The mall mystery

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The suburbs and exurbs of all our towns are witnessing a glitterati opening every day and malls are moving towards suburbs, tier II and tier III towns. Never mind recession, inflation and the presence of numerous other malls in the city. Perky singers, celebrity launches, weekend events and people in all the shops in the mall and all look positive.

Recessions come and go and malls are not made for just immediate consumption, but are long-term structures with extended plans for customers. According to industry estimates, by the end of 2008 about 900 lakh sq ft will be available through 263 malls in the country.

‘Smaller towns—bigger growth’ is the mantra and retailers are upbeat about this. Growth has shifted beyond location. Getting the crowd pullers, the anchors—the big stores that retailers count on to serve as magnets for customers —is very important for mall owners in these tier II and tier III towns. Customers are so used to best experiences wherever they go, and the expectation is beyond just a shopping experience. The operative word is indulgence and mall owners in the suburbs are not turning their face away from it.

Where smaller towns, style and spends used to be considered oxymoron, they gel very well today and it is this change in the shopping culture and phenomenon that has allowed mall owners to brave what were known as the secondary territories. After all, malls have taken the role of ostensibly contributing to the social setting. Exurbs are no exceptions to this. Exurbs by definition are residential areas beyond suburbs and prosperous residential area outside a city, beyond the suburbs.

Is the decision of taking up projects in tier II & III towns easy and welcome? For many it is a forced decision, but the reasons are many and make better business sense. So, why not go for it?

The decisions are based on lower operating costs that add at least 3-4% to the margin. Moreover, real estate in the cities is already taken, and whatever exists is exorbitantly out of reach. Bigger markets are more saturated than the smaller ones and that covers all parameters. Real estate, human capital and maintenance are the major costs for any mall management. Ready availability, prudent real estate investment, intelligent recruitment, long-term plans are very crucial to keep up with the number game, in this case the footfalls.

In addition to the obvious business reasons, the shoppers are from the suburbs and the secondary towns. Increasing urbanisation has definitely pushed organised retail deeper into the country. People in established cities have moved out to vast sprawling suburbs.

These suburbs have broken free of the gravitational pull of the cities and now exist in their own world far beyond. Now you have a tribe of people who not only don’t work in cities, but don’t commute to cities or go to movies in cities or have any contact with urban life.

An increasing demand for residential growth and shifting of office space to these suburbs is another factor, which has fuelled the development of the shopping arcades. The NRI population has definitely brought in the need for the leading brands and style into these shopping destinations. Therefore, it goes without saying that there is a need to build and maintain these malls at global standards.

It is not just numbers, but the conversion rate that is an added attraction in these smaller markets. The so called new breed of malls will have facilities that were lacking in the earlier malls. Developers will give priority to determining factors like parking, mall design and soft strategies like customer relationship to make these malls work.

It is imperative that developer’s position malls correctly to attract the right tenant mix and differentiate themselves from their counterparts in the city or other suburbs. Taking the revolution further is very important to define growth in this sector and all mall developer who have put their money in these smaller kitties will wait for the big gain.