JLL outlines the top trends shaping the future of retail space in India taking into cognizance the rapidly changing market dynamics and digital transformations. Going forward it would be all about place making, offer of superlative experience, innovative formats and technology. Creating places where people want to be, where they are offered differentiated and interactive environment will drive the development of the built environment over the next decade.
India has become the top most retail destination among 30 developing markets in the AT Kearney’s Global Retail Development Index (GRDI) impelled by positive foreign investment environment, strong economic growth and a rapidly increasing consumer spending.
The pace of evolution in Indian retail sector has been quite fast forward. The gap between India’s retail sector and developed countries is shrinking leading to entry of marquee global brands and development of international standard retail spaces. India is accelerating quite rapidly on the evolution curve similar to developed markets as the world is getting flatter day by day. Indeed, we can say that it’s just the beginning of the next big wave of retail evolution that we are witnessing. Infact the speed of transformation has just accelerated and the changes that we have witnessed in the last decade will be predominated by the transformation coming in the next decade. Indian retail real estate sector is also responding quite dynamically to the changes witnessed in the retail market.
In 2017, around 3.9 million sq.ft. of retail supply is expected to get operational. However for retail spaces to stay relevant in future there is a constant need for evolution and innovation. Propelled by technology and option of buying online the super informed consumers are demanding the best products and services.
Trends such as online retailing and Omnichannel retailing are significantly gaining traction in Indian retail sector. Smartphones play a key role in driving website traffic in India, and the retail sector was the most visited, with an annual growth rate of 45.3 per cent in 2016.
While popularity of Omnichannel among retailers is foreseeable, it is also being recognised that providing an overall pleasing experience and personal touch points leads to brand loyalty and repeated visits by customers. The human connect and touch points can be offered only by a brick-and-mortar stores. The emotional intelligence and superlative services provided by the physical stores are inevitable in retail sector. Therefore, while physical stores would remain at the centre of the retail expansion strategy but its role would undergo massive transformation against the backdrop of constantly changing virtual world and super informed consumers.
So the big question is how do we future proof our retail spaces?
Going forward it would be all about place making, offer of superlative experience, innovative formats and technology. Creating places where people want to be, where they are offered differentiated and interactive experience will drive the development of the built environment over the next decade.
The top 3 trends shaping the future of retail space in India taking into cognizance the rapidly changing market dynamics and digital transformations are:
Re-looking Store Network Strategy: As there has been adoption of multi-channel retailing by retailers, they are re-strategising their store networks taking into account the consumer expectations and effect of online retailing on the particular markets. In order to stay competitive, reconfiguration of real estate is an important part of the retail evolution that brands are adopting. Having the right physical retail space in the right location has become the foremost factor for the success of retailing.
Omnichannel Retailing: It has become pertinent to provide consumers with a seamless and integrated Omnichannel shopping experience. The retailers are opting for ‘phygital strategy’ in order to enhance their market coverage and reach to the consumers through all avenues. Integration of physical and digital experience is taking place to provide an interactive and all-inclusive in-store experience.
Moreover, some of the online retailers are also venturing into brick-and-mortar stores so as to expand their market penetration and offer the touch-points to the consumers before actually buying the products.
New Formats and Store Designs: Various new formats such as Experience Stores and Pop-Up Stores are emerging to attract the shoppers and register sales growth. The retailers are innovating and opening different type of formats as per the requirement of the micro markets. There is no better way to create meaningful connections with clients than through personalized experiences and unmatched services.
Local Brands Exploring New Geographies: Famed local brands are opening their wings and venturing into newer markets. The regional brands are trying to expand their reach across the country and in some cases internationally too.
REDEFINING RETAIL SPACES
Dynamism, Place Making and Value Added Services: Today, the success of a shopping mall is no longer dependent on the sales generated but also on the overall experience it offers. Also, as the market is changing quite dynamically, shopping mall developers also need to churn their tenant mix frequently in order to imbibe the new global entrants and fashions. Malls have started auditing their tenant mix regularly so as to be relevant and also provide the value added services to attract the consumers. Malls are frequently churning their tenant mix to accommodate marquee global brands such as Kate Spade, Muji, H&M, Massimo Dutti, Gap, Springfield, Women Secret, Xiaomi-Mi Home etc. The fast fashion brands along with the F&B are now preferred over the traditional department stores for allocating prime spaces in shopping malls.
