India

Retail Reboot
2021
REPORT CBRE RESEARCH
OCTOBER 2021
Contents
03 Section 1
Retail Sector During The
COVID-19 Outbreak

06 Section 2
The COVID-19 Impact:
Realignment In Retail
Categories

09 Section 3
What Lies Ahead: Rethinking
Pre-COVID-19 KPIs
 India Retail Reboot 2021

Retail sector
during the
COVID-19 outbreak
Lockdowns The most immediate impact of the COVID-19 pandemic and the resultant nationwide
lockdown in March 2020 was felt on the retail sector as the government-mandated
during the second shutdowns, travel restrictions and social distancing made a huge dent on consumer
confidence and discretionary spending. As a result, sale of products that fell in the
wave hindered “non-essential category” was negatively impacted not only across store-based
retailers, but also on e-commerce platforms.
the recovery However, the receding pandemic, commencement of a vaccination drive and lifting of
restrictions towards the end of 2020 resulted in increased footfalls across high streets
and malls. The recovery gained further momentum in early 2021, especially across
southern and northern cities as Pan-India retail sales in February 2021 touched
almost 93% of February 2020 (pre-Covid) levels1.

However, the onset of the second wave in April 2021 and re-imposition of the lockdown
restrictions impacted consumer confidence and purchasing activity once more. But,
unlike the national lockdown in 2020, the impact on retail was not as severe because
most restrictions were regional / localized. The gradual lifting of restrictions since
early June led to a steady rise in footfalls. This recovery was initially led by North
India, where a relatively stronger bounce back from the second wave was witnessed;
and mostly recreation-led footfalls improved across prime malls and high streets. From
July 2021 onwards, this recovery was visible across other regions in the country as well
and Pan-India retail sales reached more than 70% of the July 2019 levels2.

1. 13th Retail Business Survey by the Retailers Association of India

2. 17th Retail Business Survey by the Retailers Association of India

3 CBRE RESEARCH ©2021 CBRE, INC.

 India Retail Reboot 2021

Figure 1.1: Current retail demand, organised retail stock and projected organised retail stock across major cities in India

Mumbai Delhi-NCR
Retail demand Retail demand
(Y-o-Y) (Y-o-Y)

11.1
mn sq. ft.
Organised
retail stock 19.7
mn sq. ft.
Organised
retail stock

12.7
mn sq. ft.
Projected
organised
retail stock
24.9
mn sq. ft.
Projected
organised
retail stock

Pune Hyderabad
Retail demand Retail demand
(Y-o-Y) (Y-o-Y)

4.4
mn sq. ft.
Organised
retail stock 11.4
mn sq. ft.
Organised
retail stock

5.8
mn sq. ft.
Projected
organised
retail stock
15.5
mn sq. ft.
Projected
organised
retail stock

Bangalore Chennai
Retail demand Retail demand
(Y-o-Y) (Y-o-Y)

12.8
mn sq. ft.
Organised
retail stock
Retail and recreation
4.9
mn sq. ft.
Organised
retail stock
google mobility index for
17.9
mn sq. ft.
Projected
organised
retail stock Limited mobility
September 2021
Improved mobility
5.4
mn sq. ft.
Projected
organised
retail stock
due to lockdown due to relaxation in
restrictions lockdown restrictions
Source: CBRE Research, Q3 2021
Note: Retail demand (Y-o-Y) indicates H1 2020 vs. H1 2021 leasing demand across grade A malls and prominent high Source: Google Mobility Index; CBRE Research, Q3 2021
street locations; demand improved in Bangalore during H1 2021 owing to the closure of one large sized transaction
Organised retail stock up to H1 2021 (Grade A malls only)
Projected organised retail stock up to 2023 (Grade A malls only)

4 CBRE RESEARCH ©2021 CBRE, INC.

 India Retail Reboot 2021

Figure 1.2: Month-wise mobility index for India

Jan-21
5

Sep-21 4 Feb-21

Despite easing of lockdown restrictions

1
in Q1 2021 and only a phased presence Aug-21 Mar-21
of regional lockdown restrictions 0
during Q3 2021, mobility index for retail
and recreation improved significantly
during Q3 2021 compared to the first
quarter, owing to strengthening of the
vaccination drive. Jul-21 Apr-21

