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Growth of Malls in Non-Metro Cities: Developers remain bullish on potential of organised retail

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As incomes rise, aspirations change and brand awareness increases among non-metro consumers, an increase in the number of malls has been observed in the largely untapped non-metro cities.

Growth of Malls in Non-Metro Cities: Developers remain bullish on potential of organised retail

As locations for malls in metros are maturing rapidly, brands and developers are eyeing unexplored territories. They are capitalising on the growing demand as well as a lack of entertainment options and organised retail in Tier II and beyond.

Non-metros like Ahmedabad, Jaipur, Ludhiana, Indore, Chandigarh, Bhopal, Surat, Amritsar, Nagpur and Lucknow have accommodated a healthy percentage of retail growth over the last few years mostly because these cities have very favourable demographics and a high propensity to consume, which naturally attract national and international brands. Consumers in some of the non-metro cities around New Delhi travel to the malls here to shop for luxury and high-end brands, but mid and mass-segment brands are much better equipped to leverage the demand in non-metros, and many are trying to gain first-mover advantage.

What Research Says

According to a recent ANAROCK research, 31 malls over 13.5 million sq. ft. will come up in non-metro cities such as Ahmedabad, Lucknow, Indore, Surat and Nagpur, among others.

Among non-metro cities, Ahmedabad stands out with as many as 6 new malls slated to come up in the city by 2022-end. These new malls will be spread over 3.2 million sq. ft. Both domestic and international brands aregung-ho on Ahmedabad; besides scoring high on consumerism, the city has a growing young population of entrepreneurs, IT professionals and factory employees.

Lucknow presents a similar picture and has plans for 4 new malls to be added by 2022-end. The western cities of Surat and Nagpur will see new supply of 2 malls each spread over 0.7 million sq. ft. and 0.85 million sq. ft. area.

According to : “As per our estimates and
findings, about 300 malls are expected to come up in non-metro cities over the next 3-5 years. Besides the sheer number of malls, they are also growing bigger in size. So far, mall developers were looking at a mall size of about 1,00,000 to 1,50,000 sq. ft., but now, they are thinking big in terms of size of the mall.”

Mall Culture Evolves in Non-Metro Cities

Non-metro malls have become the epicentre of retail activity. Real estate boom, direct reach by brands via social platforms and e-commerce platforms has introduced the consumers in non-metros to plethora of foreign brands. More educated and armed with knowledge, the non-metro customers are now no way inferior to a metro customer.

“As compared to the demand of malls, most of the non-metro markets are a potential for a good development. However, while building a mall in such cities a developer must size the development appropriately, keeping the potential of the city mind,” explains , CEO, Inorbit Malls.

“The expectations and aspirations of people living in non-metro cities are identical to the people living in metro cities. They want quality experiences, be it in shopping, food and entertainment in their towns as well. Secura Developers have taken the lead in fulfilling these aspirations and providing a rounded mall experience in non-metro cities of Kerala,” adds M A Mehaboob, Managing Director, Secura Developers Pvt. Ltd.

Today, an average person in a non-metro city is well travelled, has an increased exposure to all kinds of media and is aware of all kinds of brands across different segments. Mall developers have to cater to this increasingly aware and connected consumer.

“Keeping the on-going trend in mind, we have completely revamped our DLF Chandigarh mall. With a new look and new brands, we have repositioned it as ‘the mall’ for cultural experiences with the best of the brands for shopping,” states Pushpa Bector, Executive Director, DLF Shopping Malls.

Similarly, Virtuous Retail has also positioned its shopping centres as community engagement spaces, so that they can become an essential part of the area they are located in, in non-metro cities.

“In non-metro cities, the avenues for social entertainment are limited and shopping centres offer customers experiences like shopping from premium brands, multiplexes, food and entertainment all under one roof. Malls also create programs around shopping or entertainment to ensure customers spend more time in their premises,” says , Chief Operating Officer, Virtuous Retail.

Speaking on the same lines, Bipin Gurnani, President & CEO, Prozone Intu Properties Ltd, says, “Over the years, the benefit of the convenience of having all needs under one roof is being highly appreciated in non-metros. Also, community events are a big draw here for bringing everyone together and this continues to this day irrespective of age groups and demographics.”

But even as the mall culture in India evolves in terms of technology, community building and experiential marketing strategies and there are plenty of opportunities, it is also true that setting up in smaller towns has its own set of challenges. Malls that explore new territories must have strategies and plans to address these challenges along with addressing the needs of different sections of society.

