Aligning fast with the changing market dynamics, the retail real estate sector in India has shown tremendous resilience in the recent past. There is no second thought that malls and organized retail spaces are a symbol of India’s great consumerism story. The concept of shopping malls in India started sometime back in early 2000 and since then it is a learning experience for all the stakeholders, right from developers and retailers to shoppers.
Today, we are in a completely different world. Developing a shopping mall is no more a fancy work, it is all about systematic planning, researching and strategizing. The future of retail real estate is going to be shaped up by certain trends that are clearly visible in the market now. Here are the major ones.
1. Survival of the fittest: In the period between 2005 and 2015, we saw a large number of retail real estate projects coming up in metros and some select Tier-II cities in India. However, only a few of them got successful. Many of them suffered high vacancy rates and low footfall. Why? If we refer to a research study done by JLL, it clearly shows that while the A-grade malls had an average vacancy rate at 8%, the average and poor grade malls registered 17% and 39%, respectively.
This simply proves that quality is the single largest success factor for any mall. And quality is not just about construction and design, but other aspects that include accessibility, location, parking and other facilities provided to the visitors.
It is also noticed that if the above factors are met, malls even if they co-exist within a short radius can experience success. The Great India Place, Garden Galleria and Mall of India in Noida are a case in point here.
2. Focus on Consumer Experience (CX): Developers and retailers have to factor in the point that malls are not just shopping destinations; they are the modern hang-out zones for families and youngsters alike. Therefore, having a good tenant mix is crucial here. As visitors are increasingly looking for experiences and not just merchandize, there needs to be an exquisite mix of supermarkets, grocery stores, apparel shops and other regular retail points with entertainment zones with great food, music, cinema, 3D-7D shows, to name a few.
The malls which organize live events consistently stand a better chance to gain more footfalls than others. For that matter, thematic malls are also well-placed to get better footfalls.
3. The rise of e-Commerce: The growing popularity of e-commerce portals is already giving physical retail stores a run for their money. The war is going to intensify with the global retail bellwethers like Walmart aggressively entering the e-commerce market in India through acquisition of Flipkart. The retail stores have to prepare well to meet the challenge.
If we notice the profile and buying behavior of consumers today, it is apparent that they are upwardly mobile, tech-savvy and impatient to a great extent. They won’t like to be a part of long billing queues which have become normal at popular grocery supermarket chain stores and will resort to online buying as soon as they get better pricing and conveniences.
For the retail stores, it will again come back to ‘CX’. People will buy from them due to the experience they won’t get in online buying. That means, the in-store experience will need to be enhanced with great ambience, better displays and faster check-outs. Technology will play a key role in ensuring that people prefer to buy from stores and enjoy their shopping.
(By Ashish Bhutani, CEO, Bhutani Group)