With new shopping-malls having become operational in many cities across India, it is interesting to observe how the shopping-behaviour of consumers in the vicinity of these malls has changed and thereby draw some lessons that could be of some use to the developers of hundreds of new malls that are currently under planning or construction across India.
It is still not too long ago that the operators of a particular new shopping-mall at Mumbai had to contemplate restricting entries of visitors by imposing conditions that such entry was limited to those having mobile phones or credit cards a.k.a., the income tax department's one in six criterion for filing a tax return.
Delhi and Gurgaon saw some of the initial mall developers become parking lot operators as well by charging exorbitant parking fees from all visitors.
Rentals, rather than going down with more malls coming up, started moving up even as the quality of services within the malls started deteriorating.
In this context, therefore, it is somewhat surprising that questions are already being asked, albeit in whispers, whether shopping-malls can survive and operate profitably in India.
Many tenants lament about the low percentage of conversions from those who walk through the portals of these malls, and casual observers routinely find shopping-bags missing in the hands of the supposed shoppers visiting these malls as an indicator that the initial euphoria about shopping in the malls is already on the wane and that consumers are reverting to their traditional shopping-destinations.
There are some myths and some realities about these observations. It is, indeed, true that many Indian retailer tenants in the shopping-malls have now become familiar with terms such as footfalls, conversions, average transaction value, and repeat customers.
However, it is also true that for many of these tenants, it has been their first expansion beyond their traditional high street locations and hence, they have expectations born more out of hype than by any real experience.
For instance, I would like to speculate that daily or weekend footfalls in traditional shopping high streets of India such as South Extension and Karol Bagh in Delhi, Linking Road in Mumbai, Commercial Street or Brigade Road in Bangalore, or for that matter, T Nagar or Anna Nagar in Chennai would easily exceed the more carefully estimated (or measured) footfalls in any of the malls in the country.
Similarly, if one were to carefully observe the ratio of visitors having "shopping-bags" in their hands in these high streets versus those in the new malls, it is not going to be very different.
As far as individual retailers' performance is concerned, even in the traditional markets some established retailers do extraordinarily well while many other shops see a change of "shop boards" very frequently.
There is no reason to believe that it should be any different in a shopping-mall, which, in any case, is fundamentally no different from a traditional shopping-high street, except that a mall has a more modern and compact structure, in most cases a single roof.
Local retailer tenants who move into a new mall for the first time should not expect any customer loyalty being built up overnight.
For example, in Delhi's case, it is possible for a retailer to be very successful in Karol Bagh or Lajpat Nagar shopping-districts but he would have to start from scratch in terms of building up brand recognition as well as generating customer conversions in a new location such as Gurgaon or Noida.
In contrast, national retailers such as Shoppers Stop, or national exclusive brand outlets such as those operated by Madura Garments, Arvind Brands, Raymond, and Zodiac, have national brand recognition and hence the performance of their outlets in shopping-malls is usually comparable (or even better) with their outlets in traditional shopping-markets.
Secondly, with most mall developers having blindly opted for a questionable winning formula of shopping, entertainment (read Multiplex) and food (read MacDonald's/Pizza Hut as the main draws), it is no surprise to find many mall visitors having no shopping-bags since they have been enticed to visit only for watching a movie and/or having a burger or a pizza or even a cup of coffee.
The situation pertaining to shopping, for instance, would be no different in locations such as Saket or Vasant Vihar in Delhi, which are better known for their movie theatres and eating options.
What is the lesson for mall developers and for the prospective tenants? For the developers, the critical lesson is to invest some quality effort in understanding the shopping-needs of customers in their targeted "catchment" areas and then build a carefully planned portfolio of retail options that can meet the needs of these targeted customers.
In many instances, customers would only need shopping and eating options rather than a multiplex as well. The developers also have to understand that their retailer tenants have to earn a profit and hence the rentals have to be aligned to what the retail business can bear (usually 5-8 per cent of gross revenues).
Mall developers also have to create distinctive identities for their specific malls, much like the identities that have developed over time for major shopping-high streets in various cities in the country.
Their work is not done just when the mall has been commissioned! As for the would-be retailer tenants, it is important to realise that merely moving into a mall does not guarantee business for them.
They have to work as hard to draw consumers to their own stores once the latter have entered the mall, and then have the right value proposition for them to get converted into customers, and then become repeat customers.
The final, obvious, conclusion is that mall developers have to invest in getting a better understanding about the retail business, while retailers have to get a better understanding about the dynamics of operating at a new location.