“It is very important to cultivate a welcoming atmosphere for each kind of buyer, so that the mall becomes a destination that caters to all. This will make it stand out from the rest of the local markets. Technology in retail is something new for the non-metro shoppers, so it should be easily adaptable and inclusive for all. This helps us in building communities that prove to be a loyal customer base for several brands of their choices,” explains , Executive Director, .

Difference Between Malls in Metro & Non-Metro Cities

Mall Supply: Malls in non-metro cities are changing the way people shop, eat and socialise. However, there are some major differences in malls in metro and non-metro cities. Metro cities are already saturated in terms of mall coverage. Almost, every locality in a big city has its own mall. In fact, some even have 3-4 malls built next to each other. This is almost unheard of in non-metro cities.

Bansal says, “Pacific Mall, Dehradun is the only fully operational mall in the area, so the customers are more loyal, as they don’t have options like in metro cities.”

“The growth rate of non-metro cities is slower compared to metros. On the other hand, the supply of retail real estate is also limited providing less opportunity to grow. For example, we started a 4.25 lakh sq. ft. mall in Vadodara in 2013 and in 7-8 years, there has been only one more development of a small size that came up. This gave us good time to grow and establish our presence in the market,” says Mahajan.

Footfalls, Dwell Time: “The consumer spending pattern and dwell time too vary in metros and non-metros. The formats, sizes and pricing all change as per the spending power and target audience in each city,” explains Gurnani.

, Chairman, SFC Megaa Mall adds, “Keeping footfalls steady is a big issue in non-metro malls as customers do not visit the mall on a regular basis. Rentals and maintenance charges are low, hence keeping a mall well-maintained is a challenge. ”

Tenant Mix: Considering a lesser rolling population in non-metro cities, developers need to work the tenant mix in such a way that they cater to all ‘needs and wants’ of the local population. Further, due to right sizing and limited tenants, each tenant needs to be selected carefully, after a full market analysis.

“The income of people is still not very high in non-metro cities as compared to metro cities, so all the premium and luxury brands are not present in malls here. However, value-based and a little more than value-based brands work well for these malls,” says Mukesh Kumar, Vice President, .

“As mall culture is maturing in the metro cities, naturally, the brands that enter country through metros, start expanding in non-metro cities,” Vatsal Prithani, City Centre Guwahati states.

Challenges Faced by Non-Metro Malls

Infrastructure Issues: The non-availability of good infrastructure is something that continues to plague not just smaller cities but also the malls in them. The roads are in a bad shape. Load shedding and power shortage is a big problem. Many non-metro areas in the country suffer from power cuts for hours in peak summer season forcing malls to depend on alternate sources, which come at a higher cost, eating into profit margins.

Clearances & Land Acquisition: With state governments proactively introducing single window clearance system across the country, the land acquisition issues have been sorted out in many states. But getting clearances for the project still remains a concern. Slowly, this process will also be eased, as state governments are taking steps in this direction.

Shortage of skilled workers: Experts with knowledge of developing and managing a mall are very few in the country. While the retail finishing schools are designed to help the retail industry, they are not helping in improving the skills of employees in the shopping centre industry.

Marketing Strategies

VIRTUOUS RETAIL- Marketing strategies of Virtuous Retail are very city focused as it is all about connecting communities and the marketing strategies revolve around the culture and people of that city.

INORBIT MALLS – “All the five malls of Inorbit have their own set of planned marketing calendars which is curated keeping in mind things like positioning and catchment of each mall. Inorbit has a yearlong events calendar and every month Inorbit hosts some unique events that create buzz. Larger than life décor, exclusive offers and exciting giveaways is given special emphasis. In addition to this, events like Art Fairs, Durga Puja Festival, Science Festival and Dogs Day Out have been lauded by people of all age groups.

BHUMIKA GROUP- Bhumika Group’s malls are coming up in cities of Udaipur, Alwar, Jaipur, Bikaner and Jodhpur which will give them a culture advantage and will help them in replicating the activities in a chain.

SFC MEGAA MALL – SFC Megaa Mall does various advertisements keeping in mind that particular city, as each city has its own identity. They try to find what people want and try to highlight how they can help them get that. The various advertisement modes are: newspapers, FM, billboards and social media. Also, they keep events in collaboration with shops in mall to attract more footfalls. They also decorate mall on various festivals and occasions.

SECURA DEVELOPERS PVT. LTD. – Kerala stands unique among Indian states with a uniform development throughout the state, and economic equity. The consumer behaviour and spending nature are more or less identical in all regions of Kerala, but the brand does try to bring a difference among the Secura Centres by roping in regional brands. The best marketing strategy remains satisfaction of customers with right mix of tenants and good experience.

