05 December 2023, Mumbai
Indian retailers are actively enhancing the in-store experience to attract more customers, capitalizing on the renewed enthusiasm post-pandemic.
Despite increased rental costs, many retailers have expanded their retail spaces by 30 to 50 percent, believing that unique in-store experiences will give them a competitive edge. The focus has shifted from simply increasing footfall to prioritizing conversion rates.
Retail more about experience now
As brands experiment with immersive shopping experiences aided by smart technology, physical retail space has become essential rather than optional. With India's GDP surpassing $4 trillion, the rising purchasing power indicates that consumers now prioritize experiences over just value.
As Pankaj Renjhen, COO and Joint-MD of the retail division at Anarock Property Consultants, explains, physical stores are now more about providing an engaging experience than just showcasing merchandise. He noted that brands recognize this shift and are expanding their stores to broaden their offerings.
In the first half of 2023, gross leasing in the top seven cities across India reached 3.16 million sq. ft, with experts attributing this growth to increasing consumer confidence. The trend underscores the evolving landscape where retailers are strategically investing in creating memorable in-store experiences to meet the changing preferences of Indian shoppers.
Growth of retail leasing in 2023
In 2023, there's a notable trend of expanding retail spaces in India. From January to September, the top cities witnessed a collective growth of 4.73 million sq. ft. in retail areas.
During this period, the proportion of stores ranging from 2,000 to 5,000 sq. ft. increased from 19 percent to 21 percent. Similarly, stores in the 5,000 to 10,000 sq. ft. category rose from 9 to 11 percent, and those in the 10,000 to 15,000 sq. ft. category increased from 9 to 13 percent.
Nuanced view
Renjhen says, retailers are not only enlarging existing stores but also increasing the number of stores to capitalize on the rapid growth of the organized retail market. CBRE India, a retail property consultant, reported a substantial 46 per cent year-on-year increase in retail sector leasing during the January-September period of 2023.
Hoghlights
Harsh V Bansal, Unity Group, a mall operator in the Delhi-Punjab region, highlighted the significant transformation in physical retail post-Covid.
Unity Group has adjusted some existing malls based on brand request as expanding within an existing mall becomes challenging. The group’s new mall reflects changing customer preferences, with a notable inclination towards larger areas, aligning with shifts in store designs.
Malls attract hefty investments
Retail stores are in need of more space, and malls are stepping up to meet this demand, creating a mutually beneficial situation. Following a substantial 60 per cent growth in mall leasing spaces by the end of 2022, the positive trend has continued into 2023, with mall revenues collectively surging over 125 percent compared to pre-pandemic levels.
Multiple data-points
The mall space landscape in India is poised to expand by 30-35 million sq, ft., which is roughly a third of the current stock, over the next three to four years. This surge is driven by robust recovery in retail sales during the fiscal year 2022–23.
As per CRISIL Ratings, next three to four years will witness investments exceeding Rs 20,000 crore in mall development. A significant contributing factor is the revival of mall projects that were on hold during the Covid period, coupled with accelerated pace of completing new projects.
While 25 percent of incoming space will be allocated to Tier II cities, Tier I cities are expected to claim the majority share.
Quick point; The expansion of leasing spaces is not confined to urban areas; it is extending into Tier III cities and semi-urban regions, ensuring comprehensive geographical coverage.
