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The changing dynamics of shopping centres

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No matter how far and deep the web of e-commerce across the globe, the allure of brick-and-mortar retail appears to endure. Not much, it seems, can replace the experience of shopping in a physical space. Discounts – the raison d’etre of online commerce – may be tempting, but the case for human engagement offered by physical retail is compelling. We take a quick look at the major trends being witnessed by retail real estate businesses in India and elsewhere.

The changing dynamics of shopping centres
Technology and social media have changed rules of consumption and expenditure behaviour, and that impacts shopping centres as well

The world is getting smaller. Literally. Retail is bringing the world closer, and in a good way. Buying and selling is happening everywhere. From the store at the corner of your street to groups on Facebook to pages on Instagram and yes, through WhatsApp groups as well, retail has made people connect far and wide. Pakistani suits are a rage for those who like dressing in salwar kameezes, while copies of premium branded merchandise bind buyers in India and the sellers from Hong Kong and China. Within one family, palates have started diverging. The little one enjoys her burger, the teenage son is a pizza fan, the wife is on diet and she needs a sub and the man of the house is craving for chaat. But then what is the connection of these things to shopping centres? Now think about this: where will the lady flaunt that spectacular Pakistani suit purchased on one of her WhatsApp shopping groups? And where will that starry-eyed fashionista flaunting an clutch actually go and use it? How do you satisfy multiple food cravings in one place?

The only destination that can take care of everything mentioned above is a mall. The existence or current relevance of malls is not in question; the question is, will they stay? Well, only those who reinvent themselves with time are here to stay. For the rest, there is an American portal – www.deadmalls.com — which is doing its bit to make them legends, anyway! But really, who wants that kind of achievement?

International Dynamics

Technology and social media have changed rules of consumption and expenditure behaviour, and that impacts shopping centres as well. No mall today can afford to operate in isolation and just be a ‘shopping’ destination. Selfie stations (whether you decide to label them that way or just call them an attraction) are a must and so is free WiFi. Ensuring an online identity with names of all tenants along with the events’ calendar of the mall is a given. These are just the basics for malls to follow in India and internationally. In more developed markets, however, technology is few steps ahead and offers the shopper a lot more. Here are some value additions:

Living and Shopping Under One Roof! – The trigger to this is diminishing footfalls at shopping centres, but then some things do come as blessings in disguise. In India, the concept of a township is already popular; residents can shop, go to school, college, attend to the sick at a hospital and dine out… all within the boundaries of their residential campus. Internationally though, we hear about retail destinations being remodelled to include both residences and shopping centres.

In a recent article on news.com.au, Chief Executive of the Real Estate Institute of Queensland Antonia Mercorella was quoted as saying that this model has been particularly successful in Queensland where a shift towards apartment living is underway. Buyers of apartments are looking for are amenities and lifestyle elements. Living above retail and cafes and restaurants is already very popular. Proximity is one of the skew drivers in residential living – proximity to transport, proximity to workplaces, proximity to leisure – as shopping centres move beyond being retail-centric to become places where consumers hang out. Living close to that will certainly be attractive to a segment of property buyers.

The article (news.com.au) further has an interesting take from Adjunct Professor at the Royal Melbourne Institute of Technology and practicing architect Dr Graeme Gunn, who gives a thumbs up to this concept. He says, “The idea goes back to the 1980s when we were starting to rehabilitate warehouses for both residential and office use. In terms of sustainability, you are getting that density of mixed uses, it’s absolutely something worth pursuing.”

Extending the Touch – It is all about touch! The touchphone means that anything that doesn’t work with our touch is not for us. So, if a mall doesn’t have a user-friendly touchscreen functioning as an information desk, we are not too pleased. A majority of the malls in developed markets – and the stores they house —have gone ahead to e-connect with their shoppers. For instance, YunTouch uses face recognition technology to collect and analyse customers’ past purchases when they stop by a digital display terminal. In Japan, there is a store that has a robot that is fluent in eight languages, can attend to customer queries and can also follow up with them using emails and text messages.

Having an App – Having an app is mandatory for malls today. In China, a large number of shopping centres have apps that help them connect with their shoppers, keeping them abreast with information on ongoing and forthcoming discounts, promotions and events.

