The Tale of Two Indias: A look at the evolving landscape of malls

India's mall scene presents a fascinating paradox. On one hand, there's a boom. Reports from CRISIL Ratings suggest a significant rise in retail space, with a projected growth of 30-35 million sq. ft in the next three to four years. New malls are springing up in major cities, boasting high occupancy rates exceeding 90 per cent. Investment is pouring in, with private equity participating heavily in new ventures. A 2022 Knight Frank report reveals a contrasting picture, highlighting the plight of struggling malls, particularly smaller ones, facing vacancy and potential closure.

Ground zero growth vs. ghosts

This investment boost is due to numerous factors. Rising disposable incomes is one of them. India's growing middle class has more money to spend, creating a demand for retail experiences. Malls, particularly well-managed ones, capitalize on this by offering a curated shopping experience with entertainment and dining options. Almost 60 per cent of new malls in 2023 had private equity backing, indicating investor confidence. Moreover malls are increasingly becoming entertainment and leisure destinations, not just shopping hubs.

The Knight Frank report sheds light on a potential mismatch. While larger malls in prime locations thrive, smaller ones, especially those relying on a single anchor store or lacking a strong tenant mix, struggle to attract customers. This suggests a potential oversaturation in specific segments of the market. The rise of e-commerce undeniably impacts physical retail. However, it's not a death knell. Malls that offer a unique experience beyond just shopping, leveraging experiential marketing and entertainment options, can thrive alongside online retailers.

Consumers hold growth key

Changing consumer behavior is a key driver. Customers today seek convenience and value. Malls offering easy accessibility, diverse shopping options, and a seamless online-offline integration will likely succeed. Conversely, those failing to adapt to this evolving landscape may become relics of the past. The rise of e-commerce has undoubtedly impacted traditional brick-and-mortar retail. Consumers are increasingly comfortable shopping online, especially for certain categories.

The future unfolds

The short-to-mid-term future of Indian malls will likely see a consolidation phase. Only the best will survive. Well-designed, well-managed malls in prime locations with a strong focus on experience are likely to remain afloat, potentially attracting further investment. Struggling malls might need to reinvent themselves. This could involve repurposing space for offices, co-working areas, or entertainment hubs. Also, malls might see a shift in tenant mix, with a greater focus on experience-oriented brands, pop-up stores, and local vendors catering to specific niches.

In the next two to three years, the Indian mall landscape is likely to see further consolidation.

• Mergers and acquisitions: Stronger malls may acquire weaker ones, creating larger, more vibrant destinations.

• Focus on technology: Malls will leverage technology for better customer engagement, like loyalty programs, interactive kiosks, and personalized shopping experiences.

• Sustainability push: There's a growing emphasis on eco-friendly practices in mall design and operations.

The Indian mall story is likely to be one of cautious optimism. Growth will likely continue, but it will be measured and focused on quality over quantity. Malls that can adapt to the changing consumer preferences and leverage the power of experiential retail will be the ones standing tall in the years to come.