Retailers struggle to find customers in branded stores and malls

Branded stores, standalone or in malls, have been the worst affected


Manav Krishna was treading on very thin ice. He had decided to disregard the strict instructions of his wife, as well as the general paranoia over COVID-19, to go and check out stores in New Delhi's glitzy central business district of Connaught Place a few weeks into the 'Unlock'. An avid shopper and tracker of new trends in fashion and electronics, the corporate lawyer, desperately wanted a taste of how things used to be before COVID-19, the lockdown and work-from-home had forced him to coop up at home for months.

“It was unnerving in a way,” Krishna recounted after strolling down the colonial arches that constitute the British-era hub. “Not all stores were open, but there were hardly any customers at the ones that were open. Even the corridors were bereft of their usual hustle and bustle.”

While his disappointment was more in not getting his regular fix of eye candy and window shopping, it is a precariously dire situation when you view it through the lens of retailers. While e-commerce has been soaring to new highs and the neighbourhood grocers have held their own, the ones caught in the middle, branded stores, standalone, in a mall or part of a department store setup, called 'modern trade' in business speak, have been the worst affected. For retailers, ranging from fast-moving consumer goods (FMCGs), fashion, accessories, electronics and everything in between, the upheaval of these past few months have been mighty debilitating.

“Modern trade is not operating at a near normal level,” Dabur chief Mohit Burman admitted at its recent earnings call. “(While) general trade has recovered quite a bit, modern trade is far from recovery. Modern trade declined by 28 per cent and still we see modern trade is not recovering.”

Business leaders and experts across the board privately admit that with social distancing becoming the norm, fears of infection in visiting malls and big stores, as well as the pressure on family finances due to widespread job and pay cuts, customers are likely to think twice before making that outing to a retail store. And, if you really need to buy something, there is the convenience of online e-commerce companies, of course.

“New technologies are changing the landscape of the consumer goods market,” Hindustan Unilver chairman and managing director Sanjiv Mehta told shareholders in the company's latest annual report, adding, “Consumer preferences are constantly changing...(HUL will be continue) to be agile and responsive to leverage market opportunities and navigate.”

While electronic goods have seen a sharp uptick via online shopping sites, it is not exactly good tidings for fashion and lifestyle. A study by the Retailers Association of India says these categories have declined by 69 per cent compared to last year.

Adding to the woes of this once-crucial mode of brand visibility and marketing has been the fact that many branded stores and department stores are present in malls, which were kept shut by national and state administrations for long. Even after opening, their multiple layers of sanitising and security—some establishments do not permit entry to those not having Aarogya Setu installed in their phone, for instance—some feel, has been forcing customers to refrain from making that outing.

Then there are the constantly changing local restrictions and lockdowns. Some places, most famously Mumbai till recently, had odd-even rules for shops to open, while many states have enforced regional lockdowns. Punjab, Haryana and Chandigarh have gone into a weekend lockdown of shops and offices, a decision announced on Friday evening and scheduled to be repeated every weekend until further notice. Shop keepers and their associations point out that this doesn't help in business recovery at all.

“Footfalls in large-format stores or malls are not going to change,” predicts N. Chandramouli, CEO, TRA Research. TRA's recent whitepaper says it is unlikely to see a rise even by Diwali. “The experience of the mall is completely different after COVID safety guidelines, as each store has to do its own temperature checks, creating resistance in the customer to go through this process multiple times on a single visit. Unless malls come up with plans to create a one-time health status check, like they do with security, they will not see many customers.”

Chandramouli contrasts this with the sudden growth in popularity of the neighbourhood kiranas. “On the contrary, the local kirana store, grocery store and small standalone stores are seeing an upswing in consumer footfalls.”

Big department stores and premium brands have a lot to worry about. Reports say Pantaloon sales fell 91 per cent in the first quarter, while Shopper's Stop dropped 93 per cent. Big Bazaar is in a limbo of sorts, with parent Future Group in negotiations with Reliance for a buyout. FMCG companies have also encountered a pattern of premium brands suffering in sales, as people go for mass market brands, be it on e-commerce platforms or through kiranas.

Not that modern trade is not trying. From deep discount sales, scouring through customer data to send out offers via text and even organising sale jamborees in housing societies, no stone has been left unturned. Bata India has a service whereby you can select from a catalogue via WhatsApp, which will then be home delivered. Marks & Spencer has rolled out a shopping assistant service, who will guide you through the store displays via a video call, letting you decide on what to purchase. This service is currently available in Hyderabad and Gurugram.

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