Enriching Experiences – This again stems from the need to have shoppers make the best use of their time at the shopping centre. A visit to the mall has to be made into an all-day activity. From housing underwater aquariums to art galleries, malls today need to be all-encompassing. Xanadu, a mall 30 km from Madrid, for instance, features a ski-slope, go karts, balloon rides, bowling and billiards. The Mall of America in Minnesota has an underwater aquarium, a theme park, and a dinosaur walk museum.

Design Dynamics – With the ubiquitous nature of online retail, shopping now can happen behind closed doors. For malls to make shopping experience more interesting, it has become imperative for them to provide open space for the customer to feel at one with nature even when he is in a commercial environment. Landscaping is an important aspect that cannot be ignored as part of mall design today. The Cabot Circus Shopping Centre in Bristol, England, has a unique shell-shaped glass roof that is the size of one and a half football fields, for instance.

Community Spaces – Shopping centres as community spaces is a given norm. From hosting art shows to music festivals and also celebrating major festivals, shopping centres across the globe are turning into community spaces and rightly so. Keeping in mind the ever increasing pressure that everyone faces when it comes to time management, it is only apt that shopping centres provide an opportunity for an individual to satiate his need for shopping and leisure all under one roof.

Clear Demarcation – Having everything under one roof is a good idea but then it is only wise to ensure that the shopper inside is not lost. Dedicating each section or floor to a particular category would only help the mall to generate focussed shopping from its customers.

Similarly, a customer who is visiting a mall only for luxury brands, may be irked by the value brand placed next to his or her favourite tony store, and may not want to be seen on the same floor as bargain shoppers. Internationally, malls are overcoming the commoditisation problem by focusing on specific consumer segments and/or creating specific zones within the mall. In the Dubai Mall, ‘Fashion Avenue’ is an area dedicated to luxury brands and services tailored to the upscale customer, including a separate outside entrance and parking area. Or, the 7-storey Central Word Mall in Bangkok, where each level has a specific offering.

Launch of New Shopping Centres – Globally, the retail real estate industry will be witnessing the launch of many new malls and shopping centres. To take an example of the UK, a new surge of activity is expected in 2017, according to research released by . The development of European shopping centres is predicted to accelerate, with 9.1 million square metres due to be delivered over 2016 and 2017, according to the report. The European Shopping Centre Development Report showed that 2015 delivered one of the lowest annual volumes of the past decade, with 4.6 million sq.m of shopping centre space opened, which was a 15.8 per cent fall on 2014. However, in the year to come, shopping centre development is expected to accelerate with 9.1 million sq.m currently in the pipeline and due to be delivered over 2016 – 2017.

As reported in the www.thebig5hub.com, developer Dubai Holding will start construction on the first of four phases of the Mega Mall of the World project next year, Chief Executive Ahmad Bin Byat said. Built at a cost of nearly US $8.2bn, the first phase will cover 25 per cent of the total project and be finished by Expo 2020, as shared by Bin Byat during the in Dubai. The US $21.8bn Mall of the World project was first launched as the world’s largest shopping mall. But a Bloomberg report quoting Chief Operating Officer said the developer now favours building three malls in stages rather than one mega mall.

To summarise the key international trends, CEO – West, , shares, “We see an intervention and disruption with technology in offline retail, digital presence of offline players to become Omnichannel players, new payment mechanisms becoming mainstream, like digital wallet and big data analytics; retailers will unify their online and offline data collection and hence understand customer profiles better. As far as Indian context is concerned, core differences in offline and online presence are blurring. However, there is a long way to go with respect to having significant online presence in areas of digital marketing, online customer engagement, etc.”

Agrawal talks about re-engineering old-school loyalty solutions with disruptive start-ups and says that in the Indian context, disruption and re-engineering of loyalty programs has not taken off yet. Existing retail loyalty programs have not been able to disrupt and expand as expected. Another thing he points towards is the availability of multi-tenant facilities in common locations where we would see the trend moving towards mixed-use projects that combine stores with housing, hotels, office space, restaurants and other tenants.

“Some key value additions will be luxury hotels, water parks, motels, entertainment parks etc. The multi-tenant facility has been one of our key differentiating factors,” he adds.

Moving Over to India

Chief Executive Officer, R City Mall, Ghatkopar, Amaan Fakih talks about the changing dynamics. “With the changing face of communication and media, today’s shoppers expect more from brands and believe customer service is the differentiator,” he notes.

