India’s e-commerce sector is expected to touch US $28 billion by FY 2019-20 on account of an increase in the number of buyers and stable annual spends per consumer, according to a Kotak Institutional Equities report.
“A gradual increase in shopper base, coupled with steady increase in online spends can help the Indian e-tailers reach gross merchandise value of US$ 28 billion by FY 2020. We assume buyer penetration to improve to 18 per cent by FY 2020 from 12 per cent in FY 2016, with annual average online spend to increase by 10-15 per cent year-on-year over the forecast period,” the report states.
The report observes that e-commerce will continue to find more takers, particularly as organised retail penetration remains limited in Tier II and III cities.
So, will shopping malls will loose their sheen in the future since consumers will seek shopping solace through clicks over bricks?
“I believe the mall culture has only begun in India, the concept of shopping malls is still evolving rapidly and adjusting to the ever changing market and consumer dynamics. E-commerce and shopping malls in India will co-exist and be complementing each other. People go to malls for the entertainment and experience value it provides them however one cannot find that on an e-commerce platform. Malls have now become a community centre where individuals spend a lot of time with family and friends, shopping on an e-commerce more often than not is a lonely affair. The mall culture is here to stay as long as the mall developers identify the changing dynamics and make changes to their offering,” says EVP & Head Premium Malls, DLF Mall Of India, Pushpa Bector.
Resonating the same thought, CEO, Inorbit Malls, Rajneesh Mahajan says, “Our total supply of malls is still less as compared to some of the developed countries and the entire organised retail as a business is really small. So we see a lot of growth coming in and I think both e-commerce and malls will see tremendous growth in coming years. E-commerce has impacted the overall size of the organised retail by growing it further in India and it is a positive impact. And both of them are helping each other in growing the market bigger.”
Generally, the success rate of malls varies, usually depending on factors like design and layout, the mall’s brand positioning, location and how well they cater to the needs of their target segments. Also, whether or not they have been able to evolve into family destinations rather than just remaining shopping centres is important.
Mall owners these days are striving hard to provide shoppers with an unparalleled shopping experience combined with never-ending entertainment, fun and food.
“During the last few years, the retail has witnessed a substantial growth and the Indian retail industry has made substantial progress aligning a vast range of items from across categories under one roof. Due to liberalization of the FDI policy, major international and global players have now entered the retail space with ambitious plans to expand in the future years across verticals and cities. Though growing smartphone penetration and burgeoning of online retail platforms have created diversions offline retail is here to stay. In fact an eMarketer report states that 90 per cent of retail sales still take place in store.”
“In fact, the future of retail is Omnichannel. This trend towards an Omnichannel strategy will enable retailers to re-think their business strategy in order to tap the best of both worlds and maximise on footfalls,” reveals Executive Director, Pacific Malls, Abhishek Bansal.
Key factors helping shopping centre industry to flourish
Growing youth – The youth population is growing in India. They are becoming more brand conscious and desire a better standard of living. According to Census report, India has about 500 million Indians under age 25 with easier access to money giving them a significant purchasing power. This is driving growth and demand for products.
Increase in working population – According to the KPMG report, the working age group of 15-54 years is the largest spender on retail and as per the census of 2011, more than 50 per cent of India’s total population falls under this group, indicating the significant influence by this segment.
Rise in income and purchasing power – India has a large and aspirational middle class and its disposable income has increased significantly, which is resulting in a substantial change in their spending habits and purchasing power. Other factors such as rising internet penetration of the retailers offering a high class shopping experience, rapid real estate infrastructure development, new product innovation, growing interest of investors have wedged the Mumbai retail industry to a large extent.
Ways that mall operators can further improve their business
– They can raise retail categories like food & beverage, entertainment, services, lifestyle and luxury segments.
– Malls could opt to implement O2O (Online-To-Offline) offerings in order to help retailers raise their offline sales. Most Asian mall operators are adjusting their tenant mix, but O2O offerings are still in an infant stage of development.
– Mall operators, in the time to come, could focus on large malls developed in strategic locations keeping specific micro markets in mind. Where this could be a “one stop shop” type large/ regional centre development which has an excellent mix of all the various retail categories catering to customers across all age groups and segments with a focus on food & beverage, entertainment, services, and lifestyle segments.