Retailing is all about being at the right place at the right time. While deciding on a business proposition, real estate issues are the most crucial ones by the virtue of the fact that real estate is the largest fixed investment for a retailer.
And within real estate, location related decisions in retailing are the most critical and fundamental decisions because that is what facilitates getting the merchandise to the ultimate consumer at the right place, at the right time, in the right quantities, and at the right price. Location is one of the key considerations for the customer, making it all the more vital.
Secondly, location decisions are strategically important for the retailer because they help in developing sustainable competitive advantage over the competitors that cannot be copied at any cost.
The Fading tradition of High Street
Traditionally, High Streets have been the favorites of retailers because they provide easy accessibility to the consumers. But this is now diminishing owing to the exorbitant prices of properties on the High Streets and lack of availability of large space. This has compelled retailers to opt for compact properties.
But if one has to cater to the consumers’ demands, compact spaces don’t really work. Consumers demand for better and more quality and shopping ambience which has resulted in retailers to have move to the outskirts of cities in order to provide the entire range of products in large retail formats.
The decline in real estate prices in last 4-5 years has boosted the morale of the retailers, because of which there has also been an increase in the supply of property for retail locations.
Mall: The Buzz Word
Over the past years, attributing to the dynamic market, malls have moved far away from its definition of – a large retail complex containing a variety of stores and often restaurants and other business establishments housed in a series of connected or adjacent buildings or in a single large building.
Today, malls have evolved as active hangout places from just being shopping destinations. When customers walk into a mall they expect engagement on an emotional level while offering it with convenience. Retail has moved to experiential buying, entertainment has moved from more than just being movies, games to art exhibitions, live concerts, etc. There is a demand of value creation, where occasions and special celebrations top the list.
While this shift is being noticed, what is also important is to remember that in Indian context, shopping is often related to momentous events. These events include celebrations, birthdays and anniversaries, achievements that are realized through buying something new, which becomes more like a ceremony. And how much ever digitization is moving up the ladder, these moments can only be felt in person, and not through any screen.
What do retailers want?
Apart from their own research and strategies, retailers also look forward to peripheral support from the malls that add to the overall experience.
Experiences & Conveniences: Just like the customers select the mall they would like to visit and then re-visit, retailers also choose malls on the basis of the experience, amenities and exclusivities that the mall offers. These include free parking, baby care room, mall help desk, ticket booking, currency change, bill payments, live entertainments, exhibitions, fashion consultants and many more such services that entice consumers to visit the mall, as a result of which the retailers get more footfalls.
Maintenance: Retailers are also very conscious about the maintenance that the mall offers. They need the mall management to be responsible for the maintenance which include things like AC, cleanliness etc.
Digitization: It is non debatable that digitalization is the need of the hour today. Hence to be relevant in this growing digital world, one of the solutions that retailers seek from malls to increase sales is collaborating to use technology as the means to create the next-gen shopping experience for customers. One such collaboration is the Online to Offline offering. Although it is at a very infant stage that’s hardly been implemented by any mall, but if done well this could definitely help retailers and malls to increase their revenue. Loyalty programme is something that many already do, but with hoards of loyalty programmes bombarded at the consumers, the trick is to make it easier and more efficient.
How does a Mall react?
On the other hand, malls are also carefully choosing the tenants, placing them at the right point to ensure that it lures more and more customers. These tenants are thus named as anchor stores. However, the moment these stores outlive their utility, malls are wasting no time to move them to basement or higher upper floors in much smaller spaces, and quickly replacing them with new, global brands, which at that point in time are more in vogue.
According to reports Pantaloons, Westside are such stores that have been moved to lesser prominent spaces by various malls, and replaced by brands like Zara, H&M etc.
Malls are more inclined towards working on a revenue share models with these retailers and new global brands like H&M, Zara, Forever21 are more likely to generate higher revenue per square feet. They also add to the mall’s appeal, and attract the young crowd who is also likely to spend at the food court. All in all, it works well mutually.
The growing awareness of global fashion trends has been fueled by the Internet and the fashion and lifestyle media. Having said that, malls are also aware of the cultural inclination of Indian consumers. Pertaining to this, malls are consciously focusing on having a good mix of International & local brands and also promoting more and more experiential brands need to be promoted , Salons and Spas being one category.
And now the customers…
According to a KPMG report, the working age group of 15-54 years is the largest spender on retail. They are becoming more brand conscious and desire a better standard of living. Internet has exposed them to global fashion and latest trends.
For this dynamic set of consumers, it is but imperative that the retailers and malls work hand in hand to enhance the shopping-cum-entertainment experiences in such a way that it also delivers value to them. While they desire global, they are also rooted and while they seek sophistication, they also demand convenience.
With increasing population, shifting lifestyles, lengthy working hours and shrinking free time, it is definite that malls will grow dynamically. Mall businesses are also picking up in Tier II and III cities and so are the national, international retailers. Retailers are actively looking at revisiting their strategies and scouting for avenues to enter into these cities. They are openly adopting flexible approaches, customized for different micro-markets. This means, there would be equal opportunities to explore for malls and retailers – international & local.
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