E-commerce: A threat or opportunity for a retail mall?
Presently, the country has about 25 realty developers who are into retail, while back in 2008 this figure was 100. If current scenario remains prevail then by 2020 the country would leave with handful of retail developers.BY Shipra Srivastava | Apr 03, 2017 | comments ( 0 ) |
Indian Malls: Then and now..
The Indian mall story began the 1990s with Spencer Plaza in Chennai, Ansal Plaza in Delhi and Crossroads in Mumbai. From these two malls to 720 malls (till second quarter of 2016) Indian malls have registered exponential growth. However, vacancy ratio in retail malls is also increasing at staggering pace.
As per the JLL data, India level mall vacancy percentage is staggering 17. However, if we go city wise then picture is not that disappointing, for example in Mumbai has the vacancy ratio of 3%, Bengaluru 4% and Delhi- NCR only 5%. Furthermore, unlike to past, the capital value of superior quality malls is much higher than residential properties. So, the survival of malls located in tier II is only a cause of concern.
JLL data also indicated that there is a sharp decline in number of developers who are into retail. Presently, the country has about 25 realty developers who are into retail, while back in 2008 this figure was 100. If current scenario remains prevail then by 2020 the country would leave with handful of retail developers.
So, the question arises, why there is a falling interest of developers to invest in retail real estate projects?
Though there are many deterrent factors but the biggest gate crasher for Indian mall industry is said to be ‘e-commerce’. Indian e-retail is not even a decade old, but it has already started taking a toll on the shopping lmall business. The convenience offered by e-commerce started eating the footfall of retail malls. Although, the things have started change now, malls are now evolving and looking beyond retailing.
E-commerce: Threat or opportunity?
India remains an underdeveloped retail ecommerce market, with digital commerce accounting for only a small piece of the country’s total retail sales. Given the growth of e-commerce in India, retailers are feeling the heat, but on the contrary, malls are last in the line to fear online retail. Provided shopping centres have positioned themselves as entertainment hubs and hangout zones, the mall operators are of the opinion that no matter how much people shop online, they ought to drive down to malls for social gatherings as they can’t have a birthday bash or a friend’s outing/gatheringonline.
Globally 8% trade happens online, so we are talking about 90% plus offline trade to address the friction between online & offline scenarios.
Speaking on same, Sachin Dhanawade, Vice President - Operations, Virtuous Retail said, “In my opinion there could be 2 sides to this:
(1) When e-commerce websites are negatively affecting shopping malls.
(2) When such websites Complement shopping malls to meet consumer needs.
In the first scenario, the e-com industry will adversely affect Shopping Malls when the online store offers greater discount/ price differences and the mall doesn’t take any steps in being a destination and offering the consumers an experience.
In the second case however, websites such as these tend to supplement the malls/ local shops. In Tier II and Tier III cities, branded goods/products are rarely available and if they are, there is always very limited choice. Online retail stores in this sense can be a boon to people from these cities as they enable the population to shop the latest products be it clothes, electronics, etc. In this case, local shopping malls which are decent but are not huge like those in the capital and other metro cities, are a good product mix for a customer to have.”
A road ahead..
Ecommerce has surely created a big hoopla and given the consumers another avenue to shop from and get the goods delivered right at their doorstep. Also, it has given an opportunity to retail malls to evolve themselves.
Jayen Naik, Vice President, Ahmedabad One said, “We feel, outside the metro’s, e-commerce will still take a while to create a massive impact. India is still a traditional shopping market where they like to touch and feel a product before buying it. Given the pace at which we live our lives these days, very few people would have the time to return products which do not meet expectations,” Electronics is probably the only segment that has taken a marginal hit due to e-commerce, but we are doing whatever is in our control to support them, Naik informed.
Concuding the topic Dhanawade said, “The online shopping population and the offline shopping population are quite different and have various rationales for being so. A busy business man may order his groceries and clothes online but a housewife may like to visit the grocery store and spend a day or two shopping and browsing around in the mall. So while the two populations are quite different, at this point in time, I don't think there is a battle between the offline and online stores. It's a good ecosystem for all the shoppers, offline & online stores to co-exist in happily.”
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