The meteoric growth of e-commerce in India in recent years was broadly seen as a threat to physical retail. Seemingly bearing this out, ASSOCHAM states that e-commerce has grown at a compounded annual growth rate (CAGR) of 30 per cent, while retail sector growth has been at 15 per cent CAGR over the last five years.
However, these fears have little foundation in reality – there is in fact no threat to quality malls (meaning malls with good designs, management practices and healthy tenant mixes). Such malls have actually become more attractive for premium retailers; vacancies have fallen and rentals have increased in such malls. There is, however, no doubt that other shopping centres have suffered a steep decline in footfalls.
Interestingly, many e-commerce companies have started to lease space in quality malls to increase their visibility. Players such as Flipkart, Freecultr and Lenskart have actively pursued this strategy, acting upon their customers’ demands for convenient pick-up / touch-and-feel centres.
E-commerce has witnessed the largest growth in categories such as fashion (apparel, footwear and accessories) and electronics. Consumers prefer established brands in these categories, and choose to buy them from the cheapest sources – often disregarding the point of sale. As e-commerce players started retail activity in these categories, they offered steep discounts – a formula for guaranteed initial success. That said, the ‘deep discount’ strategy cost them dearly, meaning they had to forego profitability in favour of growth.
High streets continue to witness dominance of the same retail categories unlike quality malls. However, high streets are left with no novelty factor, as their sole USP of easy access and convenience to consumers is being matched by e-commerce players, which provide home delivery and exchange pick-ups. In such a scenario, high streets could learn from quality malls and not allow e-commerce to become a bigger threat to them than it currently is.
It would probably help if high streets got more active in initiating holding events or festivals on streets or in designated areas within the area to keep onlookers engaged, thereby inducing shopping. We have seen such events in practice in specific areas like the annual Kala Ghoda art festival in Mumbai and exhibition-cum-sale events of products from various regions of India at Delhi Haat, etc.
About the author: Suvishesh Valsan
is AVP – Research at JLL India. The views and ideas expressed in this article are his own