Malls Should Promote Holistic City Growth

Malls have captured the imagination of shoppers everywhere and it is no surprise that they are said to range between 500 – 900 in the country today. 

Though we are playing catch up, by global standards our malls are still modest in size. The largest, Dubai Mall, spreads over of 3.7 million square feet GLA, (Gross Leasable Area) and worldwide many are between two and three million square feet (m sq ft). 

Our two largest malls, the Sarath City Capital Mall in Hyderabad and the new Lulu Mall in Lucknow are both just shy of the two m sq ft mark, most others range between a million square feet to 300,000 sq ft.

Size is dictated by many factors, the primary being the availability of expansive unencumbered real estate which is hard to find in our overbuilt cities. Still, at our scale, we have done well with the maturing of the concept of mall shopping. Management have become increasingly sophisticated, quickly learning and adopting global best practices including zoning, anchoring, variety, convenience and easy and adequate parking.

They understand well the maxim ‘more time spent in the mall means more money spent’ and work hard to surprise and delight customers with their entertainment offerings and celebrations. People look at malls as a family outing destination, so good food courts and restaurants are nowde rigeur. Cinemas have also been an integral part of malls for years. Today’s declining trend in cinema viewing calls for close monitoring. It should not create a hole later which will need plugging with something else. 

In this quest for fresh entertainment, a plethora of ideas are at play, from Venetian gondolas in canals in the mall to sports, gaming halls, bowling arcades, ice rinks and climbing walls et al.  Customer service and loyalty programmes are much bandied buzzwords, as malls try to differentiate themselves.

All this helps the industry to grow and flourish. However, while we have bounced back from the pandemic blues, the galloping growth of e-commerce has certainly had a dampening effect. Another party pooper is increasing transit times with logjams on city roads, crimping the impulse factor for many otherwise willing visitors.

Despite all this, large players are again betting on offline sales. In the next five years, Ikea and investor Ingka committed Rs 7,250 crore to develop shopping centres and stores in Gurgaon and Noida. The Lulu Group also announced that they will be investing Rs 6,000 crore on a pipeline of 12 new malls including major projects in Varanasi, Prayagraj, Chennai and Coimbatore. The well-established DLF group plans Rs 3,000 crore investments in malls in the next five years.

With all this, reports are that 85 new malls will be opened in this period and individual retail brands are growing in tandem. 

As a sampling, in the five-year time frame, Fila has announced 100 new shops, Sephora another 50, Bata 500 new franchise stores, Croma 50 stores and Marks and Spencer’s 37 stores. The Indian Avatar with 95 stores is looking at having 500.  Starbucks has planned 50 stores a year, and KFC, despite the pandemic, grew from 450 to 480 last year and plans to keep growing. A big portion of such brand shops will end up in malls. So, as the number of malls increases, individual brand expansion plans also seem achievable.

So, what do we need to look out for?

There is a bias towards expansion in well ‘malled’ areas such as Gurgaon, Noida, Delhi and  Chennai. Inevitably, each new mall will cannibalise sales of already established players, first in its immediate area, then in its city. The overall cake may grow marginally, but the share of older, smaller players will shrink rapidly as customers switch loyalties. This has happened in many other countries and there is no reason why it won’t happen here. A good case study is the rise and fall of malls in the crowded Sector 16 in Noida.

Internationally, developers work hand in hand with city authorities to create new destinations in nascent, developing parts of the city. This attracts people to the new vicinity. For example, when the Mall of the Emirates was opened in Dubai, there was practically no established population in its five km catchment radius. In a couple of years, a vibrant community had surrounded it with schools, shops and eateries and lots of apartment blocks. This has been the experience in the city after city.

Far-sighted planning by developers and city authorities can direct new investments to less established areas decongesting the burden on city services like water, sewage and most of all electricity, which is needed for constant lighting and controlled temperature. Traffic can also be diffused by properly planning parking, access and egress.

The city inevitably expands then in a new direction, taking real estate values up with it and easing pressure on the city centre.

All new properties need not be luxury malls. It makes sense to build for different income and purchase segments. Having mid-price or even budget malls or shopping centres gives smaller retailers and budget chains opportunities in good locations which are often denied to them in upmarket malls. Customers in the natural catchment area around these malls are also comfortable shopping there.

Two caveats

Even smaller and budget malls should be managed with the same level of skill and expertise as the more sophisticated malls. Often such properties suffer through lack of professional management, gradually fading away.

Experience has great value in this business. It is worth stating that every builder with money cannot be a mall developer or operator. There is an art and a science to it and vanity projects should be avoided. 

The rationale of opening a new mall should not only be quick returns, it must have the added benefit of helping the city to grow holistically, meeting different specific needs. 

The writer has over 30 years’ international experience in marketing, managing brands and retail and ecommerce businesses and consults in these areas.

Ajai Kumar Dayal

Guest Author The author has over 30 years’ experience in managing and consulting on big brands, retail, and ecommerce. He has been a commentator and columnist in many publications.