Jun-21 May-21

Supermarket and Retail and Lockdown

pharmacy recreation restrictions

Source: Google Mobility Index; CBRE Research, Q3 2021

5 CBRE RESEARCH ©2021 CBRE, INC.

 India Retail Reboot 2021

The COVID-19 The COVID-19 pandemic induced

not only a change in economic Figure 2.1: The COVID-19 impact: percent Y-o-Y retail sales performance* growth

impact:
growth direction but also resulted
in a realignment of consumption 140.0%
Hypermarkets
patterns. As consumer priorities

Realignment in witnessed a change in order,

the preference for ‘conscious
120.0%
F & B e-commerce,
e-commerce, health and
beauty and traditional
Supermarkets
Traditional Grocery Retailers

retail categories spending’ increased and

significant shifts were witnessed
in consumer purchase behaviour
100.0%
grocery retailers*
emerged as winners despite
the pandemic.
Apparel and Footwear
Electronics and Appliances

80.0% Health and Beauty

– both across physical retail and
As the unpredictability e-commerce.
Department Stores

E-Commerce
intensified, changing
60.0%

F & B E-Commerce

priorities resulted in 40.0%

a reshuffle in “top” 20.0%

categories 0.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
While hypermarkets and supermarkets also witnessed a decline in retail sales
-20.0% owing to restrictions on purchase of non-essential products; department
stores, apparel and footwear; along with electronics and appliances retailers
were impacted the most during the pandemic. However, some of these
-40.0% categories did witness a surge in sales after the relaxation of lockdown norms.

Source: Euromonitor International, February 2021; CBRE Research, Q3 2021

Note: Traditional grocery retailers - local neighbourhood stores
*Retail Sales Value RSP (Retail Sales Price) excluding sales tax

6 CBRE RESEARCH ©2021 CBRE, INC.

 India Retail Reboot 2021

Figure 2.2: The COVID-19 impact: growth categories for e-commerce

90.0%
Beauty and personal
care, consumer
80.0%
appliances along
Media products / OTT platforms, personal accessories and eyewear,
with food and drink
70.0% video games hardware and consumer health e-commerce are slated for
e-commerce picked
significant growth over the next five years
60.0% up significantly
during 2020
50.0%

40.0%

30.0%

20.0%

10.0%

0.0%
Apparel and Beauty and Consumer Consumer Food and Home Homewares and Media Personal Video Games Consumer
Footwear Personal Care Appliances Electronics Drink Care Home Furnishings Products Accessories Hardware Health
and Eyewear
% CAGR (2015-2020) % CAGR Forecast (2020-2025) Y-o-Y Growth (2019 vs. 2020)
Source: Euromonitor International, February 2021; CBRE Research, Q3 2021

