While the shopping mall phenomenon is fairly new in India, the industry has already seen its ups and downs in a very short span of time. Three-four years ago, almost every developer was able to sell mall space to investors or signed leases with retailers even before starting construction. Now, almost 30-40 per cent of shopping malls are lying half-filled and others have to rework lease agreements or work on just revenue share.
So what will make the mall business viable and more successful? The key is to accept that any longer term success comes only from long term planning and short terms gains are always short-lived. Most malls were conceptualised on very little homework or research about the future catchment dynamics or financial feasibility for a retailer. Malls were planned either because there was already a popular mall in the vicinity (so the footfalls were already there) or just because there was a property available to the developer (without considering the accessibility and relevant catchment).
These malls started to see lower footfalls once the novelty of the concept died down, resulting in exodus of their tenants. There are three key elements to a shopping mall’s ecosystem: consumers, retailers and mall developers. Each has to gain for the venture to succeed. The planning needs to capture catchment demographics, distance and current options for the consumer; mall design, potential footfalls, expected rentals and zoning for the retailer; and service environment, parking, accessibility and anchor tenant for the developer.
Our experience shows that a lot of the earlier malls have lost significant business as retailers shift to newer, bigger, better planned malls. While, one way is to work on the service elements and create customer-focused promotions and community building, another is to rework on the tenant mix from time to time to keep it relevant and differentiated to the target customer segment.
The writer is Associate Vice President, Technopak Advisors