PACIFIC GROUP – As a mall in a non-metro city, Pacific is doing a lot of engaging activities, also the colour palette of the décor and event is more vibrant. Pacific celebrates all local festivals, also gratification works really well for them. They do a lot of shop and win which gives us good spike.

PROZONE INTU – Inclination towards cultural events and traditions continue to remain strong in Tier-II & III cities. Therefore, customizing marketing strategy to the local culture becomes very important in each city. A unique proposition is planned every week suiting to the demography and festival calendar.

Region specific events pertaining to the local community are planned and differ from region to region. However, bigger events like Diwali, Christmas are designed by maintaining similarity across the centres and across various regions. The group also focuses on customer engagement through digital activities by integrating online activities with on ground promotions.

DLF CITY CENTRE, CHANDIGARH – Malls in non-metros are also going through a dynamic and exciting transformation to measure the customers sentiment. DLF City Centre Chandigarh does social listening to understand consumer preferences, study their pain points and basis the gauged insights, they device marketing campaigns and marketing promotions to connect with potential consumers.

It also focuses on doing more of regional/ local events, which helps them to connect with them consumers at a personal level and encourages them to visit the mall for an even more enjoyable experience.

Marrying Malls & Technology

VIRTUOUS RETAIL: “We use technology very extensively. For our food court, which we call as the FoodBox, has an app to order food and make payments as well,” says Pankaj Renjhen, Chief Operating Officer, Virtuous Retail.

BHUMIKA GROUP: “I think technology would play a very fascinating and positive role in non-metro malls. We plan to launch the mall app along with the soft launch and augmented reality corners will differentiate us from the local competition.
Engaging customers digitally is definitely going to add more excitement,” states , Sr. Vice President – Leasing, Bhumika Group

SFC MEGAA MALL: “Technology in non-metro malls play almost similar role as compared to the metro malls, as non-metro malls are also getting upgraded with every technology advancements available in metro cities,” says Sukumar F. Chougule, Chairman, SFC Megaa Mall

INFINITI MALLS: “I think it will take a little longer for non-metro malls to adopt technology, but technology is very important for any market,” Mukesh Kumar, Vice President, Infiniti Malls says

SECURA DEVELOPERS PVT. LTD.: “Technology plays a major role in non?metro malls too as its helps the mall to keep innovating and stay updated with the latest trends happening in the retail sector. In addition, non-metro malls also may be considered as a good outlet for Omnichannel shopping as we move forward,” says M A Mehaboob (Managing Director, Secura Developers Pvt. Ltd.

PACIFIC GROUP: “Technology helps us create the buzz around, especially, if it is for the entertainment section, the technology helps us attract good number of crowd for a significant amount of time. However, the amalgamation of retail and technology is welcomed only if it comes with a lucrative offer. This does not limit us in any way, but help us prepare better for our future endeavours with technology,” states Abhishek Bansal, Executive Director, Pacific Group.

PROZONE INTU: “Technology is an enabler for all shoppers if used correctly. Whether it be a metro or non-metro, good use of technology to implement benefits like seamless loyalty programs, parking assistance, movie reservations, seat booking in food courts etc. can be useful for all malls,” Bipin Gurnani, President & CEO, Prozone Intu Properties Ltd states.

DLF SHOPPING MALLS: “The world has also seen a transition in the way consumers shop at the mall – with retailers giving suggestions to shoppers on what to buy based on their personal needs, dictating the success of the store. To satisfy these burgeoning customer needs, not only retailers but malls are also embracing technology to reach modern shoppers. Technology has transcended from an aspiration to an expectation and has wedged itself securely between consumer and experience to create an everyday interface.

In order to be more competent, malls are putting their best foot forward to embrace emerging technologies. With increasing cut-throat competition, it has become the need of the hour for mall developers to innovate and implement cutting-edge technologies in a bid to lure the customer who was shifting to e-commerce due to convenience and vast choice,” says Pushpa Bector, Executive Director, DLF Shopping Malls

CITY CENTRE, GUWAHATI: “Technology plays a major role in non-metro malls. We have invested heavily in machines measuring footfall and sales data in order to get a sense of how well the mall is performing. Moreover, as consumers are becoming more and more tech-savvy, malls have to ensure that they have a good online presence via social media and appealing ads,” Vatsal Prithani, City Centre Guwahati states.