Ex-Managing Director – Retail Division, JLL India, Pankaj Renjhen comments, “India is famous for its traditional markets and shopping streets that offer speciality products, entertainment and leisure interfaces. With the emergence of modern retail and shopping malls, there has been profound evolution in the Indian retail industry. Due to changing aspirations of Indian consumers and entry of international brands, malls are themselves adapting to meet the changing requirements.” He further talks about how the retail real estate industry is gradually maturing and going towards the next wave of evolution against a background of rising competition from e-tailing.

“Within this process, there is a need for developing shopping centres that provide a more specialised experience to shoppers with specific needs,” he states. “The speciality malls that emerged a few years ago to provide such services left a lot to be required.”

According to Fakih, unlike the West which took sometime to perfect and fine tune its shopping mall culture and the retail proposition, the Indian retail segment has piggy-backed on those experiences and taken those learnings from the international shopping centres. Hence the learning curve in India is far more sharp, and what would have typically taken 15 years to understand, has taken us possibly just five years to accomplish.

“Today our shopping centres are quite similar to those around the world. Indian developers are investing more resources (experienced human resources), technology to provide ease of access and simpler processes for consumers and also to ensure service enhancement on the ground,” he adds.

We are already witnessing a change where shopping centres are featuring more ‘open’ designs. Stores have an open front rather than a door-in approach. International brands are paving the way for malls to rethink on store fronts. Brands such as H&M and Zara have pushed mall developers to rethink design. Two-storey stores are gaining a lot of momentum, especially in the department store category. Having in-store elevators is a norm now.

F&B outlets are not restricted to the food court area any more. Each mall that one would visit today would feature food kiosks and coffee shops on each floor. The ‘I need some rest from shopping’ need is taken care of by these small food and coffee outlets. It was a refreshing change to see Phoenix MarketCity in Kurla extending generous sitting spaces in the atriums on each floor. This is a trend that other malls need to catch up with as well. To have the aged accompany the youth to the malls is not possible if there is lack of sitting space.

Selfie stations and other art decors have been coming up on vacant spaces in many malls and this is a perfect way to utilise the space to engage customers. Recreation for children is also gaining momentum with each mall having a USP of its own. From a to a Snow World, the international attractions are trending well.

The other most dynamic change we are witnessing is that of malls being open to renting out their open spaces to local artisans/ stores. This is something that was started by in Delhi and a large number of malls across India are now replicating it; from Flea Markets to Pop-up Stores, innovative options are helping local retailers to experience the mall culture.

Real estate developers who are in this business are now clubbing malls with hotels and residences and this again is a trend that shall gradually be accepted throughout the country keeping in mind the need to balance the returns from different asset classes.

Another thing that has caught our attention in the wake of international brands coming in is the diminishing practice of having just one anchor store. Malls today have more than one anchor and given this fact, it is more safe to say that the concept of anchor stores is fast diminishing. A customer pulled today to a mall is not enamoured by the aura surrounding just that one brand, but by the overall package the mall offers.

Trend Dynamics – India

A visit to any of the enclosed shopping centres in India highlights the fact that the retail brand mix and the F&B offerings are more or less the same. What truly differentiates one mall from the other is the dedication it shows towards engaging its customers through events and activities.

Associate Vice President – Marketing and Corporate Communications, Inorbit Malls (India) Pvt. Ltd., talks about how the customer today has become extremely savvy and the decision to buy/ consume is influenced largely through digital social mediums.

“Unbranded social content is gaining popularity and is used by brands to build fans and communities, which further helps to propagate positive word of mouth for the brand,” he says. “With rise in spending power and awareness on latest trends, consumers are upgrading more frequently and consuming more than what they were two years ago. They are also more inclined towards impulse buying of fast fashion, accessories, travel/sports gear and more.”

Commenting on the primary international trends, he adds, “International brands prefer larger and more attractive spaces that allow them to embellish their stores with world-class in-store environments and merchandise depth; we see that trend getting adopted by Indian malls today. Indian malls are creating spaces for exclusive fast fashion brands and further improve the quality of high networth individuals that visit the mall. New trends
point towards larger anchor spaces, larger shopping centres, entry of more international brands, focus on experience through F&B and entertainment.”

On the top three trends that the mall/ shopping centre industry is witnessing now, Senior Manager – Marketing, Growel’s 101 Mall, enlists:
Personalised retail: Personalised store experience is a trend where the retailer provides an in-store experience that is customised for each visitor.
Increased usage of technology: Loyalty programs, point of sale (PoS) solutions, billing management solutions, RFID technology or inventory management solutions are all that a majority of retailers have banked upon thus far. But now, retailers need to consider technology as an enabler of providing richer experiences to their customers.
Smartphone: Nowadays, retailers are utilising the power of mobile phones in the best possible ways to reach out to consumers. The data they capture is also being harnessed to learn and predict customer behaviour.
Relationship marketing: With rapid evolution of technologies and changing customer behaviour, marketing has acquired an all new meaning.
Utilising the socially networked is the demand of the hour.

