The Shopping Centres Association of India (SCAI), in continuation of its weekly custom webinar series, ‘SCAI Mondays’; organised a second virtual session titled ‘Retail & Shopping Centres: Confidence Building Measures’ on May 4, 2020. The webinar aimed at redressing the unprecedented challenges arising out of COVID-19 pandemic for India’s shopping centre development ecosystem. It focused on the measures of prepping to reopen shopping centres in India.
The panelists discussed preparations and strategies that retailers and shopping centre owners will need to design in order to build consumer and partner confidence as India begins emerging from the restrictions. As the day also marked the beginning of the third phase of lockdown in the country and with the Government of India announcing major relief in terms of opening of stand-alone retail stores including liquor shops, the panelists talked about having a more organised method of opening malls and stores in days to come.
With the shopping malls still facing closure pan India, the panelist spoke in one voice to seek both relief and stimulus to survive and create immediate and long-term strategies to revive. Amitabh Taneja highlighted on the key immediate tasks being undertaken by SCAI nationwide to roll out common guidelines and to work with partners towards re-opening all operational shopping centres backed by stringent SOPs.
“The non-profit body has been active on multiple fronts since the lockdown through daily virtual meetings with stakeholders, making presentations to government functionaries, regulatory and civic administration bodies, community media and PR,” he added.
Shopping Malls to Remain Close in Lockdown 3.0
In a major announcement last week, the Government of India decided to extend the lockdown period till May 17, 2020 to fight COVID-19 situation. As per the new announcement, shopping malls, education institutions, religious places and public transport will remain shut in this third phase of the lockdown as well.
“It is unfortunate that shopping centres have still not been included amongst the sectors which have reopened in India. This is a situation of lack of understanding on the importance of retail being the forefront of the economy. Shopping centres are the second large contributor to the GDP. Reopening them is very essential not only for the economy but also in respect to safety measures being properly adhered to. Malls are a more controlled and safe environment than local markets on the parameters of social distancing. We believe the Government should allow at least the ones in green zones to reopen,” Taneja stated.
On being asked how things must go forward in cities which are in orange and green zones, in comparison to those in red zones, Irfan Razack, Chairman and Managing Director, Prestige Group expressed happiness and satisfaction as construction work can now begin.
“The good news is that the construction activity has started in major cities of South India. It is a big relief to half-built projects, as they can restart their work with available resources. Unfortunately, as far as shopping centres are concerned, we will still have to wait. For now, the mall owners and developers are readying themselves to face the situation. Yes, the development period will be slow, and it will be a while before things come back to normal, but we have already started working on providing more a hygienic environment with added safety measures. We can effectively control the intake of crowds in a mall, in stores and other common areas. Take for example, liquor shops which were opened in the national capital. Complete chaos reigned and social distancing wasn’t followed. Now, if the government had allowed liquor shops in malls to open, it would have been more organised and controlled. At this moment, the safety and health of the customers is the first concern, so everything should go by a plan, strategy and in a measured manner.”
Regaining Customer Confidence
Harshavardhan Neotia, Chairman, Ambuja Neotia Group said, “I feel that the challenge of opening a mall is more than to just get it opened. The reason is there are activities that are contact related and are associated with food, shopping, and entertainment. Right now, people are generally apprehensive in any contact activities. The second issue is undesirability to shop, as large segments in the shopping category fall into the non-essential section, apart from food and medicines. Some important aspects which shopping centres will have to deal with when they open now include safety, money, and confidence to shop. Malls are one of the most organised platforms but still consumers need to overcome their fear and should have money in their hand to enter the mall and shop. With so many people currently scared of losing jobs and witnessing pay cuts, even if we open the malls, it is possible that there would be very less business.
Arjun Sharma, Chairman, Select Group disagreed with Neotia saying, “We are in touch with a large number of our consumers and the feedback is that, even in the lockdown, people are calling to enquire about the opening of stores related with fashion, electronics and other things. There is a very strong consumer demand, which is very latent in the Indian economy. There is lots of frustration in the people for being locked in their houses for such a long period, so the intent to go to shopping mall and buy things will be more. India is a country of shoppers and savers and they will buy things once this phase is over. India is very similar to a domestic market like China, where there is a strong latent demand for everything. As centres, we have to be very, very careful in the measures to open the mall. We have to sort out the carrying capacities and initiate strong measures of hygiene and control. For me, I think a huge opportunity for Indian markets waits on the other side of this phase.”
Dalip Sehgal, CEO, Nexus Malls agreed with Sharma adding, “Commenting on the international front, I think different things are happening in the different markets, with China being the first one to open. As of now, China has opened 80-85 percent of restaurants and 90 -95 percent of commercial assets, but the consumers are yet to come out as far as footfalls are concerned. It is a gradual build process and will take time. Similarly, in Germany there has been quite a positive response.”
Sehgal explained that usually, there are three phases of recovery under any crisis situation. These are:
– First signs of recovery: After 60-90 days, whenever malls can open, one thing which will matter the most is getting footfalls back. So, the first stage is bringing back the confidence and trust of the shoppers.
