'Digital adoption has accelerated but it would never replace the physical experience. I believe it will displace physical shopping to some degree. One will have to find ways to create experience-led shopping for which people will still gather in these centres'
Bengaluru: The second wave of the pandemic and partial lockdowns may prove to be a setback for shopping malls and offline retailers, who were recovering from last year's impact. Just five new malls opened in the country last year, and with the spillover to 2021, 14 new malls were expected to be operational by year-end. In an interview, Siddharth Yog, founder and chairman of Virtuous Retail South Asia Pte Ltd (VRSA), the retail arm of private equity firm Xander Group, Inc. spoke about recovery, addressing new needs of customers and expansion plans. Edited excerpts:
What kind of recovery have the VR shopping centres seen? What has been impact of the second waveso far?
Sales in our shopping centres in March were about 70-75% of pre-covid levels but footfalls were less, at 50%. However, shopping in terms of money spent is the real metric. In two of our centres, sales reached 100% of pre-covid. Chennai and Bengaluru continued to grow through March whereas other centres in the north and west regions had shown marginal de-growth in both footfalls and sales primarily because of shutdowns in these locations.
Different cities have different restrictions. In the first ten days of April, the Punjab and Amritsar centres showed marginal growth over the last week of March. The Nagpur shopping centre has not been operational since 15 March, only the hypermarket is open and online deliveries of F&B orders are serviced. Surat has been having weekend lockdowns all through March and continued in April as well. Chennai has regulations on the maximum capacity allowed in restaurants, cinemas and the centre as a whole capped at 50%, since 8 April. The centre had a 95% recovery in sales in March 2021, but as covid surges again, performance dropped marginally in the first ten days of April. This also may just be a seasonal adjustment as April usually is slower than March even in regular years.
How has the rapid transition to shopping online affected malls and brick-and-mortar retailers?
People are ordering online but they also want to gather. In the last six months, after the lockdown was lifted, it was quite evident that people wanted to get out, gather and visit shopping malls. Sales also came back very strongly. The weak retailers, whose operations and balance sheets were weak to absorb this disruption or really small retailers would have found it tough to sustain.
Digital adoption has accelerated but it would never replace the physical experience. I believe it will displace physical shopping to some degree. One will have to find ways to create experience-led shopping for which people will still gather in these centres.
Retailers and the master retailer or shopping centre owner will have to devise ways to make sure that the nature of the retail experience is different.
Do you think malls need to address new demands of customers or be designed differently?
Customers today want instant fulfillment, and they don’t want to wait for their product. While shopping online is one end of the transaction, I think hyperlocal delivery is the other end. Retailers need to service that customer, who is also willing to pay a premium for the service. If it’s tough to get warehouses in the middle of the city, shopping centres are a great place to do that. We have 24/7 operations, loading-unloading docks and stores themselves can service their customers as the last mile delivery and many retailers are already doing that.
More informed, institutional landlords and mall owners are working on it and implementing it. This is how we can capture the displacement that has happened due to online orders.
In the last eight months, our team produced an F&B delivery system not just for ‘Food Box’, our food court, but also for other food retailers, some of whom can’t afford to have their own delivery system. But we do it hyperlocally, for our community, up to 1-3 km through our app. However, physical retail experience will not go out of fashion because of digital acceleration, which happened faster in the last nine months, in what would have taken 4-5 years. So, malls and retailers need to adapt to that faster.
What about future acquisitions?
We are actively looking for new opportunities and would like to be in Kolkata, Hyderabad, Lucknow, Jaipur with different types of projects. Some time, we will acquire existing shopping centres that can be repositioned, upgraded or redeveloped just the way we did in Nagpur and Amritsar. We will also look at new acquisitions where we can plan and develop the land ourselves.
What’s VR’s new pipeline of projects?
We have a 1.7 million sq ft development underway in Delhi, our first project there. There is a two-acre public park in the middle of the project which we are creating and that will be operational by December. There’s also four acres of space around the two buildings in the project, which will have inside-outside space, shopping, co-working, co-living, food and beverages, events and planned public spaces. The second one is in Mumbai, which is a 20-acre project in Thane, and that is in the planning and design stage.
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