Where lies the success of malls?

A mere mention of the word, ‘mall’ suggests lots of things like shopping, varieties of food, movies and entertainment.  With the beginning of the 21^st century, establishment of malls started in the country translating aspirations of lifestyles of metropolis and big cities. Piramal Holdings presented the first full-fledged mall, a 1.5 lakh sq.ft-centre to the people of Mumbai in 1999. Brand Super Mall of Sahara was set up in 2001 in an area of 3.89 acre on Mehrauli-Gurgaon Road, Delhi.

Concept of retail space and infrastructure changes with time. In India, this change is, at present, taking place very fast, at least in urban areas. New forms of retailing have already set in taking over the traditional ones. Transformed and in the process of further transformation, the retail space in India has, today, a new appearance and greater range of activities and facilities. There has been a sharp rise in the number of new formats, especially malls and, this speaks for their popularity – one mall in 1999 to 158 in 2005 to 600 in 2010. Although, business logistics of a mall ensure that, over time, shopping preference for consumers in a mall would go for high investment and more expensive product categories, small retail stores at the corner will continue for they provide all the daily consumptions that a family needs. With glitz and glamour, malls do end up selling the lifestyle, high-end and expensive products. But the basic necessities would continue to be purchased and sourced from local corner stores.

Origin, growth of Indian malls

Development of malls in India started only about a decade ago. Which formats of retail did precede malls? Giving a comment on chronological sequence of retail space developments, Mr Anuj Puri, MD, Trammel Crow Meghraj says, “Historically, the stand-alone next-door shop was first. Then, the chain stores and departmental stores came next. Now, India is being swept away by malls. Before the dust has settled, theme malls or specialty malls will entrench themselves.”  Mall is, not doubt, the trend-setting format of the hour. Consequently, developers have been focusing their business on building malls. “In India, every real estate major is making waves in the mall market. Not only do malls provide their customers a complete shopping experience with immaculately designed and spacious showroom spaces, they also offer an entertainment experience with multiplexes and food court. With non-availability of quality space at affordable prices in the cities, India is now following the US trend of providing multi-activity mixed used centres on national highways, where plenty of space is available”, says Mr Puri. Sharing this opinion regarding the growth of malls in India, Mr Gibson Vedamani, CEO, Retailers Association of India, says, “The growth of malls started in India long ago with the advent of ‘shopping complexes’ where the entire structure assumed a ‘build and sell’ real estate model. Since late ’90s, the actual ‘mall’ format has been founded – a format, which only leases out spaces and manages the mall mix with a professional mall management team.”  Giving also information on success and achievement of malls, he adds, “This has led many retailing companies to look at malls as good retail destinations. Over the last few years, malls in India have been very successful as many of them can compare themselves with those in developed economies and these have contributed to the growth of modern retailing in India giving even global brands the promise of good ‘retailable’ space in India.” Estimates reveal that Delhi and its suburbs have seen growth of 100 bigger and smaller malls. Around 600 new malls are also coming up in other metros and large townships in which the retail business is projected at less than 35 per cent.”

Are malls failing?

Speculating on a consumption boom, a large number of malls came up but the situation has played a truant. Closing of some restaurants and shops in recently developed malls began due to high rents, maintenance cost and dwindling public interest. DLF Mega Mall located in the IT and ITES hub of Gurgaon is not performing up to the expectations. Of the few operating shops in this large mall, most rarely have customers for survival. The same goes for several other retail outlets and many other malls in the vicinity. Move to Mulund (West), a suburban locality of India's financial nerve, Mumbai where residents have the option of shopping at Big Bazaar, Apna Bazaar, Subhiksha, Spinach, Shoprite, Foodland or at the local Sai Supermarket, all of which are within a two-kilometre radius of their residences. This is paralleled and replicated by the developments happening in the Delhi suburb of Ghaziabad, where the upcoming Shipra Mall at Indirapuram already has Big Bazaar operating out of its lower-ground floor, while Reliance is slated to open shop on the third floor. To a great extent, success or failure of malls will hinge on consumer population of the area. If the spending power of consumers is high in a locality, it could sustain two-to-three large players.

Shoppers are spending a lot of time and not much money here, and profits are beginning to fall. All around the suburbs of Delhi and NCR, developers have bought up plots of land that are fast being converted into shopping complexes. The relatively small community of Gurgaon is witnessing a frenzy of construction; its six shopping complexes, along a stretch of road known as Mall Mile, are to be joined by 17 others within two years.

This explosion has triggered concern among retail industry analysts who have begun to question whether the Indian love affair with mall culture is likely to survive. Mall weariness has started only months after the burst of mall enthusiasm that accompanied the opening of these vast shopping centers.

Reasons for failure

 Success of a mall depends on several factors: right location, focus on merchandise in terms of selection of suppliers, quality of goods, correct pricing, right management. Selection of people with right management skills responsible for good customer interaction is also a crucial factor.

