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Fashion Retail: The money spinner for Indian malls

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Indian consumers have a deep-rooted association with fashion and luxury. According to Euromonitor International, the sale of luxury goods in India grew 25 percent in 2014 in comparison to China and Indian consumers have never looked back since then. Fashion, which comprises the major portion of the luxury goods segment, has been on a continuous growth spree since then as well. By 2020, spending in the Indian luxury market is expected to increase more than double to Rs 23,600 crores from Rs 13,200 crores.

With the rising significance of fashion in the Indian retail scenario, it is no surprise then that the Indian fashion retail industry is on a meteoric growth trajectory.

The glamour quotient is at an all-time high with the Millennial population emulating models and film stars not only Indian but globally. This Millennial consumer – with his/her high-income level, even higher spending capacity and his shop ‘anytime-you-wish’ attitude – wants the best of fashion. There is no limit to the changing trends in fashion and the demand to have the best of the lot automatically pulls the consumer to the epicenter of fashion brands, which are shopping malls.

Despite the presence of fashion brand stores in high street markets, hypermarkets, community centres, local markets and of course e-commerce portals, 80 percent of the shopping population prefers to go to malls. The reason is simple: whether it is a Tier I city premium mall or Tier III average mall, there are enough fashion brands in a mall to cater to shoppers living in a region. Even online shopping fans like to visit malls when they need to buy expensive outfits.

While Food & Beverage and Entertainment segments are emerging as lucrative categories for malls, the importance of the fashion segment cannot be ignored. No shopping mall can afford to take this risk.

As per JLL India, fashion retailers continue to command a prominent presence in Indian shopping malls. It is expected that more international and national fashion brands will open ‘experience stores’ and newer formats and strengthen their footprint across the country. The consumer is ready to explore and happy to spend and the retail industry is eager to comply. New shopping malls are coming up every year and the fashion retail sector is catering the evolving consumer through a number of mediums, including physical, digital and Omnichannel.

Millennial Influence

The fashion market in the country is in the midst of change. Millennials are using new technologies and are spoilt with unprecedented choices both in terms of product offering and convenience. Being able to serve such demanding consumers can be challenging, but at the same time provide an important opportunity for retailers. Only those retailers who are willing to adapt according to market trends, stand a chance to grow and capture the market.

Established fashion retailers are looking for opportunities in secondary and tertiary cities in order to grow further and national fashion retailers are expected to innovate and come up with newer formats to sustain in the highly competitive and demanding market environment.

Bringing in new brands in shopping mall is the solution but not a full proof one. Interactive and enhanced consumer experiences are other key factors which can’t be ignored.

Fashion: The Money Spinner in Malls

Munish Khanna, Chief Revenue Officer, Express Avenue Mall explains, “Chennai has been a quite dormant market from some time. With the growing competition, the fashion quotient is slowly picking itself up. As compared to Delhi and Mumbai, fashion in Chennai was not a prominent category, but now the traction has started increasing and the specific result can be seen all over. We recently launched the first store of Armani Exchange at the mall and it is currently doing an average business of Rs 45- 50 lakh month-on-month. We have the only store Burberry in Chennai at our mall and it does a business of Rs 70-80 lakh month-on- month. This indicates the numbers and demand Chennai currently has. What I mean to say is that it is not necessary to be bullish in approach, but we need to take the right steps, get the right brands in the mall and have a strong pulse on what is continuously going to evolve so that we get the relevant brands here.”

“In Express Avenue Mall, the entire ground floor is focussing on international fashion. As far as we are able to cater to the international, national and regional diaspora, only then we will stay relevant to the market. We are planning to introduce a few international fashion brands which are not there in Chennai but are there in Bengaluru, Mumbai and Delhi market. We are focussing more on the bridge-to-luxury brands.”

Mukesh Kumar, CEO, Infiniti Malls states, “In the mall industry, everything started with fashion. F&B, entertainment and everything else came later. Fashion is the mainstay of every mall. Almost 60-70 percent of the mall’s space is dedicated to fashion. We are making, on an average, Rs 1,800 per sq.ft. from fashion. We have dedicated around 55-60 percent to fashion in the mall. Initially, fashion used to occupy 80 percent of the space but slowly it is coming down as the other categories like F&B and FEC have been increasing as a footfall driver.”

Shibu Philips, Business Head, LuLu Mall says, “Fashion is almost 70 percent of any shopping mall and fashion is important as everyone aspires to be a different person by being fashionable. Beauty and fashion work together and India has a lot of festivals and for every festival, you wear something new. And if you look at e-commerce, how it has gained prominence is by selling fashion at affordable prices. At the end of the day, as a mall – which is a destination point for consumers – we can’t be very different. Today India has so many brands and with FDI in retail opening up for single-brand retail- lots of brands have come into the country. In our malls, we have dedicated ground and the first floor to fashion, and we get 85 percent of the revenue from fashion.”