7 CBRE RESEARCH ©2021 CBRE, INC.


Figure 2.3: Demand across retail categories
Apparel and
Footwear
Pent-up demand is likely to lead to
a strong rebound as people return to
offices, start travelling and socialise.
Most retailers are expected to
continue ramping up their digital
/ online capabilities to remain
competitive. Store-based retailers
will focus on unique shopping
experiences such as smart mirrors,
smart fitting rooms and other
personalised / appointment-based
options.
The need for a physical experience
will continue to fuel retail space
demand and retailers that
previously focused on presence
in shopping centres are likely to
expand in standalone / mixed-use
developments and high street
locations to widen their footprint.
Certain categories of stores may
alter store sizes / layouts to
align with their modified plans /
strategies post the pandemic.
Source: CBRE Research, Q3 2021
8 CBRE RESEARCH
Health &
Beauty
The sales of beauty specialist
retailers were severely impacted
due to the lockdown restrictions;
however, the performance of health
retailers (chemists / pharmacists)
was better than usual due to the
increase in demand for OTC (over-
the-counter) drugs. As purchasing
patterns normalise, beauty specialist
retailers are anticipated to make
a strong comeback. The focus
of beauty brands will remain on
widening product offerings, while
building a strong online presence to
complement their physical stores,
especially in tier II cities.
In addition, as the chemists /
pharmacists’ space continues to be
highly unorganised, leading players
such as Apollo Pharmacy, Tata 1Mg
and MedPlus are anticipated to
expand aggressively.
Electronics and
Appliances
While the sale of certain electronics
and appliances suffered during
the pandemic, higher demand
was witnessed for products
such as desktops, monitors,
laptops, electronic accessories
from professionals working from
home, as well as for consumer
appliances such as vacuum cleaners,
dishwashers and personal grooming
appliances. Retailers not only
ramped up their online and delivery
services but also partnered with
banks to offer attractive payment
options.
Although consumers would continue
to research products online, the
need to visit stores to vet the items
would remain intact. Therefore,
multi-brand outlets are likely to
become a preferred choice among
consumers and we expect retailers
such as Croma and Reliance Digital
to continue to expand.
Department
Stores
Due to a decline in footfalls, retailers
had to find innovative ways to engage
with consumers. While some brands
such as Shoppers Stop, Lifestyle,
etc. already had established online
platforms, other retailers started to
offer virtual tours and personalised
shopping through various online
platforms.
Despite a slow recovery across
department stores, their one-stop
shopping experience format is
likely to remain popular among
consumers.
Hypermarkets, Supermarkets
and Traditional Grocery
Retailers
Hypermarkets are likely to
remain popular as time-pressed
consumers are expected to make
bulk purchases to ensure fewer
shopping trips. Consumers will
remain value-conscious which will
benefit hypermarkets as they are
better placed to offer discounts due
to their volumes. The comeback
of non-essential sales is likely to
aid recovery and growth across
supermarkets. On the other hand,
traditional grocery retailers are
likely to maintain their popularity
as their easy accessibility and a
loyal customer base remain their
strengths. These outlets will also
play a critical role in last-mile
deliveries for e-commerce players.
As hypermarkets and supermarkets
are large format stores, expansion
opportunities in metro cities could
be limited. However, low penetration
of modern grocery retailers, lower
real estate costs and availability
of large spaces offers tremendous
expansion opportunities in tier II
and tier III cities.
India Retail Reboot 2021
E-commerce and F&B
E-commerce
The pandemic acted as a catalyst for
e-commerce in India, accelerating
consumers’ move to online shopping.
E-commerce is expected to witness
high growth going forward and is
likely to co-exist well with store-
based retail channels. As penetration
remains low, higher growth in
e-commerce is expected, especially in
the tier II and tier III cities.
Due to the movement restrictions and
temporary closure of food outlets,
online ordering of F&B increased
tremendously, and F&B e-commerce
was among the fastest growing
categories in e-commerce during
2020. Leading operators will continue
to focus on technology enhancement
to minimise contact; dark kitchens
and partnerships with other store-
based retailers will be key to offset
logistical challenges in the future.
Similar to e-commerce, expansion into
tier II and tier III cities is likely to be
the next stage of development in the
F&B e-commerce category as well.
©2021 CBRE, INC.
 India Retail Reboot 2021

What lies ahead:

Re-thinking pre-
COVID-19 KPIs Figure 3.1: Imperatives for building a new retail realty

A few changes will remain The pandemic has created a new set of challenges for a
sector that is fairly unorganised and already dealing with
permanent as retailers and several structural changes. Trends that were on a multiyear
trajectory saw a dramatic acceleration and the retail
Restructuring
retailer-landlord
Omnichannel
to become
consumers align with the industry witnessed more innovation in the past year than it
did in the prior decade.
relationships omnipotent

new normal To traverse through this looming uncertainty, CBRE has

identified six imperatives that are expected to help retail
stakeholders adapt to a changing consumer landscape
while pursuing new opportunities. Reshaping
Navigating
the idea of
the digital shift
a ‘store’

