Like a phoenix from the ashes

Just as Radosław Knap, the managing director of the Polish Council of Shopping Centres (PRCH), points out, the retail sector only had a few days to prepare for the partial lifting of the restrictions on shopping centre operations that took place on May 4th. On this day according to PRCH’s data, around 60–70 pct of tenants reopened their stores and many of others have been opening up since. However some still remain closed because they have not been able to negotiate their lease terms. There is nothing strange about the number of shoppers in such centres being markedly lower than before the lock-down. “In the first week after shopping centres started operating again, depending on the day, footfall was between 53–68 pct of the same period last year in the centres we surveyed,” says Radosław Knap. “In the following week we saw the numbers go up a bit from 60 pct to 68 pct with the figures being a little bit better for working week days. However, the situation changed on May 18th, when the food sections opened as well as the health and beauty stores, which it turns out was what shoppers had missed the most,” he adds.

Shopping centres are slowly returning to their normal operations. For example, after the restrictions, which were in place for a number of weeks, footfall for the second half of May in the Libero mall in Katowice was around 70 pct of what it was last year and in the first week of June it went up to 75 pct. The goods purchased are also going up in value in the centre, which is owned by Echo Investment. “Now [in the middle of June – ed.] 95 pct of our stores and service outlets are open, and soon the entire centre will be operating as it did before the epidemic. Many of our tenants are seeing turnover similar to what they had before the introduction of restrictions,” claims Urszula Łatka-Styrkowiec, an asset manager at Echo Investment.

And in retail parks...

The limitations on movement and on the number of people allowed into stores also had an effect on footfall in retail parks, which also resulted in a fall in revenues. “Our tenants in some segments closed their stores because of their minimal turnover and the difficulties they faced in maintaining their operations such as problems resulting from the reduced availability of their personnel,” says Jacek Wesołowski, the managing director of Trei Real Estate Poland. According to Trei, the developer of the Vendo chain of retail parks, the segments that suffered the worst were clothing and sports stores, while grocery outlets suffered the least. Jacek Wesołowski also points out that smaller retail centres of less than 2,000 sqm couldn’t count on government help from its Anti-Crisis Shield programme. “We had to take matters into our own hands. Trei Real Estate Poland,Mallson Polska and RWS Investment Group were chosen to represent the majority of retail park owners in Poland in negotiating with the tenants. The most important thing was to ensure that rent levels weren’t so high as to prevent the tenants in over 200 retail parks from restocking their stores and that they would be able to resume their operations in the coming months,” he explains. “We came to an understanding that satisfied both parties. But you have to remember that a good compromise is one that neither party is completely happy with. However, what is most important is that most of the stores opened in May,” he adds.

E-commerce wins out

In a survey conducted at the end of April by Accenture and Fashion Biznes, which examined the fashion, health and electronics segments, around 20 pct of Poles made their first purchases online during the pandemic and over 55 pct of those surveyed intend to limit their visits to shopping centres due to safety concerns. “The pandemic has accelerated the changes we’ve been seeing for some time in consumer behaviour. Shoppers have been forced to use other means to do their shopping and collect their goods. Some people miss the physical experience of walking into a store but many others have realised how easy it is to do their shopping online. The importance of e-commerce is rising and those companies that act fast and adapt their stores to the new needs of consumers will gain an advantage over the competition” claims Rafał Reif, the head of fashion and retail for Poland at Accenture.

Indeed, in the final quarter of 2019 online sales accounted for a 14.5 pct share of LPP’s sales, but in the first quarter of this year this jumped to 33 pct. “What we’re seeing is that shopping centres are not regaining their former glory; shoppers are returning, but only very slowly. They still find the disinfection requirements tedious and there are fewer of them. On the other hand, in those countries where restrictions on retail had already been lifted a few weeks ago, we are still seeing no fall in internet sales,” says Jacek Kujawa, the vice-president of LPP.

Give us back our Sundays!

The situation for traditional retail could be improved if stores were again allowed to trade on Sundays. According to Radosław Knap of PRCH, even if footfall is rising to 80 pct of what it was and the conversion rate is higher, this is still too little to protect traditional retail, which includes services and entertainment. “The retail ban took 53 Sundays as trading days away from businesses and Covid 19 has got rid of at least another two months,” he points out and adds: “We’re appealing to the government to allow us to open retail centres on Sundays, which is essential for us to regain the revenues of traditional retail. Such a move is being dictated not only by the need to support the sector but also to improve shopper safety.”

***

Marta Mikołajczyk-Pyrć
the director of the retail property management team at Savills

A catalyst for change

According to the Polish Council of Shopping Centres, footfall in the last week of May 2020 ranged from 68 pct to even as high as 93 pct of what it was in the same period last year. These figures match up with the centres that we manage, where we’ve seen average footfall of over 70 pct of what we saw last year. It’s worth pointing out that despite the pandemic, the number of shoppers has stayed at the same high level in retail parks. The situation is improving from week to week together with the further lifting of restrictions as well as customers increasingly wanting to come back and do their shopping. It’s going to take some time before people get used to the safety measures that shopping centres have introduced. In this regard, a return to trading on Sundays would certainly be helpful.
Covid-19 has accelerated changes that we have been seeing on the market for some time. This includes a switch to omnichannel retailing, where the rivalry between the online and offline worlds doesn’t have to mean that one will beat the other. Instead, they can coexist and support each other as sales channels. Many people and especially those of the older generation tried shopping online for the first time during the pandemic and they’ve grown used to it. On the other hand there are those who miss going to shopping centres. I think that many chains are now going to concentrate on developing their online stores but this doesn’t necessarily mean that they are going to give up on traditional points of sale. Shopping centres are not going to disappear because they are essential for offering the full shopping experience.