The tug of war between modern and traditional retail formats is passé. Discussion and debates today revolve around the survival of the physical retail space in wake of the onslaught of e-commerce. In this piece, the sharpest mind from the world of retail real estate and brands discuss how offline retail can coexist with online retail…
Technology. The buck stops here and the journey to success also begins here. A click or a touch is all it takes for a customer to fill his shopping basket. Keeping this in mind, it is but natural for those in retail to question the viability of having a physical space to sell their products which eventually leads to questioning the need for mall development. But then how about offering you a cup of say Starbucks coffee online? Does it make any sense? Majority of those who swear by their cup of Costa of Starbucks really cannot imagine sitting at home and savoring the taste. It is the experience that the coffee shops provide that matters.
The entire debate of online versus offline rests on this principle. People in India do not visit malls just to shop. Malls are in India what community centres are abroad. With a generous dose of entertainment and dining out options, it is no exaggeration to say that malls in India are here to stay – on the condition that they adopt technology and upgrade and keep up to date with the ever-evolving consumer.
ONLINE ONSLAUGHT?
Not really? Chairman and County Head JLL, Anuj Puri says, “America is years ahead of us when we talk of online retail but then have we seen the extinction of malls in the US? Online and offline both are here to stay and coexist.”
According to Puri, mall owners launching new malls in the near future are seen changing their plans, upgrading themselves to keep pace with the changing dynamics of the new generation.
Categories likes books and electronics are seeing more takers online. Executive Director Inorbit Malls, Rajneesh Mahajan says, “I keep on hearing that bookshops are going to be dead in a few years. On the contrary, the year on year sales from bookshops in increasing though yes, the shops are becoming smaller in size. People who are avid readers would like to browse through books and then choose their pick and this can happen only at a bookshop.”
Accentuating the point of book stores not facing any extinction, CBRE Senior Director Joel Stephen, talks about how China is once again witnessing a rise in the opening of bookshops post a phase when many shut down due to e-books.
“Bookshops are seen as lifestyle destinations. If the consumer gets an unmatched experience at a store, there is nothing that can drive him away from physical shopping and towards online space. Having said that, the online popularity in India cannot be undermined,” he said.
Stephen also draws an interesting analysis on how online is big in India and China but not so much in Hong Kong, the reason for which can be attributed to the fact that Hong Kong has a very open market culture thus taxation of products is lower than in India and China.
“Price – an important factor that leads people towards online – is also not an issue in Hong Kong since it is a small place and driving anywhere takes between 10-15 minutes at the most. Brands are literally at your doorstep and hence offline shopping is convenient,” says he.
Sharing data from a research conducted by his company, Stephen says, “Through a CBRE consumer survey we found out that 84 per cent people in India check prices on phone when they are in and around a store. Across Asia Pacific this number is lower – 61 per cent. In India social media is accessed by 85 per cent for product information versus 67 per cent in Asia Pacific.”
MAKE WAY FOR OMNICHANNEL
Malls will need to increasingly imbibe technology, and there is no shortage of examples of this happening already. For instance, online retailers are now launching stores as fulfillment centres, and are locating these stores near major metropolitan areas in an effort to locate products which are in high demand but close enough to be able to meet same-day or next-day delivery requirements efficiently.
Meanwhile, though offline retailers have bigger constraints in terms of the warehouse infrastructure available to them, they do have an edge in the sheer number of stores located all over the country, and even worldwide. They have the option of re-purposing these stores so as to be able to offer direct order fulfillment and back-office stocking, while keeping a cap on the assortments stocked on the floor.
Introducing Omnichannel will definitely call for a lot of investment in terms of changing systems and operations, but it is well worthwhile for achieving long-term competitiveness with e-commerce players. High internet and smartphone penetration is also playing a big role in how retailers conduct their business. In F&B, more and more players are developing mobile applications which allow their customers to inspect the menu, make table reservations and make online payments online.
Fashion retailers are increasingly adopting Omnichannel retailing, giving customers the flexibility to inspect merchandise in their stores and then pay for their purchases either in-store or online. We are also seeing the use of tablets by store staff taking off in a big way. This allows them to conveniently process payments and also help shoppers to check sizes, styles and the availability of selected items. In case of non-availability, store staff can let shoppers to place online orders directly on the tablet, and to decide on whether to receive the ordered item in the store or in their homes.
