Google News
spot_img

East India: More scope for retail growth

Must Read

Despite low mall supply during the year, the Indian retail sector remained quite vibrant in 2018. There were major policy overhauls such as the government’s decision to permit 51 percent FDI in multi-brand retail and 100 percent FDI in single-brand retail under the automatic route, prompting giants like Walmart to enter India. The government is also planning to tweak norms for retail trade – similar to SEZs – and enact a 365- days working policy.

Besides government policies, rising disposable incomes and growing consumerism is also contributing to the overall growth of the Indian retail sector, projected to grow from US $672 billion in 2017 to US $1.3 trillion in 2020.

Apart from offline retail, e-commerce is also growing exponentially and is expected to reach at par with physical stores over the next 5 years. This growth is largely driven by robust investment in the online space and rapid increase in the number of internet users.

Another interesting trend witnessed in 2018 was that besides the top metros, Tier II & III cities were also a significant part of the entire retail growth momentum. Flourishing Tier II & III cities included Ahmedabad, Bhubaneshwar, Chandigarh, Coimbatore, Indore, Jaipur, Lucknow, Kochi, Nagpur, Thiruvananthapuram and Vadodara.

Why East India Lags Behind Other Regions in Retail?

As per ANAROCK data, nearly 39 million sq. ft. of new mall supply is estimated to come up in India between 2019-2022. Out of this total, East India is likely to see merely 1.8 million sq. ft. mall supply during the period, comprising the least share among all regions. The West region of India – comprising cities like Mumbai, Pune, Ahmedabad, Surat, Nagpur, Baroda, etc. – will see maximum mall supply – nearly 43 percent share – during the next four years.

This clearly indicates that even while the other regions are increasingly bucking up their mall supply, East India still needs to pick pace. Besides Kolkata, smaller towns like Bhubaneshwar also possesses immense opportunities as retailers want to explore the potential here by increasing their offline presence.

Another striking trend is that in comparison to other regions, the average size of malls is relatively less in the Eastern region. For instance, the average size of malls in the Western region is approximately 7 lakh million sq. ft. while in the East it is merely 4.5 lakh sq. ft. The main reason for this could be that since there is limited mall supply in the region the developers cannot be certain on the exact demand for malls across cities and the behavioural pattern of the consumers.

More so, the vacancy levels of malls in key cities like Kolkata has been rising Y-o-Y – from 12 percent in 2016 to 13 percent in 2017 and 17 percent in 2018. This is the second highest among the top 7 cities. The high vacancy levels indicate a possibility that the footfalls may not be enough for brands to sustain their business in the respective malls and thus shut down.

The average monthly rentals in Kolkata (Rs. 105/ sq. ft.) are way higher than cities like Pune and Bangalore where rentals stood at Rs. 95/sq. ft. and Rs. 92 per sq. ft. respectively in 2018. High retail rentals and vacancy levels in the city of Kolkata is certainly something that mall developers will need to look into if at all they want to encash the growing potential of Indian retail market.

Also, mall developers in eastern region will need to analyse trends in other region and probably give major emphasis to F&B, multiplexes and entertainment centres in malls as shoppers’ quest for ‘experiential’ shopping is rising. Besides being mixed-use businesses that incorporate social entertainment options, malls will need to provide unique appeal along with certain depth in shopping experience and lie in prime destinations that are easily accessible by both public and private transport. Additionally, the ability to anticipate the changing consumer needs and adapt accordingly will make malls successful here.

Latest News

70% of retailers struggle to retain customers post-festive season: Report

According to the report, the struggle to retain customers stem from distracted users due to intense competition, high costs...