With the organized retailing in India growing at the rate of 25-30 percent per annum, malls are considered to be the next big happening thing. Dr. Prodipta Sen, Executive Director, Marketing, Corporate Affairs and Retail, Alpha G:Corp assesses the future of the malls, mall marketing, and new trends in mall industry, and compares the market in different cities.
Q. What is your assessment of the Indian market in terms of mall development?
So far mall development is not where it should have been, but with the prospect of FDI being allowed there is a huge potential. Time will tell whether the developers will carry through the deliverables based on their announcements.
The size of the organized retail market stood at INR 28,000 crore in 2004, thereby forming a mere 3 percent of the total retail market. Moving forward, organized retail was projected to grow at the rate of 25-30 percent per annum. Quite predictably, favorable demographics, upbeat consumer trends, and changing lifestyles saw modern retailers growing at the rate of 30-40 percent year-on-year. Moreover, apart from the large-scale shopping centers, retail formats in India’s tier II and III cities were also expected to grow, thanks to the expansion of the IT/ITES and BPO industries, which were instrumental in creating consumption demand for high-end lifestyle products.
India is on the verge of becoming one of the fast-growing economies, driven by many factors including multinational entrepreneurialism, buoyant local stock markets, robust economy-changing demographics, and the overall emergence of India on the global stage. Indian retail industry is going through a period of rising sunshine and is ranked as the most attractive emerging market for investment, as well as the fifth largest retail destination globally. In the last couple of quarters, retailers across India have resized stores, renegotiated rentals, and exited unviable locations. Professional developers on their part saw the need to improvise in order to take their unique offerings closer to their consumers. The right retail mix, revenue sharing arrangements, professional CRM, and wise zoning choices combined together distinguish the truly successful destination points from among the mass of shopping malls.
Q. What is your assessment of the retail industry vis-a-vis mall industry?
Retail will continue to grow rapidly to meet the needs of the fast-growing middle class, demanding higher quality shopping environments and stronger, recognizable brands. Malls are fast learning; in order to have a healthy mix of retailers, differential rates have to be offered to a multitude of tenants. This attitude to be flexible in a nascent market will go a long way in ushering the much-awaited renaissance in organized retail.
Retail industry in India is regaining strength with incomes of major retail players expected to grow consistently to more than 30 percent by the end of current fiscal according to an ASSOCHAM Financial Pulse Study. Smart retailers realize that shopping in the real world will forever satisfy consumers’ deep-rooted needs for human contact, instant gratification, and promise of happy experiences. Hence, the flurry of new formats, technologies, capabilities, themes, and products are now delighting retail customers around the world.
Q. What are the latest mall marketing trends seen in India?
Mall marketing is still at a nascent stage; however, events, promotions, and cultural and celebratory activities are the trends for facilitating an emotional connect. The mall industry in India estimates the size of organized retail to grow from current $7 bn to 17 bn in the next four to five years. There are about 300 new malls, 1,500 supermarkets, and 325 departmental stores currently being built in cities across India. This suggests that the potential for growth is immense.
Strong underlying economic growth, population expansion, increasing wealth of individuals, and the rapid construction of organized retail infrastructure are key factors behind the forecasted growth. Mass grocery retail sales alone are expected to undergo enormous growth over the forecast period in India. This is a consequence of country’s dramatic rapid shift from small independent retailers to large, modern outlets.
Q. How does mall marketing differ in tier I, II, and III cities?
Tier I cities have been carrying out activities to ward-off competition, while tier II and III towns usually depend on the retailers for activities which would attract footfalls.
The trend of expanding megapolises will be stronger in 2011-12 and give far more flexibility in designing city centers, commercial complexes, and townships. Huge segments of untapped space especially in tier II and III cities and towns with large scope and potential for expansion will ensure a steady trend followed by the development in rural sectors.
While the mall culture in India is surely rising, the moot question is how many of them succeed in what they set out for. As organized retailing in India grows, tier II and III cities, especially, are seeing hectic activity in the mall space. Development in a tier II city is more challenging as the target audience needs to change its buying and consumption patterns and keeping that in mind one needs to plan the development and its amenities. In a metro city, one has competition and the consumption pattern is already set so the value proposition is a little different. However, in all cases the “experience” one delivers to the customer is what defines the success.
Q. What is the future of mall development and mall marketing in India?
The retail sector is one of the most booming sectors in the Indian economy with some of the world’s biggest players likely to enter the industry soon. It is on the threshold of bringing the next big revolution after the IT sector. Indian retail already contributes 10 percent of the GDP. On the other hand, the organized retail market has not achieved its full potential yet, but is expected to grow manifolds by the year 2015.
Organized retail has come to stay and has great potential, provided the developments are able to incorporate designs that are of international nature and become the extension of the hospitality industry. Mall marketing as we go along will need to be very enriching and fulfilling so as to enable the patrons to enjoy the complete experience which needs to be different from buying online. This means that the retail marketing will become highly specialized and the skill sets will become very important to succeed. The government’s five year tax relief for opening shopping malls and multiplexes will boost this trend to a great extent.
A number of changes have taken place on the Indian retail front such as exponential increase in availability of international brands and a growing number of malls and hypermarkets as a result of easy availability of retail space. For the customer, the emphasis has shifted from reasonable pricing to conveniences, efficiency and ambiance, all interspersed to deliver unforgettable family experiences.
Q. What is the ideal tenant mix for a mall in tier I, II, and III cities?
In tier I, you normally cater to the not so price-sensitive clientele so the brand value is far higher than the shopping or retail experience. In tier II and III cities and towns having a middle and agro-based economy, the mix caters to the value and more cost-effective formats. In Amritsar, it is right from the families into agro economy to the entire city’s middle and upper classes where the household income is over Rs 10,000 per month. In Ahmedabad, we expect similarities with Amritsar as both are progressive cities.
Apart from metros, several tier II and III cities such as Ahmedabad, Amritsar, Jaipur, Aurangabad, Sholapur, Nagpur, Nasik, Kolhapur, and Amravati are witnessing the expansion of modern retail. However, retailers need to adjust their product mix and communication for smaller cities, as they tend to be more conservative than the metros.
It is very important to have the right mix of tenants at the right place, so as to ensure smooth flow of customers. You have to create visibility in the market to get the desired footfalls. The location of mall is one of the main factors that decide its success. Good visibility and access via roads are some of the main pre-requisites for a mall followed by zoning of the mall.
Q. What is the expansion plan of Alpha G:Corp in terms of mall development?
Alpha G:Corp has retail, residential, and mixed-use projects encompassing an area of more than 70 million sq.ft. in Gurgaon, Amritsar, Ahmedabad, Karnal, Fatehabad, Jallandhar, Jaipur, Goa, and Meerut. We are developing projects worth Rs 5,000 crore in India in the coming five years. The Alpha G:Corp signature City Centres are branded as “AlphaOne” and would be located in most of their residential townships to complement the international lifestyle with retail and entertainment.
Q. What are your plans for metro cities?
There is no land available that can be looked at for a large retail city center in metro cities. Our attention would be on controlled expansion with a tight grip on maintaining quality standards and ensuring all statutory compliances. Our city centers in Ahmedabad and Amritsar are our show windows to an ever growing customer base and thereby help in creating demand in all the real estate segments that we are involved in.
Q. What is the targeted revenue of Alpha G:Corp from its retail and mall business?
Our targeted revenue for 2011-2012 is Rs 70 crore and over Rs 120 crore for 2012–2013.