Going forward, we will see fast-paced adoption of technological solutions by retailers, as this is the only way to stay competitive in today’s tech-driven world. We are just looking at the beginning of this trend. In the coming ten years, technology will entirely revolutionize the way people shop and retailers sell their merchandise. Physical retailers will come up with a whole range of imaginative solutions to counter the competition from e-commerce. Interestingly, this movement is primarily being fueled by start-up tech companies with a focus on disruptive innovation – and India has a clear edge in terms of saturation of such firms
WHERE ARE THE TAKERS FOR ONLINE SHOPPING?
Big online portals take pride in stating the numbers of pin codes they serve. Brands often talk about how online has helped them reach the interiors of India where they see orders coming from towns they would not have even heard of. But does it lead to accepting that online is gaining popularity in Tier II and III cities and towns? Throwing light on this, Co-founder and CEO CREIndia, Ajay Rakheja says, “Smaller towns are not very attracted to online shopping. The culture of touch and feel buying still exists there.”
However, Rakheja does admit that online is more convenient to users in a country like India – it saves people from traffic, long queues, while adding deals and discounts to the kitty.
4 INCHES WAGING A WAR WITH 4000 SQ.FT.?
Rajneesh Mahajan draws an interesting analogy. “When home theatres and blue ray DVDs were launched, people were quick to say that this would be the end for cinema houses and theatres. But did this happen? Each mall today boasts of multiple screens. It is all about experience. People pay for experience. Malls just need to upgrade themselves and provide great customer experience.”
On whether online is here to stay and always remain evergreen, Director Prozone Intu and MD Provogue, Nikhil Chaturvedi says, “Between 2006-2008, the retail market share was valued in land grab that was taking place. What we are seeing right now is gaining the market share and changing habits being driven by online retail. People grew accustomed to visiting malls, but now they have realized that e-commerce has a price advantage along with easy returns. But what will happen when investors stop pumping in money? When the discounts go, will people still shop online? Easy return policies are driving people to shop more and more but then we see an increase in return rates too. If you keep all this in mind, the online cost of brands is almost at par with setting up a shop. E-commerce is delivering fantastic value to the consumer but we need to keep in mind the cost of reverse logistics. Investors are allowing this but when reverse logistics stop, markets shall change again.”
Mahajan adds, “We have gone through many cycles in the last 15 years. Initially consumption was driven by novelty and then by prosperity. Mall business changes to stay relevant to the customer. Relevance to the consumer now has to be corrected with this new aspect – technology. We need to find out which products a consumer will buy online and which ones offline. Strategy is to find the relevance. Malls make for a great consumer experience. They only need to change the way they interact with consumers and adopt technology to lure them into buying as well.”
SOCIAL MEDIA AND MALLS
The advent and the gradual popularity of social media has led to not just brands but also malls and shopping centres to have their own Facebook pages, Twitter handles, Instagram accounts etc. The smallest of brand from the modern retail world today can’t afford to give social media a miss. What though is not clear is whether their mere presence is enough.
While for brands, just mere presence on social media will suffice, for malls and shopping centres much more is needed.
Director Terragni Consulting, Anil V Pillai says, “Social media cannot be used as a medium to announce sales / discounts / offers / promotions. If they begin to concentrate on just this, then they are literally getting into a ‘me too’ game with the online players. A game which malls will lose for sure, since online players can offer unmatched deals and discounts.”
He feels malls need to utilize social media a little better. For example: DLF Promenade organized a fashion bloggers’ meet, where – as the name suggests – fashion bloggers met to showcase their styling skills. The entire pre-event and post-event buzz was carried online for days.
ROAD AHEAD
Advocating a strong reason as to why malls shall not lose relevance to the retailers, Founder and CEO, Pretr, Bhavik Jhaveri says, “Convenience is and will always be the only way to attract consumers. Impulse shopping happens at stores and not online. Online shoppers specifically know what they want to buy.”
The road ahead for offline retail stores and malls is not as bleak as it is made out to be. Online retail will complement and not eat into the share of offline retail.
Malls need to understand and upgrade themselves to keep pace with the changing dynamics of the new generation
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