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Emerging Leasing & Partnership Models As Retail Merges Physical, Digital

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In an attempt to discuss the preparations, objectives and parameters of the retail businesses in order to thrive in the current pandemic situation and also to sail through the phase, Phygital Retail Convention (PRC) hosted a session titled, ‘Emerging Leasing & Partnership Models As Retail Goes with experts from both retail and shopping mall industry.

The discussion was segmented into three different chapters which was dedicated to specific topics highlighting the situation of the retailers and mall developers on parameters of business, revenue, leasing, partnership models, leadership and thought process involved during lockdown, reopening and upcoming coming months.

The session was moderated by Anuj Keriwal, CEO & MD, Retail.  The panellists included:

CHAPTER 1: THOUGHT PROCESS DURING LOCKDOWN/UNLOCKING TO COME OUT STRONGER

Rashmi Sen, Group COO – Malls, The Phoenix Mills Ltd rated safety of retail employees and consumers as the prime objective during the pandemic. “For this, we implemented many new policies at a very early stage. The second aspect was dealing with all regulations set up by the authorities, which was indeed a huge task in the beginning but slowly we got used to it. The third and the most important thing was to focus on the business and bring it back on track after re-opening. The key objective was that our retail partners’ businesses should also return to normalcy as soon as possible. Phoenix malls as a unit was fortunate enough to return to good business and occupancy in two-three weeks time after reopening.”

She said that luxury as a category was initially a very slow starter, but it picked up really very fast. “Actually, we were never worried about this category as we have ‘A-list’ of consumers and catchment around all the malls, so we knew our consumers will return. The sale in the luxury category has doubled since re-opening. To everyone’s surprise, it has over and out-performed many other categories by far. We are quite hopeful that this trend will continue as people will not be travelling overseas much due to the travel restrictions. Therefore, those consumers will look forward to shopping malls having those premium brands in India. We have also provided lots of services to our luxury brands as well which worked quite efficiently.

Luxury brands work in a set international protocol mandate and they do not do anything which would work particularly for a specific country/ region or store. They have a customer patron program and that is something one should learn from them. Knowing the consumer is very important as luxury brands do. The shopping malls assure connectivity between their two clients, consumers and retailers. People also believe that mall is way safer environment which has worked for us,” she explained.

Anuj Keriwal, CEO & MD, Anarock Retail added, “During the pandemic, we often heard from experts that the top of the pyramid in the retail industry has been most affected and only the essentials, which are way down in the pyramid, have been doing very well. However, with the kind of sales and demand that the luxury products have seen, there is potential for the entire pyramid yet.”

Connecting With the Consumer

As per Rajneesh Mahajan, CEO, Inorbit Malls, the time frame of the pandemic is of real concern. “Beyond the question of safety and health is the question of time frame, as no one knows how long the pandemic will last. We are studying malls which have opened up in other countries to understand how they are planning their merchandising, discounts, online and other initiatives so that it’s easier for consumers to continue buying.”

He said that video calling was one of the main initiatives which came out a winner. In fact, a jewellery brand in Inorbit mall with a strong online presence did 78 percent of their business in one month from video calling. “So popular was the initiative that it led to the establishment of more programs like slot booking. Other brands also did hefty chunks of their business from video-calling, showing the importance of connectivity between stores/brands and consumers,” Mahajan said, adding that it was also important to connect with consumers to understand the kind of products they desired since the lockdown had changed their habits and thus their requirements.

He urged more consumers to come to malls saying that big developers spent a great amount of money and effort into sanitizing malls and since this is done in an organised and systematic manner, it is always better to visit malls than other social venues.

Tier II & III Retail Benefitted

During the lockdown, a huge amount of people migrated to their native places and most part of the population is still to return back to the Tier I cities. This reverse migration gave a new dimension to the retail industry in the smaller towns and rural areas.

Sidharth Pansari, Director, Primarc Group (Junction Mall) explained this saying, “Reverse migration did help especially in the region of the East India in cities like Durgapur etc. People who were traveling to bigger cities in search of better malls, brands and products were sticking to their own hometowns and this impacted malls and standalone stores in Tier II & III cities positively, who in turn made the most of this situation. In fact, business in rural areas is today far better than that in urban areas, 30 percent of pre-pandemic sales versus 60-65 percent.”

As per him, categories such as food, apparel and electronics are doing well in smaller regions.

Bangalore: Leading the Charge on Sales Post Re-opening

Shashie Kumar, COO -Retail, Brigade Enterprises highlights how Bangalore took the lead in the race towards normalcy and how other cities can also follow the trend.  “The government’s approach here was very progressive and the efforts were very visible. Bangalore was the first city to open the metro train.  There was very willful and promotive approach from the government to handle the situation. Even the pubs were allowed to open from first week of September. The moment the restro-bars opened up, there has been a surge in the malls. From the first week of September, the footfalls increased. These decisions are the takeaways for the other metro cities. There is so much as a mall or private entity can do individually, it is a herculean task where the public government, various organisations and citizens have to come forward and work together. There is decent amount of normalcy coming back. Bangalore is highly 20-30 percent of the people had gone back or were working from the home, but they are now returning back, and the malls are totally dependent on this type of customer base.