“We have realised that as malls are becoming mature, there are a lot of niche categories that are coming up. Now ethnic is also becoming a big category for men.

Fast fashion is picking up with lots of international fast fashion brands coming in. Earlier fashion was divided only into men’s and women’s fashion but now the categorisation is increasing.”

Pankaj Renjhen, Chief Operating officer, Virtuous Retail adds, “Fashion has always been the main driver for any shopping centre and if you look at fashion and related space of accessories alongside have always occupied 50-60 percent of the shopping spaces, whether it is highstreet or malls. In our shopping malls, we have a very high quotient of fashion but now it is reducing as new categories of entertainment and F&B which are taking up space, but we are not reducing the importance to emphasize on fashion quotient in the retail centre. The curation is changing, and it is varying from market-to-market because the customer profile is very different from Bengaluru to Delhi to Chandigarh to Surat. Fashion is the principal driver along with entertainment and food for any shopping centre today.”

“In our malls, almost 50- 60 percent is dedicated to fashion and accessories and it will continue to be the same. Revenue contribution is little more because entertainment takes a lot more space in terms of volume and if you look at the volume v/s space obviously fashion contributes almost 60- 65 percent.”

“Fashion and malls will continue to grow hand-in-hand. The entire shopping centre is built around experiences and three components of the experience will be fashion, food, and entertainment. All the three components are important and fashion being the biggest.”

What Malls Do to Highlight the Fashion Section

Smart mall developers study their target audience, see the categories that are growing in their catchment area and then pick and choose the perfect brand mix for their fashion and accessories section – an exercise which is extremely important since malls depend heavily on the revenue and footfalls that fashion brings to them. Since fashion retail is all about the customers’ preferences, space allotment to brands –value formats, lifestyle, and luxury formats – needs to be in sync with the type of people visiting a mall.

The most common trend is to allow the ground floor to the international and domestic luxury and bridge-to-luxury brands. The reason behind this is that the ground floor has the highest rentals and highest footfalls.

For malls that don’t target an elite audience, international and homegrown fast fashion brands work beautifully too.

Another common trend is to exclusively allot the first floor to women’s wear brands and the second and third floors to menswear and kids wear brands respectively. One reason for this is that despite menswear holding a major share of the apparel market at 41 percent, it’s the women’s wear segment which is growing the fastest as witnessed by the footfalls and purchase patterns.

Mall developers say is that it is effectively almost impossible to understand what the customer is looking for. There is no exact science to it. The likeness for design and trend can change at any moment. Fashion consumers, according to mall developers, can be broadly divided into two categories – focused buyers and impulse buyers. Focused buyers are those who know exactly what they want, which store houses a product and come to the mall with the purpose and intent of buying that piece of clothing.

Impulse buyers, on the other hand, are those who visit a mall just on a whim and then end up buying clothes that appeal to them on the spot. Both types of customers are important for retail stores and malls and to satisfy them both, mall developers ensure retailers update their designs and categories almost every month.

Fast Fashion: New Treat in the Menu

As stated above, fast fashion is picking up the pace in shopping malls with lots of international fast fashion brands coming in. Fast fashion is emerging as an important and growing category in the Indian retail sector. Consumers, on an average, are buying apparel 8 to 10 times a year now compared to a few years ago, when it was less than half a dozen times.

This is making fast fashion more relevant as these retailers change their stock several times a year, and are thus, able to provide the latest fashion merchandise all year around.

Fast fashion, a phrase used for designs that move quickly from the catwalk to showrooms, is growing at a yearly pace of 25-30 percent, twice the rate of the overall market. Malls are also embracing fast fashion retailers and have started to allocate prime spaces to them on their premises. Mall developers prefer fast fashion brands due to their higher productivity and also the footfalls they generate for the malls. Therefore, fast fashion brands are starting to become anchor stores in shopping malls today. Recent examples include H&M in High Street Phoenix, Mumbai, and both Zara and H&M in Select CityWalk, Delhi-NCR.
Adjustments have been done in micro-location of the stores within the malls in order to accommodate the newer global brands.

Fast fashion retailers are quickly expanding their footprint in India in order to capitalise on this rising demand from consumers. As many Indians are travelling abroad, they are becoming familiar with foreign brands. This coupled with rising disposable incomes means that demand for foreign labels is also growing stronger. Domestic retail giant, Future Group, launched Cover Story – its fast fashion format last year. The player has crunched its turnaround time from design to store by 50 percent and priced products competitively. Other domestic players may launch stores along similar lines too or enter this popular category. Some others will make fast fashion dominate their merchandise mix.

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