores nationwide and Benetton has more than 400.
But even as international retailers expand brick-and-mortar, e-commerce has grown rapidly. E-commerce is dominated by Amazon India and Flipkart, in which Walmart acquired a majority stake in May 2018. Fashion platforms like Myntra, which is owned by Flipkart and is the biggest fashion e-commerce player in India, have been rapidly revising their offerings.
“The last few months have been very educational for all of us at Myntra. We rose to the occasion and revised our offering to meet changing consumer needs and to stay relevant,” said Amar Nagaram, chief executive officer of Myntra, told WWD. “We associated with our partner brands to launch masks for the first time, as they were in high demand and had a severe shortage of supply, being an essential and personal protective equipment. This was very well received by our customers.
“Next, we recognized the need for loungewear and leisurewear, which are comfortable yet functional, as consumers were at home, managing their office work and household chores together. We partnered with our brands to introduce fashion essentials comprising T-shirts, shorts, comfort wear, nightwear, etc., to stay relevant. To keep our customers engaged during this time, we launched the #TakeABreakWithMyntra initiative where we curated home styling tips, workout tips, home decor ideas, cooking hacks, relaxation tips, ideas to uplift the mood, etc. We worked with some of the leading fashion influencers in the country who shared DIY videos on a range of topics, including fitness, thus effectively helping us with traffic to our platform, which eventually reached pre-COVID-19 levels. In addition to this, we created meaningful fashion and lifestyle content that goes beyond shopping, keeping the app engaging and interactive for the users.”
Many other changes also focused on safety.
“From a customer safety point of view, we’re undertaking contactless delivery and pick-up, we have discontinued customer signature capture, there will be no ringing of doorbells and packets will be placed at a handover point the customer is comfortable with. We are also encouraging UPI payments for contactless cash-on-delivery transactions,” said Nagaram.
However, in practical terms, negotiating blocked roads and containment areas, access from warehouses, and instances of delivery boys being beaten up by over-vigilant police have been a hurdles to reaching consumers in real time.
“The logistics are huge — both in terms of national and local; they are not able to deliver within the promised timelines. So, the timelines have really gone for a toss, because of logistics issues, the different restrictions, that will take some time to sort out,” JLL’s Shubhranshu Pani observed.
Personal care has seen a spike in both brick-and-mortar stores and online. Beauty retailers noted that consumers were eager for skin care as well as hair-care products.
“We have resumed all e-commerce operations and are working closely with the leading delivery partners to ensure contactless e-commerce delivery,” said Falguni Nayar, founder and ceo of Nykaa, the biggest beauty e-commerce player in India, which has also been growing its physical presence. “We are back to pre-COVID-19 sales showing strong consumer demand. We’ve seen personal grooming and self-care category sales triple through the lockdown with premiumization of skin- and hair-care buying, as customers are investing more in at-home beauty care.
“In terms of the physical stores, we have already opened more than 11 stand-alone stores, in Mumbai, Delhi, Gurgaon, Chandigarh, Bangalore, Ahmedabad, Jaipur and Goa, where permitted and look forward to opening in malls soon as well. In the stores, we have initiated a ‘no-tester’ usage policy,” she said, adding that the Nykaa Fashion e-commerce platform has exceeded pre-COVID-19 numbers “with a strong focus on active and loungewear.”
But even as malls and more stores begin to reopen, there remains confusion between regulations set by the states and those established by the central government. Kumar Rajagopalan, ceo of the Retailers Association of India, said there needs to be more consistency.
“In compliance with the Centre’s directive, several states across the country have decided to relax lockdown restrictions to allow greater economic activity with their own unique stipulations in place. Tamil Nadu has ordered shops to function without air conditioners. Maharashtra has introduced an odd-even system for opening, additionally imposing restrictions on the use of trial rooms and the exchange of products. For the retail machinery to function seamlessly and in line with recent orders, uniform and non-discriminatory opening of retail across all states is key,” he noted.
The association has predicted about six million jobs will be lost in the retail sector in coming months due to impact of the coronavirus. In a survey, it noted that consumers in smaller cities were more likely to visit stores in the next three months — at 75 percent for smaller cities, compared to 62 percent in bigger ones. Overall the survey indicated a 78 percent decrease in shopping expenditures.
Going forward, the consumer is expected to be more thrifty and to visit stores less often, but will make more purchases with each visit. Many brands are expecting more loyalty as fittings will be avoided as much as possible, and repeat customers will be likely.
“The expectation of the Indian retailer is that sales will catch up by August. Because that is where the peak season begins, and they should be close to normal — or as close to normal as it is going to be — by September. That is why there is a lot of pressure on the government to start retail fully by June or July so that consumers have the time to be ready. In India the festive season is 40 to 50 percent of the whole year’s sales of the annual business,” explained JLL’s Pani.