Malls in India stand to lose heavily due to COVID-19. The temporary closure of shopping malls implies a revenue loss for retailers such as apparel/department stores, multiplexes and food QSRs. Also, retailers may have to potentially bear store rental costs which may vary between 15 to 25 per cent of store consumption. The most likely scenario is that mall operators and retailers may share the losses given that malls have now become a relationship-based business with the same retailer having a presence across malls. Malls are an annuity business with a few seasonal variations which are captured through revenue share when store consumption crosses a fixed threshold. During leaner periods, a minimum guarantee ensures downside protection for the mall operator.
Given the unprecedented nature of the event, and malls being a relationship-based business, mall operators and retailers have to work together for a feasible solution to minimise losses for all stakeholders. In case of an improved situation from July 2020, consumers are expected to flock back to malls. One comfort is that Tier I malls in India have now evolved into lifestyle destinations and present a clean, safe and easily accessible entertainment option.
Losses for the global economy because of the epidemic could run into a few trillion dollars.