There has been a very healthy trend. In the month of June, the malls were getting a footfall of 15-20 percent and the conversion rates and basket size was very high. The running time in the mall was low. In the month of August- September, we witnessed a growth of 70-80 percent from what we had in June. Today, on the like to like basis, most of the malls in Bangalore have reached to the level of that which was in last year August and September. Given the mobility aspect of promotion and encouragement of the government, we are able to see that good brands are also coming back.”

CHAPTER 2: CONSUMER SERVICE & CONVENIENCE

Implementation New Technology & Innovations

Speaking on the role of technology, Mahajan said that the pandemic had opened the floodgates for technological solutions. He added that the challenge was to segregate between immediate requirements and could be used in the long run. “For example, contactless dining in the food court was something that was needed immediately. Aside from that, we have worked on short-term solutions towards ensuring social distancing, temperature checking and checking whether people are wearing masks or not,” he stated.

He also explained that his mall focused on higher operational frequencies, higher consumer connect and feedback from the consumer in the form of video analytics.

“We focused on some immediate solutions like taking the mall to the consumer. We called it Residential Retail, setting up a mini mall in conjunction with our retail partners in residential complexes in Bengaluru and Mumbai. This was quite a success since many retailers sold more in societies than they had in store in months. People were literally able to shop from their balconies. The mileage we got that we got was more connectivity with consumers.”

Rashmi Sen agreed with Mahajan saying, “Initially when we reopened the malls, the areas where we used technology were contactless dining, payment, parking etc., keeping consumer safety in mind. The stage two of technology adoption was in sharing the right information to consumers at the right time, since people were apprehensive about moving out of their homes. The third thing that we used technology was to connect the consumer with the brand online. We added services like ensuring products were available online, that consumers could browse through stores on the mall website and get access to personal styling. We also launched a loyalty app in Chennai and will be launching more in all our malls to provide basic gratification and bring in more convenience to the user.”

Speaking about the technology and innovations adopted by Brigade Enterprises, Kumar, said, “The initial stage was all about safety and since this was our prime concern, all the technology that we adopted revolved around this. By July, we started making a concentrated effort to reach out to the consumer. We tied up with 10-12 important retailers of certain strategic order and the mall came out with a cross promotion bouquet of offers. These retailers we tied up with had their own database as well as their own offers. We circulated all offers to consumers through the database of those retailers. Every week there was a new campaign, a new package for consumers and the recall factor for the mall as well as for the set of retailers we tied up with was achieved. We gave rewards to consumers who bought through these offers. We rewarded the consumer who showed the courage and made the effort to come to the mall in a different manner.”

He said that from October onwards, Brigade once again changed how they were engaging consumers in response to the festival season.

CHAPTER 3: CHANGE IN MODELS & THE WAY FORWARD

Change in Tenant Mix

The pandemic has brought about a huge change in the shopping behavior of the consumer, but do shopping malls really need to change their current retail mix due keeping COVID times in mind? To this Sen said, “The evolution of tenant mix is something that happens on an on-going basis. It depends on the consumer requirement and also on new brands coming into the country. New brands usually approach malls since they are the go-to community spaces. Introducing a fresh brand every now and then into the tenant mix is a trend which malls follow all the time.

“Today, we are living in a dynamic environment and the trends and the brand mix are becoming stable. Since reopening, we have seen consumers returning to their normal levels of shopping, and then surpassing it by a huge margin in a very short period of time,” he stated.

Revenue & Leasing

“Ten years ago, no mall would have even given a second thought to a revenue sharing model, but as consumerism and consumption grew, and expected sales surpassed even the highest of targets for many retailers, malls started seeing this as a great opportunity. Soon, it became the go-to deal between malls and retailers since they both got maximum results from this,” stated Kumar.

He said that the current format was a fairly a balanced model and fundamentally, as it still remains a pure brick-and-mortar business, mall owners would not like to change it beyond this.

Talking about whether malls would get into some kind of the equity partnership with brands, he said, “It might be happening in the other parts of the world but the depth of Indian retail is not that great in comparison to what we see in America and Europe. We still have a long way to go. The overall economy also plays an important role in fixing these things. Unfortunately, our country, in the last 7-8 years, has not been seeing an upward trend economically. From a developer’s prospect these downward trends make it very difficult to get into a new model. However, I look forward to different kinds of mall offerings after the pandemic in a few segments. One such segment is entertainment. Many malls like LuLu mall have their own entertainment zone inside their premises. In this segment, there is a great growth possibility in the coming years.”

As per Mahajan the partnership between a retailer and his landlord is very typical – it starts with hard negotiations, goes intense on the agreement and then they both start loving each other for the length of the retailer’s tenure.

“The starting point of the partnership is a business opportunity to make profits and hence the entire relationship has an inbuilt conflict attached to it. However, I feel we can only be a profitable business if we learn to address each other’s issues. Every step should be taken keeping in mind that the business has to be optimised and made profitable,” he said.

“We are all in this situation together till it lasts for another year or two and therefore it is important that we learn to trust each other. We need to collaborate and strike partnerships at various levels. All stakeholders need to have faith in each other, and this includes consumers,” said Pansari.

Kumar concluded by saying that as responsible citizens, we all must follow the strict safety norms set by the government while continuing with our work and living our lives as normally as possible. The government is doing its part, the citizens should also do their part. Business organisations also must play a part in terms of reviving jobs, ensuring salaries etc. To convert this vicious cycle into a virtual cycle should be our prime focus.”