Tapping the Rethinking

altering retail asset
consumer management
behaviour strategies

Source: CBRE Research, Q3 2021

9 CBRE RESEARCH ©2021 CBRE, INC.


Restructuring retailer-
landlord relationships
Post the pandemic, more partnership-like agreements
started to surface between landlords and retailers. Landlords
provided several relief measures to accommodate retailers,
including rental rebates / deferments. Going forward, we
expect that lease agreements that are designed to absorb
the impact of such structural disruptors while at the same
time provide scope for rental growth and visibility on retailer
performance would be preferred by retail stakeholders.
3. CBRE Asia Pacific Retail Flash Survey, September / October 2020
10 CBRE RESEARCH
Navigating the
digital shift
According to a survey conducted by CBRE, 75% retailers
believe digital and technological innovation is a key enabler
for the retail sector3. Technology in retail is rapidly evolving;
especially post the pandemic. Technologies such as virtual
fitting rooms will help to synchronise the store’s inventory
and point-of-sale systems, enabling stores to catch up with
data-rich e-commerce by generating insights on data points
such as time spent in fitting rooms and conversion rates. Focus
on real time data is expected to increase, especially for
stores that operate in the essentials category to ensure more
accurate information on product availability and consumer
behaviour, particularly in unpredictable situations such as the
COVID-19 pandemic.
India Retail Reboot 2021
Tapping the altering
consumer behaviour
The pandemic fundamentally transformed consumer behaviour
and preferences. Health and safety concerns have become
important purchase drivers for the consumer, as has the
'price to value' equation where quality for an optimum price is
still on top of the decision-making process.
In addition, consumers today are extremely agile, demanding
and tech-savvy. Their preferences are rapidly evolving
due to their changing lifestyle, better access to different
types of data, advancement in technologies, and alteration
in the current work environments. They are more aware of
the brands they are using and seek comfort and convenience,
which is further driving the e-commerce demand. Given these
preferences and the pandemic-related disruption, retailers
should focus on reinventing their marketing strategies and
think of innovative ways to know their consumers better.
©2021 CBRE, INC.

Omnichannel to become omnipotent
A key takeaway from the pandemic has been that buyers are
looking to minimise contact and touchpoints. Online shopping
has provided existing (and many new) customers with the
convenience to shop in a safe environment. As a result, most
leading brands and even small, homegrown retailers are either
setting up their own e-commerce platforms / partnering with
third-party aggregators – in addition to their physical store
footprint. While omnichannel was already a trend before
the pandemic, the change in consumer shopping patterns
(some of which are expected to be permanent), have
ensured that retailers consider omnipresence as one of the
pillars of their business plan. Just like virtual kitchens were
an invaluable asset to businesses that had them during the
pandemic, omnichannel is expected to be the fallback plan for
businesses during uncertainties / lean economic cycles.
11 CBRE RESEARCH
Reshaping the idea of a “store”,
free standing stores to proliferate
While brick-and-mortar stores will undoubtedly remain key
going forward, experiential retail would hold sway among
brands. Meanwhile, store design and location strategy is likely
to evolve in response to consumers’ changing expectations.
CBRE foresees the redistribution of space between the
various areas of retail stores such as fitting rooms, product
testing zones, pick-up counters and stockrooms. As a result,
less space will be allocated to areas that have a minimal positive
impact on consumer satisfaction. With inventory management
already being optimised with the aid of predictive demand
analytics, brick-and-mortar stores may eventually become
inventory free as purchases would be dispatched from
warehouses to consumers’ homes upon payment. Check-out
counters could also be reduced in size or replaced entirely by
mobile Point of Sale (POS) systems. Location strategies are
expected to be more inclusive – brands that did not consider
high streets as a viable option will seek space in these
locations to allow easier customer access for business
continuity – in case of any further restrictions on movement
being imposed.
India Retail Reboot 2021
Rethinking retail asset management strategies,
health and safety to remain paramount
Similar to other aspects in the sector, retail asset management
strategies are also expected to evolve post the COVID-19
pandemic. Landlords are likely to adopt measures and
technologies (touchless tech) to improve the sanitation of
physical environments as our hygiene awareness has reached
unprecedented levels. Physical spaces are likely to be
rethought and social distancing may remain in effect going
forward as well – attention is already being paid to vaccinated
staff as a key “safety parameter” for customers. Developments
that are currently under construction / planned are expected
to make provisions for more open and green spaces in their
design layouts. In addition, adoption of PropTech is likely
to take centre stage in the maintenance and day-to-day
operations across the retail-built environments.
©2021 CBRE, INC.
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