Key Factors Attracting Consumers to Non-Metro Malls

A wide range of tenant mix in categories like fashion, food and entertainment is imperative, but what is also important is experiential marketing that entices consumers and gives them a superior shopping experience. Experiential activities is something that helps the mall in establishing personal connection between with the consumer.

“A storm of global trends is coming together to compel malls to change the role they play in people’s lives in nonmetros. No longer are they primarily about shopping. Now, when consumers visit malls, they are looking for experiences that go well beyond traditional shopping. Changing demographics, such as an aging population and increased urbanization, means that more people living in smaller spaces have a greater need for public spaces in which to socialize and congregate,” elaborates Bector.

In non-metros, the strategy is to connect with the local culture if mall wants to establish loyal customers. Apart from regular discount and subscription offers from brands and events, customer engagement works really well for the malls. The shopper gets excited for the gratification and feels acknowledged and special with such terms and conditions. This builds a brand connectivity and affinity to in-mall experience

“Various shopping options, variety, offers, exchange facility, and no compulsion of buying are key factors that consumers visit malls in smaller towns and cities. Other factors are the treatment given by the store personnel in malls like greetings, asking customer requirements, attending to a customer in a professional way – all these things make customers feel special attracting them to malls in non-metros,” states Chougule.

“Value for money formats, interesting FEC options and state of the art multiplex also act as crowd-puller,” adds Pakrasi.

Meeting Consumer Expectations to Stay Relevant

Non-metro malls are trying stay relevant by maintaining the right tenant mix and customising the brands relevant to particular regions. Considering the limited leasable space, shorter lease contracts and allowing non-performing units to move out is also a step forward.

“Shopping is all about a great ambience and a good experience. Apart from the best brands in fashion, malls host several consumer connect events and activities throughout the year. At Inorbit, we conduct kids-centric events like Gifting Christmas, Summer Carnival etc. We celebrate special occasions and festivals in grandeur by creating larger than life décor and installations to increase customer delight. It is imperative that we give consumers a WOW feeling when they come to shop, be it for a special occasion or a regular weekday,” says Mahajan.

“Getting new-age brands helps malls build experiences for customer and attracts them back to the mall,” adds Renjhen.

National Brands v/s International Brands

Virtuous Retail: “National brands are more dominant as the penetration of international brands is less in these cities. National brands also connect well with the local aesthetics and fashion sense of the consumers. But one category which is picking up fast when it comes to international brands is cosmetics – there is tough competition between the demand of both national and international brands,” says Pankaj Renjhen, Chief Operating Officer, Virtuous Retail

Inorbit Malls: “We at Inorbit, look at giving space to performance-oriented brands and in principle all retailers want more space. We look at consumer behaviour and changing preferences to identify the right brands which will widen the choice for consumers under one category.There are examples of international brands that did not get their strategy right in India and hence they have either relocated or moved out. Alternately,
there are home-grown brands that have adopted right strategies and taken larger spaces inside our malls. It is very difficult
to attribute growth to a single brand,” states Rajneesh Mahajan, CEO, Inorbit Malls

Urban Square: “National value brands and international brands whose price points match the disposable income of the non-metro consumers,” Shubhojit Pakrasi, Sr. Vice President – Leasing, Bhumika Group states.

SFC Megaa Mall: “Being a non-metro player, there are very limited international brands. We have exclusive stores of Puma, Apple and some stores have mixed brands with Skechers, Nike, Levis etc. So, we have a majority of national brands. In non-metro cities, national brands are clearly winners as national brands are well known to nonmetro customers, and they trust national brands,” Sukumar F. Chougule, Chairman, SFC Megaa Mall says.

Secura Developers Pvt. Ltd.: “In nonmetros, we fi nd national brands to be the clear winners, the reason is mainly the pricing strategy followed by the national brands and also the brand loyalty they enjoy,” says M A Mehaboob Managing Director, Secura Developers Pvt. Ltd.

Prozone Intu: “National brands provide good fashion at reasonable price. Almost 80-90 percent of our retailers are national and regional brands that are more agile to the sensibilities of the local markets and quicker in reacting to dynamic scenarios and adapting and offering benefits to customers. Whereas, we also have international brands which
are aspirational and now have managed to get the pricing and taste adapted to the local market requirement,” states Bipin Gurnani, President & CEO, Prozone Intu Properties Ltd.