– Re-imagining the business model: This phase will be of 60-120 days where retailers will have to start re-thinking their business model and cost structure. It is the time to be more value specific too.
– Footfalls: This stage will start from Diwali onwards as all the segments of shopping will start returning to normalcy.
“This phase which we are right now is about survival, next phase will be the recovery and the third phase will be the re-growth. It will happen. We just need to be patient.,” he said.
Government & Banking Support
Emphasising on the support from the government and banking sectors, Sharma said, “The Government must take steps to help us out in this situation. The economy right now needs a stimulus of Rs 10-15 lakh crore at this stage. It can be in form of direct transfer, granting loans or any other medium. I am sure there is something in the offering. The Government is strangely quiet, but I think they want to hold that ammunition at this moment but will certainly do something good for the entire chain,”
Sehgal emphasized on the support mall developers should get from the banking sector saying, “As far as the Government is concerned, their writing is very much clear on the wall. As per a report from one of the private sector banking, the NPA in this country is around 9.3 lakh crores on a loan book of Rs 100 lakh crore. The estimate is that if nothing happens for the next month and half, it is going to be doubled to Rs 20 lakh crore. Our industry is in an equally vulnerable position since all our renters in a sense are pre-sold and pre-mortgaged to banks. If we can’t service our LRD and hold for a month, paying the employees’ salaries will be very difficult, as there is no business happening on the board. This is a very serious situation. The first thing which a banking sector has to do – and that has no cost to the government – is to relocate the three-month moratorium given by RBI in March. Secondly, there is a 9 percent interest in this situation, whereas the repo rate is at 4 percent, so how is this a beneficial situation for the borrowers? Why can’t the banks equally decide when there is only 4 percent the cost of funds? Why is the interest rate 9 percent?”
“Insurance is the other big point to consider. This is another challenge the retail industry is facing today. Third thing is taxation which differs in different states and regions. The question is why can’t we get a one-year moratorium on taxation. We will pay it after a year or so. Electricity is another concern. Some states have given some concessions, but there are many states where the situation is not clear at this moment,” he added.
“Things like deferment of payment of installments is not a cash loss to the government and it should be done instantly and make us relax a bit and it will be a win-win situation for mall developers and the retail fraternity as a whole,” stated Razack.
Rental, Leasing & Waivers
As far as the waiving of rents was considered, Razack said, “As far mall developers and retailers are concerned, there are two aspects that one has to take into account – being legal and the contract. Going strictly by the legal aspect and as per contract, I have no obligation to give any rental waiver to any of the retailers. I don’t want to go the legal route, but if we reach that route, I think it is no-win situation as far as retailers are concerned. They have only one choice, either pay the rent and go by contract or give back the premises and then move on. Due to the letters and requests we received from retailers we made a decision that Prestige will not collect rent from any of them in the lockdown period. But we gave them this waiver on two conditions – the first was that they will support us on the CAM charges and the second condition was when the shopping centre reopens we go back to the 100 percent rental policy as it was earlier. We are here to support each other and work as partners in this situation.”
Sharma agreed saying, “SCAI and RAI (Retailers Association of India) are working together. There is very clearly a sense of partnership which we are talking about. Adding more to this, where there are reasonable requests, we also have been responding in a similar way. We haven’t raised the invoices for the month of April. We are waiting to see how long the situation is going to continue. The situation for every organization is different and there are retailers who are talking to us not for a waiver, but for postponements as well. Some have come with the proposal of doing the adjustments from the deposits which usually we do at the end of the contracts. It is very difficult to talk to 200 retailers as one. We have years of relationship and we don’t want to end it up due to a disruption which may last a year or two.”
Social Spaces in Mall & the Impact on Events
Shopping centres depend a lot on their events for footfalls and this why there are huge open spaces in all malls where events can be organised. On asked how much this crisis will affect mall events, Dilip Sehgal explained, “There are a couple of things which we must realise. In short term to mid-term, events are out. We have to look at options that are not event-led. Events will return sooner or later, and digitization will become key in implementing them. We will have to rethink this whole new digital experience as also the engagement tools that we will use to make it happen.”
Future of Upcoming Malls
Commenting on how the upcoming malls are going to deal with this COVID 19 situation, Neotia said, “If you start building a mall now, you are at least three years away from it being completed. I have no doubt that the India retail story three years from now will be very robust and therefore it will be win-win situation for mall developers. However, the factors involved to make it a success will again be location, price of the land and finance. One has to be mindful of geographical dispersions, retail mix, infrastructure and other parameters that need to go into it, before building a new mall.
Learnings from COVID-19
It is said that ‘Never let a good crisis go waste,’ so what are the leanings which the retail industry picks up from COVID-19?
According to Razack one good thing which is happening in this situation is that mall developers are coming together, discussing, strategising, and talking as one.
“Malls are a social infrastructure, not just meant for shopping; cater to all classes of society. Government must realise that job loss in retail will have a lasting impact on the economy. We are taking a decision which is good for the industry. We are making SOPs and coming out with a common message in a strong way. It has to be ‘we’ and not ‘me’ in this war against COVID-19. Our message to the retailers is very loud and clear. We want to be with you and support you. If you survive, then we survive and vice versa,” he concluded.