Malls today are a one-stop destination for shoppers offering a mix of both mid-range and high-end retail, entertainment, fine dining and experiential events. Exclusivity is at the heart of customer experience, and some of India’s high-end malls have upped their game by offering personalised services such as concierge, styling and personal shopping assistance to differentiate themselves from their competitors.
It is therefore not surprising that amid rising consumerism in the Indian market, developers are upping the ante on new shopping malls across the top seven cities. Anarock data indicates that nearly 10 million square feet of new mall supply is expected to hit the Indian market in 2019. Despite rollover of some supply from 2018, there will be a three-fold jump in 2019 against 2018 — from 3.2 million square feet to nearly 10 million square feet.
In fact, 2018 also saw a 69 per cent increase in new supply against 2017 — organised retail absorption stood at 3.94 million square feet, up from 3.75 million square feet in 2017.
Does the demand story support the supply of so many malls in India? Should developers continue to invest in building more swanky shopping centres? The answer is a resounding “yes”.
There is still significant demand for malls in India, and this demand is not limited to just Tier 1 cities, but now also comes from several Tier 2 and Tier 3 cities. Previously, most malls lacked the right tenant-mix and were located in the wrong areas, thus failing to draw shoppers. This dynamic, largely the result of bad planning and lack of research, invariably resulted in closures — and a dearth of the right kinds of malls.
Today, Indian mall developers have completely changed their strategies and are banking on creativity, technological innovations, the right tenant mix, the rights brands and locations, etc. These essentially are the parameters that decide a mall’s fate in India today.
Indian retail dynamics have evolved rapidly not only because of policy liberalisation but also on account of the hefty challenge that the boom in e-commerce presented brick-and-mortar retail. Fortunately, the government new e-commerce policy presents a distinct advantage to physical retail in the country.
Implemented in February 2019, the new e-commerce policy intends to deliver better price parity between online and offline retailers and addresses the major issue of data colonisation in the country. From now on, e-commerce players will have to treat all vendors equally, and none of them can sell products of vendors with whom they hold equity interest.
Also, the concept of “exclusivity” in terms of vendor inventory now ceases to exist, and e-commerce players can no longer influence the pricing of goods or services in any manner. The options of fast delivery and cash back offers from exclusive vendors, which had been a major pain point for physical retail players, have also been weeded out.
This not only means that e-commerce giants will have to completely revamp their business strategies in India — it also means that physical retail has regained market traction in India. Without the option of exclusivity, vendors will need to consider alternate options — largely in the form of physical retail stores — to reach a wider shopper base, especially in Tier 2 and Tier 3 cities.
In other words, the look and feel aspect of shopping in India is very much alive and, thanks to timely and highly focused policy interventions by the government, actually growing. Malls — as long as they tick all the right boxes — will therefore be in greater demand in India than ever before.
Anuj Puri is Chairman of Anarock Property Consultants.