Innovation Is the Key to Survive In This Hyper-Dynamic Shopping Era
Rehan Huck, Vice President-Retail, ILC Group
What are the prominent shopping behaviour changes evident in the last few years?
Leaving aside the last one year which has been disrupted by the coronavirus outbreak, the retail sector was witnessing decent growth. Almost every segment of this industry was growing at an annual CAGR of 10-15 per cent, especially electronics.
There has been a clear trend in the past few years where people are looking to cut a deal at a discounted rate or shopping more during the End of Season Sales (EOSS). Shopping is more or less becoming a weekend phenomenon as almost all the malls and complexes have been seeing a massive difference between the footfall of the weekdays and weekends.
People were largely flocking the large destination malls during the weekends. On the other hand, they preferred visiting nearby markets or shopping complexes in their vicinity to cater to their weekly/daily needs.
Personal care, wellness and cosmetics are some other segments that have seen tremendous spending from the buyers. Luxury and premium brands have also grown manifold in recent times, especially during the coronavirus pandemic.
However, things were hit hard by the COVID-19 as the offline markets were entirely shut. Everything moved online and the non-tech-savvy people were pushed back as well. But the retailers are expecting growth to be back on track with the implementation of an omnichannel approach when everything opens up.
What has been the impact of changing shopping behavior and growing e-commerce on retail real estate?
The growth of e-commerce has put a lot of pressure on brick and mortar. Moreover, people have also started shopping through various applications at their convenience, especially since March 2020. The coronavirus pandemic has played a crucial role in shaping the entire consumption behavior and pattern.
The luxury brands have gone a step further from e-commerce where they are now looking at bringing the brick and mortar to the doorsteps of their customers. This enables the people to book a slot with their sales personnel and the brands will take them on a virtual tour of all their latest products and services.
Some of the top brands have also started their sole e-commerce story without going through the channel of an aggregator. So, everyone is innovating themselves in terms of technology to survive in this hyper-dynamic shopping era.
What are the new trends in retail real estate development?
The developers have now become even more cautious while taking a decision on what to build, the amount to be spent on the project and the consumption behavior of their ultimate audience. This has made the supply side of the retail real estate sector even more intelligent which has helped a lot in curtailing the costs of construction and marketing.
The destinations malls sized higher than 1 million sq. ft. are gaining the maximum attraction these days. So, the seasoned constructors are coming up with well-researched projects in the market. Moreover, there are a lot of developers who build just to sell, but here, reputation plays a key role as it helps in cracking the right deal.
How have brands changed their strategies in terms of space leasing?
Over the last two to three years, there has been a visible effort from most retailers on re-aligning their optimal sizes. So, the hypermarkets which were traditionally operating at 60,000 to 70,000 sq ft. during the first phase of retail development in India, have significantly brought them down to 20,000-25,000 sq. ft which is the minimum criteria for anchor stores. In the coming years, this area is further expected to decline and follow an omnichannel approach. Therefore, hypermarkets are going to be a culmination of brick and mortar with e-commerce.
Apart from optimization of lease spaces, they are also looking at technology to play a big role in terms of reducing the leasable areas. So, whosoever was operating at 1,500 sq. ft. is now looking at curtailing it down to 1,200 sq. ft. and implementing seamless checkouts. This disables the process of having checkout counters on every floor. Everyone is trying to optimize their leasing of spacing and where they lease out their spaces is also very important.
Lastly, the concept is beaconing, which has got face recognition to come into play. This gives you a heatmap of the performances of the stores. So, most of the fast-fashion anchor brands are now able to realize which categories are generating maximum revenue for them and accordingly, they are changing their internal layouts.