The transforming retail spaces

The transforming retail spaces
Sep 2016 , by , in Story

From their advent in the nineties, malls today are no more a large structure on the city’s map with a cluster of fashion stores and food joints. These centres are now slowly evolving into weekend getaways, shopping destination and community hubs. There has been a shift in the services being provided and now coming up across the country are ‘Specialty’ malls.

By: Deepshikha Singh

Dynamic lifestyles, higher disposable incomes and advent of international standards are redefining the way malls are being perceived by the consumers. People want the malls to be nothing short of five star hotels. Systematically managedmalls today provide a complete shopping experience to the end-users. Simple operational facilities like valet parking and porter service ensure that the footfalls grow manifold.

It is imperative for mall developers today to understand the key essentials of designing, developing and managing a successful mall. With increasing competition, mall developers are now being forced to look at core competencies and accurate design offerings to target large footfalls for their malls.

Over the last decade, malls in India have evolved a great deal. They no longer remain just a shopping hub, but are all about a holistic experience of an outing. Especially with e-commerce picking up phenomenally, for a mall to be successful the right ambience, good branding, ample F&B sections, good multiplexes and activity zones are a must. There is no one-size-fits-all formula here though. Each mall needs to customize their mix basis the catchment. Thorough research, constant outreach and market evaluation is the key for sustenance of a mall in today’s time.Mall developers are also ensuring a judicious mix of brands in order to attract consumers of all strata.

Setting up a mall

Meticulous planning is the key to success. Before setting up a mall, developer spends considerable resources in researching the potential of the

• Particular location
• The consumers
• The partner brands

Besides, developer has to adhere to all the governmental regulations and legal procedures which encompass the commercial real-estate and follow standards in terms of architecture, safety, hygiene and overall maintenance.

Current scenario of malls

In the last two years, malls with good occupancy have seen record high rentals whereas underperforming malls have been deserted by consumers and retailers alike. Evidently, the malls that attract large footfall and perform well have the capacity to negotiate lease tenure and rentals to their liking. Brands that can generate good revenues have shown interest in such malls. Interestingly, while, vacancy rate is on the rise in metro cities, malls in tier-ii & III cities have been doing well.

Currently, Mumbai appears to be the strongest in the retail sector. Being the commercial capital of the country, over the last few years it has witnessed the highest amount of growth in this segment. The city being the most attractive destination for migrants and tourists has also been the most favorable in the when it comes to shopping. Lately, cites like Madurai, Kanpur, Indore and Raipur too are witnessing a lot of development in the retail real estate.

Unlike Australia, USA and Europe, ‘Mall Management’ as a concept is yet to find wide acceptance in India. In comparison with malls abroad, some key aspects are yet to see significant improvement in Indian malls – parking for instance. Globally, mall developers ensure a sizable well-planned parking facilitywhereas, in India there is still a gap in addressing the parking issue and more needs to be done.

Are malls in India dying?

Malls that have overlooked the fundamentals are facing slow death. Critical parameters such as apt design, right tenant mix, catchment area, optimum management and innovative marketing form the core of any successful mall. Adding to problem is the fact that malls are predominantly being developed by real estate companies with little or no experience in the retail real estate space. In some parts of the country, there is huge growth being witnessed in the retail sector where as a few area are seeing a big lull. Only those who make the cut are bound to survive.

A shift in the trend

Malls are indeed witnessing a great shift. Greater globalization and infusion of local brands is the order of the day. Traditional brands that used to operate at a single-store level are now on an expansion spree, especially in South India, where retail market is different, probably much sharper. Traditional, as well as local brands have started moving into malls and this will emerge as a big trend by the end of this year. Also, popular is the discount offers on a typically low-footfall day (weekday) in a specific section of a mall, for example, customers would witness high discounts in a food court of a mall on a particular day.

Another major shift seen is the shrinking size ofmalls. According to experts, the average size of a mall is gradually going to reduce in the next few years. This is a result of high operational costs clubbed with increasing competition from various e-commerce websites. Such downsizing is helping retailers contain capital exposure in the stores that are not yet fitted out. E-tailing is another significant trend which will have a huge impact on malls.

Malls in Metros

In major cities, a lot of churn seems to be happening both from the developers’ side and retailers’ side. Well positioned malls with good footfalls and retained retailer clientele, continue to be just a few. Big retailers are moving out of the underperforming malls and small retailers are struggling to sustain. Vacancy rate could be anywhere between 20-25%.

However, considering the downturn the sector faced in previous quarter, malls are still doing well with most of them evolving in accordance to the market demands, becoming a social gathering place and by offering value added services.