DLF Shopping Malls: “We have laid a strong foundation, created a scalable model and we are building the future of Indian retail. At a micro-level, what we look for in our mall is a brand with a difference, which is appreciated by the customer and has a strong brand connect. Because, there is no point in housing an international brand which doesn’t have a connect with our TG or a local brand which is not relevant for the market.We also focus on a unique brand mix for international and national brands keeping our TG in mind. We pay attention to their needs; we closely monitor social conversations of our consumers and then strategies our leasing and marketing efforts,” says Pushpa Bector, Executive Director, DLF Shopping Malls states.

: “National players are the clear winners as they are close of customer’s choice and they also understand the customer sentiments,” states , Joint Managing Director, MGB Felicity Mall.

City Centre Guwahati: “There is no clear winner per say as they both have their own customer base,” says Vatsal Prithani, City Centre Guwahati.

Key to Success

In terms of the demand and supply situation, especially in non-metro cities, malls have to be studied – and launched – differently. There is no one simple formula to succeed because you are creating a product which has to be relevant to the neighbourhood and the economic prosperity of the micro
market. Eventually, a good mall is one that provides comfort, excitement and experience for the consumer who walk in. Shopping centers are not real estate players, they are consumer businesses and their success depends upon multiple factors, coming together and delivering great experience to patrons. The success of a mall depends on a number of factors including the location, design, anchor tenants, tenant mix and the overall mall
management who is managing the daily operations and running of the mall.

“Success lies in how well the non-metro malls connect to the culture of a city. The mall should have the outlook of a modern-day shopping centre and cater to the needs of its customers,” says Renjhen.

Continuing the same thought, Bansal says, “The key to success is the unique atmosphere and advanced surroundings that a mall has to off er under one roof. It acts as a one-stop destination for community connect and customisation needs for every demographic which is pleasing and promising. The non-metros
have been subjected to traditional forms of retail and entertainment since a long time, malls open up a fresh avenue which makes them feel closer to the rapidly developing culture of metros.”

“Meeting the aspiration of the people there is very important, people from non-metro are very much aware of the quality available in metro cities and they expect the same in their town as well. At the same time, staying relevant to the region and size of the mall and without compromising on the aesthetics is also important,” adds Mehaboob.

Malls can be profitable if they are able to fulfil the consumers’ needs and their evolving preferences. As retailing is an integral part of the social structure of a city, it enhances the social and economic climate.

“Improving facilities and services can be instrumental in drawing consumers to the malls and enhance the overall retail setting for the consumers. The entertainment facilities provide extra value to the consumers. The variety of food options and new home-grown brands provide a great experience,” Bector states.

“Lack of good quality physical brand outlets is a reason why e-commerce is flourishing in Tier II & III towns. If a developer can bring up a mall with the brands, variety and experience that a metro offers, it can become a game changer. Also, positioning is an extremely important factor for the success of a mall in non-metro cities. Along with shopping, is it the entertainment experience, the food experience or leisure/ activity experience
that the mall offers. Last but not the least is the brand mix, which is a factor behind the success of any mall in non-metro mall. Local brands need to be there along with domestic and international brands. And all these have been the success mantra of Bharti Realty for Pavilion in Ludhiana,” explains Mohit Pruthi, VP – Head Retail & Marketing, Bharti Realty.

The Future

The future of malls in non-metro cities is very bright, provided there should be a proper study and survey for the demand of mall in that non-metro city.

“The future of malls in non-metro cities looks very promising, the desire for quality shopping and entertainment is there. We feel confident about the fact that there is an opportunity for a mall in every municipality in Kerala” says Mehaboob.

“The non-metros present to the malls varied options of experimenting with styles and technology to suit their desires. Thus, making the non-metros a perfect destination for malls to get established,” adds Bansal.

Gurnani says, “With maturing markets of metros, brands have started expanding their footprint in non-metros to capitalise on the growing demand. Knowing that these cities have favourable demographics and a high propensity to consume, malls are looking forward to creating their presence here. Certainly, the growth lies in these non-metro cities.”

“Another important factor is that economies of non-metros catching up slowly to metros,” adds Prithani.

The Indian real estate market was once primarily driven by the major metropolitan and urban regions of the nation such as Delhi, Mumbai, Bangalore, Hyderabad, and Kolkata. But, the infrastructure of the major cities is already encumbered now, and the developers are looking forward to expand their horizon in the non-metro cities. Consequently, many of these cities are witnessing increased economic activities and a reduction in the outward migration to the metros.

“Smaller cities now have investmentgrade retail assets that can generate good returns. Apart from Delhi NCR, Amritsar, Ahmedabad, Indore and Chandigarh are a few cities that might witness increased traction in the times to come. Long-term investments and high rental incomes are the two primary things that they look forward,” concludes Bector.