In the US, dead malls spawn global tales
Overall, the difference in experience offered by online and offline retail stores will also be key in the long run
In the West, malls are dying. The number of abandoned shopping malls in the US, the largest market, is rising and many more face the threat of a closure. Credit Suisse, in a 2017 research note, had said that 25% of US malls will close by 2022. This was obvious, given that the likes of Amazon have eroded a significant share of the traditional retail market, globally, and the US in particular.
Will this eventually happen in India, too? Experts said the growth opportunities in India’s retail sector are big enough to satisfy the appetite of both new-age malls and traditional neighbourhood stores. The long-term economic prospects, a younger demographic, and the tendency among consumers to trade up, have attracted global retailers who are looking at India as the next big growth engine.
“Unlike the US, India is under-retailed. This is the time to invest in malls that offer more than just retail. Just as in the West, urban Indians shop online, but they still want physical stores. Retailers have understood the importance of stores (in malls) in creating a lifelong connect with consumers,” said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
However, considering the overall experience and the business cycles of malls in India, a section of experts urges caution. Atul Ruia, joint managing director, Phoenix Mills Ltd, says that just like one of every three malls have failed in the US, the chances of a mall becoming irrelevant to customers is equally high in India. “We need to be careful in planning malls. They need the right location, a large scale and the right tenant mix, else it will lead to a colossal disaster.”
Overall, the difference in experience offered by online and offline retail stores will also be key in the long run. In fact, given that companies are opting for an omni-channel approach, shows that for the Indian consumer both are necessary. “The mind-share and time-share aspects are very different in online and offline retail since the experiences are different. Thus the customers are willing to segregate their wallets,” said Sreedhar Prasad, partner, consumer markets and e-commerce, KPMG India.
“India’s retail market is estimated at around $650 billion. And there is no question of one model winning over the other. They will co-exist because the consumer is far more aware and demanding,” said Abneesh Roy, senior vice-president, Edelweiss Securities.
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