In major cities the hassles of traffic and of finding a parking spot are major concerns of shoppers. Malls are thus providing ample parking space, concierge service and a wide range of options for shoppingto lure customers.

Malls in 2 and 3 cities

Unlike major cities, malls in smaller cities are in a nascent stage featuring only smaller developments. Many of these have been were unsuccessful because of poor planning and an absence of up-to-date services, when compared with the malls in metros.

Developers and operators need to stop looking at these markets as Tier II & III cities. With high internet penetration and global exposure, consumers across India are now aware of the services and facilities available nationally and internationally. Their expectations from malls and lifestyle centres are the same as those of people living in Tier –I cities. And with increasing disposable incomes and spending power, their demands are not going to be limited. Developers and operators should understand this and look at the long term view and invest in proper research and planning.

Challenges & Potential

There is still a huge untapped market for retail in India and the retail industry is expected to grow to US$ 1.3 trillion by 2020, which is a CAGR of 9.7% between 2000-2020. While the bigger cities dominate in the number of operational and upcoming malls, the hugely aspirational tier II & III cities with increasing purchasing power are vastly under tapped. Thus, to fill this gap in supply and to further consolidate in bigger cities, developers are building malls not only in the metros but in smaller metros and tertiary markets as well.

Much of the challenges faced by Malls today have more to do with macroeconomic scenario than inherent problems of the developer or sector. Overall demand in the economy is lacking and that’s the reason why brands and mall spaces have not shown encouraging growth.

The challenge for malls now is to establish a sense of community experience around them and to engage with its patrons on an emotional level to form a sense of bonding. The human factor is a unique advantage malls enjoy that e-retailers cannot replicate and they need to be able to leverage that to their advantage. Also shopping in India is closely tied with celebrations, be it any festival, wedding in the family or an approaching anniversary. Shopping malls must create the right ambiance for such festive times.

Way Forward

Booming employment opportunities, rising urban disposable income, changing lifestyles and demographic profiles all are showing a favorable skew towards rising consumerism culture. Consumer spending is clearly set to accelerate its pace. Retail is currently the most booming sector of the Indian economy. This trend is expected to continue for at least the next two-three decades, attracting huge attention from all quarters of the economy. With the retail sector growth underway on a massive scale, its time malls got into brand building activity. Due to mismatch of demand and supply of mall space there is a need for right sizing the mall.

As far as long term solution is concerned, the government needs to address the critical issues of the purpose of opening a mall, credentials of people behind the mall development, proper analysis of demand – supply scenario before allocating the permission to open a new mall etc. With e-commerce booming the retail market, malls are definitely witnessing a change in the trend. Speculations are doing the rounds in this space, whether brick & mortar will survive or online retailing. The fact remains that both platforms are fundamental elements for a successful growth strategy.However, which of these will have a longer life, that only time will tell.

Take on Malls

Dharmesh Jain, CMD Nirmal Lifestyle said, “A phenomenal growth has been experienced in shopping malls and retail stores but not all shopping centres have survived. The malls which have created a community experience have succeeded.”

Rajiv Raichand, Director, Virtuous Retail said, “Consumers are spoilt for choice. With continuously increasing disposable incomes, influx of global brands after regulation changes and to leverage an increasing demand for unique experiences from the discerning customers, developers are coming up with new projects.”

Arjun Gehlot, Director, Ambience Mall – Gurgaon & Vasant Kunj said,
“The mall segment in India’s real estate sector has seen massive transformation in the last two decades. From a cluster of few stores selling branded goods along with couple of restaurants and coffee shops tucked in a corner, malls today have not only grown exponentially in size, they also offer a wide variety of options to the shopaholic, gigantic food courts with an eclectic menu, and a host of entertainment activities including multi screen cinema halls.”

Rajiv Gupta, CEO, Wave Infratech said, “For any Mall to gain traction, location is an important criterion that drives brands and consumers. Strategically located malls can emerge as landmark destinations attracting huge footfall.”

Akshay Taneja, Director, TDI Group said, “Malls in India, especially in big cities, are constantly redefining their offerings so as to blend in perfectly with the ever changing aspirations of people. It’s no longer just about lifestyle choices under a single roof, but also about engagement. It is a melting pot where the subtle desires are translated into tangible realities and it truly touches the lives of many.”

Pushpa Bector, Head & Executive Vice President, DLF Mall of India said,“The Indian retail landscape has undergone radical change over the last five years and this can be attributed to the ever evolving customer behaviour that has influenced the way new age malls are being constructed and what they are offering to the customers. Large format malls, use of technology, food & entertainment and a right mix of brands is the focus for majority of the mall developers across the country. The Indian malls are at par with international malls in terms of look and feel and the product offerings.”

About admin