Shopping malls vs Ecommerce: How the traditional channels are preparing to stay relevant?

Ecommerce penetration in India has increased multifold and even though it is only around 2.1% of the overall retail market of $770 billion, projections for the future are staggering with a potential increase of online shoppers from 69 million to 215 mill
shopping malls

Is the apocalypse for shopping malls already here? Are we beginning to see the end of the shopping malls, the model they operate in, and their hold on the consumer?

 Statements like above are fairly common these days, especially with gloomy reports on the performance of shopping malls and their imminent closure, with retailers slashing their store footprint in the traditional shopping channels.

 The rapidly increasing sales through ecommerce have overshadowed every other channel of growth consistently over the past few years. Hundreds of retailers who operated as independent stores or within shopping malls have borne the brunt of this and many of them have had to shut shop. An indication of how fast ecommerce has grown can be seen from these statistics reported on SeekingAlpha. As per the report, “e-commerce sales in the third quarter of 2017 jumped 15.5% from a year ago, to $115 billion including online sales by brick-and-mortar retailers. Over the same period, total retail sales increased 4.3%. And retail sales without e-commerce - an approximation for brick-and-mortar sales - went up only 3.1%, barely staying ahead of the 2% inflation and 0.8% population growth.”

  Even though the times are tough for bricks and mortar businesses, fast moving technology and a new generation of shoppers have created opportunities that were either left untapped or did not exist before. Specifically for shopping malls, the horizon has shifted remarkably from being a "place where you'd come to shop", to an "experience/destination that will fulfill all your needs”.

 Westfield—a large mall operator across the US and UK—has invested heavily in technology and created Westfield Labs, experimenting and implementing with ideas like shoppable glass screens that let users swipe and buy items using their mobiles. Unibail-Rodamco, Europe's largest commercial property company has created an innovation lab UR Labs, specifically to test new concepts and ensure they reinvent the shopping experience for customers.

 Here are a 5 key changes that the commercial property owners are looking at, in order to compete and stay relevant in the space of digital retail. 

Creating a True Omni-channel Experience: For years, retailers have been talking about merging  online and offline experiences, and making the customer's journey truly an omni-channel one. Shopping centers have also picked up on these trends and are focusing on creating experiences, both for the malls as well for the retailer owners who lease out space on their premises. Shopping centers are making use of mobile technologies either to enable their customers browse products in stores with convenience, or by partnering with tenant retailers to showcase their catalogs online so as to enable users to check for stock at a shopping center location before making a visit.They also try andcreate an online marketplace with partner retailers under the brand of the shopping center. This way they are ensuring that the customers truly find the value they seek when they make a visit. Engaging customers through content and creating a connect with them through social media and/or loyalty programs are on rise as mall owners have realised that the customer is looking for such interactions actively now. On the other hand, shopping centers are also playing aggregators for their retailers online and thereby providing a platform for some of the digitally “immature” retailers. This creates a win-win situation for both the owners and the tenants.

 Shopping Centers vs Experience/Destination Centers: The definition of a shopping center is changing from a place where a customer can purchase items from a wide assortment, to a place that can be viewed as just a destination and/or an experience destination. Westfield Labs has rolled out ticketless, smartphone parking at Westfield London, thus solving one of the biggest pain points of customers. They have also included afood ordering feature in their app for Westfield San Francisco and Sydney. By identifying the reasons for not visiting the mall and converting them into opportunities, mall owners are sending out a message that they recognise the needs of the customers. Malls are being designed specifically to engage customers, making them feel more welcome and offering them more value than just shopping.

 ​​​​​​Shopping Centers as Economies of Scope: Ecommerce offers its consumers convenience of browsing, shopping and getting informed about new products/offers from the comforts of their couch. On the other hand, shopping malls have the advantage of being closest to the customer and thus creating opportunities for offering services in person to them. Lots of retailers are offering the facility of "buy online, collect in store" to their customers, to resolve the pain associated with shipping costs, and also create sales opportunities while the customer is at the store for collection. Others have also provided customers with the ability to reserve stock within a selected store and go pick it up at a convenient time. Shopping malls have also understood this model and are following suit. They are also redefining their relationships with the retailers, expanding from the lease-rent only relationship to a much deeper technology and innovation-oriented one. The opportunities to expand malls as economies of scale are endless.

 ​​​​​​​Using Technology and Customer Data as an Enabler: Retailers with strong brick and mortar presence are using technology to get as close to their customers in terms of understanding their behaviour, buying patterns and other preferences that can be used to enhance the offerings made to them. Shopping malls also have a large opportunity here that they can benefit from. A combination of technology and forward thinking is enabling the shopping center owners to study their customers more and take decisions based on data.

 ​​​​​​​Exploring new Business Models with Retailers: Traditional rental models that involved long and short term lease agreements with the tenants based on overall sales in the space, will soon be a thing of the past. A completely new relationship is now emerging between property owners and tenants that is based on increasing sales through better sharing of data and technology, keeping the customer at the center of the business. For example, a sale, initiated from the online channel and completed in the store, or vice versa (showrooming and web-rooming), are all going to be factors that drive the success of the tenant and thus the mall as well. Blended rental models that take care of these calculations are already picking up pace and they will evolve further considering  the interests of both the retailers as well as the owners. Retailers and mall owners who can understand the opportunities that lie in this space will benefit the most, while creating new experiences for their customers.

The India Story

Back home in India, the situation is clearly no different. Ecommerce penetration in India has increased multifold and even though it is only around 2.1% of the overall retail market of $770 billion,  projections for the future are staggering with a potential increase of online shoppers from 69 million to 215 million in the next 4 years. What this means is that even though India is still largely a market driven by physical shopping channels, the online medium can no longer be ignored by businesses. Retailers and shopping malls in India are working together on similar lines as mentioned above to ensure that they are up to the challenge—through collaboration and investment in innovative technologies—and not necessarily by asking brands to keep online business away from stores.


DLF, one of the real estate majors, and owner of many shopping malls that provide a unique experience to the visiting customer through a combination of shopping and entertainment, has combined technologies like Internet of things, cloud, big data analytics and machine learning to increase customer footfall in their premises. They have partnered with ICICI Bank and SBI to offer cashback to customers on a monthly total spend. This is done through access to more than 35000 point of sale machines across stores in their malls that track customer transactions through any of the two banks. IoT sensors installed across their premises track customers through the malls giving them useful information, whichcan be used to create valuable offerings to the customer. DLF has launched a mobile app ‘Lukout’ for customers that enable the user to view catalogues of different stores and brands, personalise their shopping experience, and provide information about discounts and offers before anyone else. By investing in the right areas and keeping the needs of the customer first, they have clearly shown the path ahead for shopping malls in the country.


Even with the emergence of ecommerce at a pace that is staggering, physical stores and shopping malls have a central role to play in meeting the needs of the consumers. What is important is to recognise the opportunities and use technology as a backbone not only to partner with each other, but also with the customer to provide them with a truly incredible experience.

 The article has been penned down by Amit Tripathi, Senior Manager, Publicis Sapient








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