Mr Pranay Sinha, President & CEO, Select Infrastructure Pvt. Ltd, believes, “Existing malls were developed without any thought. One hope that malls that will be made for tomorrow is made with the some realization, thought and right tenant mix because a mall is not made of bricks rather it is the tenants occupying space in it that makes a mall success.” 

Mr Vedamani says, “The reasons responsible for the failure of malls in India are specific to each mall and one need to study those in detail to redress them. In general terms, if the mall’s retail tenant mix is not coordinated well to match the target customer profile, it is bound to meet with failure.” Further, he elaborates, “The mall needs to have a strong mall management team that can coordinate and synergistically leverage the strength of all the tenants to design strategic programmes to increase footfalls, conversion, up-selling and cross-selling!”  Mr Puri believes, “In malls, size certainly does matter - Ansal Plaza in Ludhiana was simply not large enough. There were other issues, as well. For instance, the main entrance does not face the main road and presents problems with accessibility. Furthermore, this mall features an obviously under-researched, hodgepodge tenant mix.

DLF’s mall in Gurgaon was sold to investors and it should not have been. The investors sought unrealistically higher rentals, with predictable results. Also, the brand mix was an unsuitable one.” The feasibility of mall developments requires should be subjected to rigorous analysis which would examine, in great depth, factors like nature of the catchment’s area, demographics and psychographics of the prospective consumers, infrastructure of the city or town in that particular area and certainly the retail trade itself. This means that if the existing infrastructure is under-developed, the developer needs to take a serious look at investments and would be required to make this available to the prospective visitors. The incredibility on the part of developers is also one of the factors responsible for the failure of malls. Mr Vedamani believes, “The credibility of the developer is very important, as there should never be an opportunity for any gap to exist between promises and delivery. In India, mall spaces are booked a few years in advance, and in this scenario, the reputation of the developer to deliver what was promised to the retailer at the time of booking is very important.” However, Mr Puri does not consider this to be a significant factor.
Mr Sinha, agrees and says, “Yes, completely, it is the incredibility of the developers for the failure of malls. Infact, it is the assumption that making mall is a real estate business. Malls are not a real estate business, rather it a retail business.”

Still optimistic

People find malls as best places for shopping or hanging around during summer for they provide air-conditioned complexes with good music all around and lots of window-shopping opportunities, which please everybody.  And let’s us not forget those food joints, which serve various cuisines meant to magnetize the taste buds of all the foodies.

Regardless of the fact that some big malls are unsuccessful in India, retail analysts are optimistic and believe that the appetite for shopping in malls is just developing. About 65 per cent of the population is below 35 and that forms the right age group for shopping in malls, and people from this age group are designated as a powerful consumer force because they have grown up without the shortages and self-denial that older generations lived through.

India has a huge middle class of which 60 to 70 per cent live in big metros and have large disposable incomes and are being exposed, through television, to lifestyle in the rest of the world. “The mall culture has just begun to evolve in India and it’s here to stay”, says Mr Vedamani. As trends will change, fashions will change and consumer attitudes will change along with the availability of good retail spaces in malls in India.

Upcoming concept of ‘Luxury malls’

Regarding the future of malls, Mr Puri opines, “A few of the present malls will fall. They will be converted to hotels and commercial space structures. However, the big ones – especially those that get the size, brand and tenant mix formula right - will survive. In general, every mall that consistently, offers customers a new shopping experience will thrive. Indian shoppers are starved for novelty and players must take cognizance of this...there is little point in presenting old wine in new bottles.” Pointing out the prospective market of luxury goods, he adds, “Luxury malls will succeed precisely where the present formats are beginning to fail. They represent a pure genre of malls and a select number of brands decide on the factors that spell success, including their internal placement. There are presently too many generic malls around, and these are on the verge of boring Indian mall-goers. Moreover, luxury malls are not dependent on the number of footfalls they generate, as generic malls do. The first generation of luxury malls will soon see the light of day in Mumbai, Bangalore and Delhi.”

Speedy growth of organised sector has changed the dynamics of the retail industry in many aspects. Mall constitutes just one prime aspect of the industry. It is true that not every market place has the same set of demands and consumers. There has to be specific styling and choice, which fit into a given market place. Therefore, malls have to be very specific today in terms of its success-defining factors.

What makes mall a success?

A good mall needs to have a central ownership, disciplined environment and good atmosphere. Likewise control over tenants is very important.

According to Mr Sinha, “It is the tenants who make the mall successful. If you have bad mall but good tenant that mall will succeed which is why GK is successful and Sector 17 in Chandigarh is successful. It is not the fancy fountains, palm trees and glass elevators and all the money spent on the decoration of the mall rather it is constituents that makes mall a success. Right retail mix is important.”