The decline of malls and the renaissance of clothing markets as a sign of new age
The market has turned from a chaotic cluster of tents into a civilised centre of trade, and the galleries of malls are emptying
The economy of urban shopping centres is showing alarming dynamics: the pandemic, the withdrawal of Western brands from the Russian market, and the decline in purchasing power have dealt a serious blow to the attendance of malls in million-strong cities. People are trying to save money, so, for example, e-commerce is experiencing an unprecedented flourishing today, discounters are very popular among the population. And ware markets, which are experiencing a renaissance today, are also coming to the rescue. Realnoe Vremya presents a brief overview of the situation and the opinions of entrepreneurs.
Changing consumer behaviour: people are trying to save money
According to Superjob surveys, falling consumer incomes are making Russians more and more prudent. In October, 49% of the survey participants admitted that they are trying to save on purchases.
The model of purchasing behaviour, according to many experts, has changed dramatically. Domestic demand has sunk significantly. Retail trade turnover in Russia is falling every month: so, according to Rosstat, in September, turnover decreased by 9,8% compared to September 2021, and by 2,6% compared to the previous month. And if we take separately the turnover of non-food retail, the drop is even more serious: in September, a drop of 15% was recorded year-on-year.
The economic and geopolitical uncertainties of today cause fears that the recession will continue — because the purchasing power of the population is declining. 88% of the Russian retail market participants who participated in the Nielsen IQ survey reported that the main reason for their concern is a reduction in consumer incomes. 48% of top managers in the retail market are afraid of a change in consumer habits, 24% — a decrease in store traffic.
And their fears are confirmed. According to the October analytical review of the Central Bank, Russians switched to the mode of saving everyday consumption. The consumer sentiment index declined in October, compared to September, Russians tend to save. The share of respondents who prefer to save free money rather than spend it on buying expensive goods increased to 53,8% (+3,2 percentage points by September), and this is the maximum since March 2021. Consumers are trying to reduce spending in all possible ways: in everyday mode, they “click” on promotional products and are ready to abandon the usual shopping routes in large malls.
Not only hard discounters are on top, but also online sellers. They do not need to maintain a retail space and maintain a presentable layout, due to this they can keep prices lower than in a classic trading floor. But many still, choosing goods, want to see them with their own eyes before buying. This means that these people are still striving for an “analogue”, not a digital store.
“The obvious trend will be the decline of large-format shopping centres”
Over the past couple of decades, shopping malls have provided a lot of customer needs, their attendance has grown every year, and they themselves have appeared like mushrooms after the rain. However, in recent years, shopping malls in major cities have been experiencing one shock after another. In 2020, they were closed for a two-month full quarantine. In 2021, strict covid restrictions on attendance were introduced. Since March, many Western brands have decided to stop working in Russia and have closed their stores.
Experts gave Realnoe Vremya serious figures: according to some data, in April 2022, up to 40% of rental space in large Kazan shopping centres did not function. Now malls are trying to fill the vacant areas with new tenants, but this is not a quick process (the peculiarities of contracts concluded with outgoing tenants affect). And following the thinning of the rows of tenants, attendance also falls.
For example, according to statistics, the week from October 17 to October 23, 2022 showed a 2,5% decrease in traffic in Russian shopping centres compared to the previous week. In comparison with the same period of calm pre-crisis 2019, the drop was 15,3%. And this decline relative to the pre-pandemic and calm 2019 is a trend that has been going on for many months. It is also interesting that the departure of Western brands practically did not affect shopping malls in small towns (where traditionally the composition of tenants was formed by local sellers), but in cities with millions of people the situation is much sadder. For example, in Moscow, only the week in question resulted in a loss of 4,9% of visitors compared to the previous one, and as much as 42,9% compared to the same week of 2019.
Dmitry Moskalenko, the president of the Russian Council of Shopping Centres, confirmed a sad trend to Izvestia in October: “In particular, attendance is falling (to the level of 20% or more compared to the same period in 2021), and the vacancy of retail space is increasing to an abnormal value, which today can amount to 25-30% of the amount of leasable space”.
Dmitry Kostomakhin, the director of Commercial Real Estate Management CORE.XP, commented to the portal fedpress.ru that now the owners of malls are forced to revise the composition of anchor and leisure tenants, up to forced reconception.