Value Added Services Offered by Malls:
– Shuttle services from Metro Station/Bus
– Mall Magazines
– Driver rooms
– Kiddie Carts
– Dry Cleaning services
– Free Wifi
– Valet Parking
– Dedicated parking for senior citizen, handicapped and women
– Car wash
– Tailor services
– Guest survey through iPad
– Electronic Directories
– Baby changing rooms
– Styling services
– Delivery service
– Bags and Shoe repair
– Shopping assistants-hands free shopping
Increasing Importance of F&B and Entertainment: F&B and Entertainment are the forerunners of the changing retail landscape and will play a crucial role in future proofing retail spaces.
Mall Developers are increasingly realising the importance of incorporating F&B into their premises to drive foot traffic. The amount of space dedicated to F&B category has increased from 5 per cent – 8 per cent a few years back to 11 per cent -18 per cent now. The diversity of F&B offer has also expanded in last couple of years. Dedicated F&B hubs like Cyber Hub in Gurugram, Sangam Courtyard and Epicuria in Delhi are also gaining grounds in today’s retail real estate scenario.
If conceptualised optimally and integrated well in the shopping mall, F&B and Entertainment has the ability to drive shopper traffic, increase dwell time, consumer spend and enhance overall sales growth.
Internationally there are some key formats emerging which are likely to revolutionize the way F&B is seen by landlord. In India also the new formats would get popular as we move along the evolution curve.
The growing trends of increasing importance of F&B and its impact on retail spaces are summarised below. In order to incorporate the game changing F&B concepts, the shopping mall developers have to consider the food services leases and tenants differently from the traditional retailer categories.
– The share of shopping mall units dedicated to foodservice is going to be higher in upcoming malls than in older malls, and it is expected to increase significantly in coming years.
– The significance and type of F&B space in a shopping mall varies prominently by market and region, and is driven by macro factors such as market maturity, the position on the ‘development curve’ and cultural nuances.
– The growth and popularity of street food, upscale fast-casual and more diverse casual dining has triggered a marked ‘casualization’ of F&B.
– F&B operators which offer healthy and organic food are gaining popularity.
– Regional and local F&B operators are gaining fame and expanding to other markets.
– QSRs are reinventing themselves to sustain in the growing competitive landscape and are stepping up to provide superlative experience to the consumers.
– Shopping malls are incorporating dynamism through use of pop-up-spaces and newer
– F&B concepts with live kitchen and performances. F&B operators are increasingly adopting technology to offer better services and increase operational efficiencies.
– Despite huge opportunity, the future for F&B needs careful consideration as evolution and growth comes with challenges and risks for food operators as well as mall developers.
– The F&B offer needs to integrated and well complimented in the shopping mall otherwise it would lead to reduction in dwell time and unfitting overall offer for the consumers.
– Sophisticated approach is required to segment the F&B operators on part of the mall developers. Each format of F&B has distinct trading periods, dwell time and trade area characteristics which needs to be zoned and managed differently.
– Food halls can be a great way to freshen the F&B mix within larger, destination centers, often as a replacement for food courts.
They provide the opportunity to address all restaurant categories, across all price points.
Alternative Locations and formats/ Iconic Properties:
Retail Office complexes: Developers are now looking at experimenting more with a mixed-use format, rather than standalone retail formats, allowing for quality retail on the lower floors and commercial spaces on the upper floors. As there has been a captive consumer base present in the business districts, the retailer are also making inroad into these complexes. The most common retail formats in ORCs are the F&B segments and banking and financial services.
Iconic and Heritage Properties: As the quality mall space has been limited in India, retailers have been creative and responsive to seek spaces in heritage properties and recycled places like old mills and refurbished places. With a bit of creative thinking, the retailers are opening stores in iconic locations thus recycling them for creating cult and unique retail spaces.
Social Media and Apps
Technology is now a part of our lives with many consumers being constantly connected via social media and other technology. India has emerged top in the list of the countries with largest number of active Facebook users. Facebook and Instagram is no longer just a place to share photos but also as a strong medium for buying products and advertising. Presently, websites, social media and blogs play a key role in propelling customers’ process of buying. As a result some of the leading malls and retailers have created their own Facebook pages.
Mall and In-Store Technology
Growing dominance of online retail has prompted the offline retailers to adopt technology and shift the focus on customer experience.
Advanced Analytics and Artificial Intelligence is being used nowadays to forecast demand, identify assortment gaps and improve allocation to meet the business goals As consumer is the king now, the retailing operations should be built around the consumer and not the channels. It is proactive leasing approach and flexibility among the mall developers and the retailers alike which would prove to be the game changer. Shopping malls involve many stakeholders and its operation is much more than just sales generation. Future proofing our retail spaces would involve creating innovative built environment, connection with the consumers and diversity of tenant mix and services.