Maxim Karbasnikoff, Head of Retail of ADG Group in Moscow. Credit: ADG Group
Opinion | Ticker

Switching to turnover-based rent

“As far as offline is concerned, we can expect consumers to be increasingly sensitive to emotions versus price, quality versus quantity as well as health and proximity.”

By Maxim Karbasnikoff

The Russian retail market was still in a recovery phase after the economic downturn of 2014 when the Covid-19 pandemic broke out. At the end of March, like in most countries, Russian retail outlets had to shut their doors–with the exception of grocery stores and pharmacies–leading most retailers to experience an estimated 60 to 90% drop in revenue. Even if Russia seems more prepared for the Covid crisis than other countries (its “savings” policy has created a $600 bln cushion), the collapsing price of oil, which still accounts for 7.2% of GDP, will create budget pressure, inflation risks, and limit the government’s ability to support the economy during the recovery phase. Even while the official number of infected individuals is relatively low compared to those countries worst hit, the initial economic stimulus (1.3% of GDP) seems comparatively shy against what has been done by other nations.  

Rising unemployment and falling purchasing power will obviously impact consumption and retail sales post-lockdown. But clearly, consumer behavior post-Covid will be reshaped as well. E-commerce development has been boosted by isolation and this trend will remain. As far as offline is concerned, we can expect consumers to be increasingly sensitive to emotions versus price, quality versus quantity as well as health and proximity. 

Fortunately,  what we are developing at the ADG group is a chain of neighborhood centers across Moscow, with an offer focused on services, edutainment as well as F&B. Proximity to our customers is our driver. When the Covid crisis hit, and we had to close most parts of Angara, our first mall. We shifted our popular events like master classes, lectures and music concerts to the online world to keep that connection with clients.  

Our clear priority now and in the days to come is to support our tenants. We have been the first developer to switch to turnover-based rent a few weeks prior to the official lockdown. And we are now implementing creative solutions to support them during the recovery period. One of which is to implement our own online marketplace which will increase sales of our brick-and-mortar tenants and offer our customers quick home delivery of their favorite products and services. We definitely see the current crisis as an accelerator of opportunities and we have the agility to benefit from that together with our tenants.

Sign up for our ACROSS Newsletter. Subscribe to ACROSS Magazine.

Ticker MORE

Titanium acquires Ozols shopping center in Riga

The asset was exited by KS Holding to Titanium Baltic Real Estate. The former shopping center Galerija Azur was acquired by the seller in 2016 and redeveloped over three years, then opened under the new name Ozols.

Coniq develops new loyalty programs for Reem Mall in Abu Dhabi

Coniq announced their partnership with Reem Mall (Abu Dhabi) to develop innovative engagement and loyalty programs for unique customer journeys backed by the latest data science, especially for the GCC market.

FCR buys 26, 000 sq m shopping center in Eisenach

FCR Immobilien AG has acquired a shopping center in Eisenach, Thuringia, with a sales area of approximately 26,000 sq m as part of the continuous expansion of its portfolio. opens first UK store in Manchester Arndale

Manchester Arndale announced that fashion retailer Boohoo has opened its first beauty store at the center.

Trafford Center launches Tinsel Town outdoor experience for festive period

Manchester’s Trafford Centre created a festive outdoor experience with Tinsel Town, following the recent Summer Social and Spookfest events.

400th Primark store opens in Italy

Primark opened its 400th international store in Sicily (Italy) today, which now totals eight fashion outlets in their Italian portfolio.