She further talks about her take on international trends. According to her, retailers are giving consumers more payment options. She says, “The rise of mobile payments has meant that merchants are now updating their old payment terminals to newer models, which will not only help retailers with compliance and security, but also enable them to accept more payment options.” She makes it a point to highlight the observation that loyalty programs are on their way out. “These days, rewards and promotions do not matter so much. The product options and convenience matter more,” she explains. “It is not that loyalty programs are not successful at all. But, in the recent past we have been seeing that simply implementing rewards isn’t enough to stay competitive. Retailers now have to offer personalised rewards, coupled with great products and convenient buying experiences.”

Orion Mall has achieved a remarkable feat since its opening this year at one of Mumbai’s far off suburbs – Panvel. Based on that experience, Partner, MP Group, Mangesh Parulekar spots the top three trends being: Consumers have spent more on food and entertainment, value brands and casual attire brands are doing phenomenally well and electronics and home categories are growing tremendously.

A few years ago, no one would have thought about a mall in Kalyan, Mumbai. The place is far off from the city limits. But with real estate coming up across the length and breadth of the city, Kalyan has received a lot of attention in the couple of years. West Pioneer Properties (India) Pvt. Ltd. with its mall Metro Junction has been satiating the shopping and entertainment needs of consumers there with some amazing initiatives.

On the trend dynamics, Agrawal states, “The most important trend is, ‘Availability and access to products and services online’. This has forced retail players to evolve and innovate. However, with the drying up of unrealistic online discounts, it is becoming more of a level playing field for both online and offline retailers.”

Moving forward, more and more food and entertainment options will be the mantra for all mall operators, Agrawal says. “Some key initiatives undertaken have been transformational and a lot of them are bringing incremental value to our customers. Some of these are: entry of international brands, offline social engagements and customers moving from utility based models to value-added buying, for instance, the rise in fashion consciousness.”

Elaborating on the initiatives undertaken by Metro Junction Mall, he states, “We have increased the food offerings in our mall, with international chains opening up. We are also working on a unique entertainment concept which we will be launching soon. The objective is to provide customers an experience that they have not had anywhere before. We have enabled our mall with Wi-Fi in an effort to determine whether the complimentary service would increase the amount of time visitors spend onsite, ultimately driving higher sales per customer. The Wi- Fi network was also intended to serve as a platform for adding other services to the mall.”

Highlighting the surge in aspiratins of small town India, Director, Phoenix Marketcity, Pune, Rajiv Malla notes, “One of the key trends that has been emerging from the consumer perspective is the growing aspirational value of customers in upcoming cities. With a rising number of youngsters stepping out for work or education, their exposure to bigger national and international brands and aspirational lifestyles is growing exponentially. This coupled with rising income levels, greater awareness and growing urbanisation, is leading to consumers desiring a better standard of living. Driven by this awareness, national and international brands are coming closer and settng up base in Tier I and II cities. We have witnessed a steady growth in international brands settng up stores this year at Phoenix Marketcity, Pune.”

He adds his bit on the dynamics of technology playing a major role, saying, “Another key aspect is the steady emergence of e-commerce and rapidly growing smartphone users, which has definitely opened up a major shopping channel for retailers to tap into. These new channels are placing new power in consumers’ hands, and they are expected to use all channels as though they are a single experience. Retailers are also aware of the fact that merely being present on all platforms will not ensure success; they will have to blend the online and offline – the digital and the physical – into one seamless, Omnichannel shopping experience. This has encouraged retailers and brands to invest in creating a seamless platform with light integration across all channels.”

On key trends in India, Director, – Gurgaon & Vasant Kunj, Arjun Gehlot enlists:
1. Brick-and-mortar making a comeback – Offline retailers aggressively looking at expanding physical presence
2. JVs/ Tie-ups between offline and online retailers
3. Acquisitions/ mergers of e-commerce players
4. Embracing technology in a big way to improve the experience of customers
5. Mobile payment options offered to the customers
6. Increasing number of casual shoppers due to attractive deals and discounts.