Natalia Kruglova, the head of the sales department of the Russian Auction House, adviser to the director general, believes: “The decline of large-format shopping centres will become an obvious and serious trend for the market.” Valery Trushin, the head of the research and consulting department, partner of IPG.Estate, agrees with her, who believes that in the next 3-5 years shopping malls will finally cease to be a place of traditional shopping.
New life of clothing markets
Against the background of what is happening, a question arises for a representative of small and medium-sized businesses that are engaged in retail trade: where to rent a point for work? Literally 3 years ago, he would have rented a room or an “island” in the shopping gallery of the nearest mall without hesitation. But today the situation has changed a lot.
Against the background of everything that is happening, clothing markets look interesting for an entrepreneur. Today they have outgrown their notoriety, formed in the 1990s. This is no longer a cluster of tents, where clothes had to be measured standing on a cardboard box, in the cold and wind. The modern clothing market provides comfort to both the visitor and the seller. Warm, comfortable, well-lit rooms, the availability of all amenities, the full support of the entrepreneur from the administration — all this makes it possible to work and develop.
Today, a person comes to the market to buy clothes, shoes, household textiles, toys and much more — and, as a rule, much cheaper than a similar product in a city shopping center. It's just that here the seller has the opportunity to set a price comparable to the price in the online marketplace at a big sale — this is achieved due to the comfortable cost of renting a point of sale. And since the price of the product is low, it allows the buyer to save money. Taking into account the above trends, the attendance of clothing markets in large cities and in their surroundings, in contrast to the attendance of malls, is in perfect order.
For example, the shopping malls Novaya Tura near Kazan are visited by 8-10 thousand customers on a weekday, and on weekends the average passability is 10-12 thousand people. Corresponders of Realnoe Vremya went to this clothing market and talked with buyers and sellers.
Buyers confirm: it is cheaper on the market
Nailya M. lives in Kazakhstan, and she comes to Kazan to visit the children, and every time she tries to stop by the clothing market. In a conversation with her, the trend for saving was fully confirmed:
“I like it here: it's comfortable, cozy and warm. A very large selection: a wide range of clothes, shoes. That's why I love this market and come here every time I visit Kazan. The most important thing for us, consumers, is reasonable prices with good quality. The prices here are very different from the shops, and this is very valuable for us today.
The family of Juliana F. he lives nearby, so Novaya Tura is a convenient place for them to buy things for both adults and their growing son.
“We are frequent visitors here. For example, every year we come here before school," says Juliana. “It's very convenient for us. The assortment here is really very large, you can buy everything for all seasons. My son is engaged in football — here we buy him sportswear and choose classic uniform for school, and a variety of shoes. When you can find everything in one place, it's very convenient. And the prices are lower than in the store — this is also important!”
Entrepreneurs: they do not seek good from good
And what about the entrepreneurs who trade here? How do they justify such a choice for renting a retail outlet? We talked to several of them, and it turned out that most of them have been working here since 2013, since the establishment of the shopping malls. They are satisfied with everything on the market, and first of all, they note the great involvement of the administration in building business relations with tenants. For example, this is said by Tamila, who has grown her business from two outlets to six pavilions in a few years: according to her, the administration will always help, and the main thing in Novaya Tura is the people who work here.
There are those among the sellers in Novaya Tura who previously rented showrooms and outlets in malls. For example, Elena represents the domestic brand of youth clothing District. She admits to us that she was disappointed in trading in the city showroom: in Novaya Tura, the flow of buyers is much larger, and business is going more briskly. Given the more comfortable cost of renting a retail outlet, she concentrated on this direction.
We are also told other advantages of shopping malls for doing business. Elena reminds about free parking. Osman has rented space in Novaya Tura since its opening — he sells men's suits. It shows the convenience of organising retail outlets: directly above the cell, there is a warehouse for goods of the same area. And when asked if the sellers are planning to go to work in a mall in the city, they all shake their heads as one: they do not seek good from good.
So, the modern clothing market in Russia has moved from the chaos of the 1990s into a civilised and comfortable form of development. Today, there is everything for convenient shopping: comfortable indoor temperature, light, large free parking, several cafes, sewing workshop services, necessary sanitary facilities. The prices for the goods are lower than in the city mall, which means that there will always be a buyer here. People return to the transformed clothing markets, month after month forming a steady and dense flow. This means that the product is also in high demand.