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Can shopping malls survive COVID-19?

Overwhelmed by the dual onslaught of online shopping and COVID-19, malls have abandoned the concept of traditional shopping and are moving towards businesses that are less likely to suffer the offensive of digital commerce and the requirements of social distancing

August 27, 2020 / 01:24 PM IST

The business of shopping malls falls among the several businesses that have been severely dented by the COVID-19 pandemic.

A shopping mall is a large single building or multiple interconnected buildings housing a great number and variety of shopping units that are all commonly accessible. Large shopping squares, markets, ‘bazaars’ or ‘haats’ have been in existence for several centuries across the world. However, these were generally open-to-sky facilities. The concept of gigantic malls as we know them today are a 20th century phenomenon, predominantly conceptualised in the West in the second half of the last century.

Over a period of time, these gained huge popularity in cities as they combined enormous retail diversity, social experience and a place to get together. The concept caught on and proliferated across the globe. Asia readily accepted the idea and some of the largest malls that got built are now located in Asia.

India’s own shopping mall romance was no different, except that its beginnings were more recent. The year 1999 saw the rise of the first shopping mall in India. By 2017, there were more than 600 operational malls strewn throughout India’s metropolitan and mega cities. Thirty more were slated to come up by 2020. In the popular eye, shopping malls announced the arrival of the city into the fold of the vibrant, modern and upbeat city lifestyle.

However, as the digital revolution swept across the world and brought the convenience of online shopping, malls did not continue to be looked at as favourably as in the past by customers. Online shopping allowed the choice of a wider variety of goods and saved the trouble of travel and transport through endless traffic. This also brought in economies of time. The services were offered at the customer’s doorstep and no cash transaction was required. The variety on offer was so large that it could not be matched by a physical store. The penchant of many customers to prefer online shopping has been well articulated in the statement that it allowed shopping ‘anytime, anywhere, anything’. As a consequence, consumers were drawn globally and increasingly to buying online.

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Online shopping percentages, prior to COVID-19, were rising every year and India had the fastest growing online market in 2019. Digital buyers were expected to be approximately 330 million in 2020. The sector was catalysed by tailored advertisements, striking discounts and quick, quality delivery. Since this level of growth was achieved with limited penetration restricted to metropolitan cities, it was natural that e-commerce companies would plan to move beyond metros and reach their goods to customers in medium and small towns.

As a consequence, the booming business of shopping malls was seriously hurt.

A year back, prior to COVID-19, of the 1,200 malls across United States, a dozen had closed, another 60 were on the verge of closure, and many had 30-50 percent of their rental space vacant. COVID-19 appears to have hastened the downfall of malls, first, due to closures enforced to fight the pandemic and, second, due to the requirements of social distancing post-opening. The situation forced the International Council of Shopping Centres (ICSC) to write to the US President seeking “federal support associated with outstanding debt obligations as well as tax and regulatory relief.”

The situation in India broadly replicated that of the US. E-commerce had already battered brick and mortar retail. Since such retail shops formed a large portion of shopping malls that lost business on account of e-commerce, the percentage of non-rented spaces rose and many malls began to struggle. While they were still strategising on how to contend with online shopping, the arrival of the pandemic threw the malls into complete shutdown. As India went through the phases of lockdowns and then started emerging out of them, malls remained one of the activities that authorities were highly reluctant to open up. Neither have the customers appeared as enthusiastic as they were before COVID-19.

The pandemic clearly has given an exponential boost to on-line shopping. Big Basket, a key online grocery business, was overwhelmed by the demand piled up on it and its services broke down on account of its inability to handle the volume. Post the first lockdown, on March 25, it mounted a message stating, “We’ll be back soon!” explaining that the unprecedented demand had forced them to restrict access to the website to existing customers only. The message urged customers to “Please try again in a few hours.” Amazon, the leading, global e-commerce player, also overwhelmed by unprecedented surge in demand, prioritised its services differently. It concentrated on supplying essentials such as household staples, healthcare, hygiene, personal safety and other high priority products and put a temporary stop to the supply of lower-priority products.

It is evident that the worries about non-observance of social distancing and problems in adequate air circulation rendered malls suspect during COVID-19 times. These factors are dissuading people from visiting malls as readily as in pre-COVID-19 days. Thus, while the rise in e-commerce dented the popularity of shopping malls, the fears stoked by COVID-19 coupled with governmental weariness to allow shopping malls to function normally have virtually delivered the coup de grace to this business.

The obvious question facing these malls is whether they should entirely fold up or strategise anew in regard to the usage of their space. Globally, shopping mall owners have realised that they cannot compete with online shopping advantages of enormous product selection, price comparison and 24-hour operation. Hence malls are attempting to differentiate their offerings by concentrating on areas that online shopping cannot offer.

Many of them are getting recast as centres of leisure and entertainment (concerts, art centres, spas, theme parks, fitness clubs and farmer’s markets) where online shopping cannot be a competitor. Others are creating spaces that can allow people to come together and spend quality time to relish the social joy of togetherness and sharing. Malls are leveraging technology to practice relationship marketing, finding parking spaces and booking tickets, thereby improving convenience in the use of the malls. Still other malls are transforming themselves into commercial real estate spaces.

In India many malls also began repurposing themselves. Ansal Plaza in Delhi converted into primarily a commercial complex; Jewel Square, Kakade Centre Port and East Court in Pune have reinvented themselves into office spaces. Some others, such as Nirmal Lifestyles in Mumbai, are re-crafting their leasable area into residential buildings. All these innovations clearly establish that the traditional shopping mall, overwhelmed by the dual onslaught of online shopping and COVID-19 pandemic, have abandoned the concept of traditional shopping and are moving towards businesses that are less likely to suffer the offensive of digital commerce and the requirements of social distancing. Quite evidently, the malls of old are easing out of shopping and diversifying into centres of experience or places of commerce and residence.

We may not have shopping malls post-COVID19 as we understood them.

(A full version of this first appeared in the ORF)

Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning. Views are personal.
Ramanath Jha
first published: Aug 27, 2020 01:22 pm

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