Are department stores still relevant to malls?

Are department stores still the heroes in a mall? Do they still have a significant impact on the success of a shopping mall as they did at the peak of their popularity? We ask some leading shopping centre players

New Delhi: Ever since department stores made their entry into the shopping malls, they have been playing a significant role in their success. Offering a diverse range of products under one roof, including clothing, accessories, cosmetics, footwear, home goods, electronics, and more, department stores serving as anchor stores has been a regular pattern in the malls.

The presence of department stores, like Shoppers Stop, Pantaloons, Reliance Trends, Lifestyle attracts a significant amount of foot traffic to the mall, benefiting both the mall and the retailers.

As department stores house a massive mix of popular national and international brands, it gives them an edge over the other stand-alone stores in the mall also in terms of dwell time. Shoppers tend to spend extended time in a department store browsing through the broad range of choices in terms of styles, sizes and price points.

“The department stores in malls drive substantial revenue and foot traffic. They serve as anchor tenants, attracting customers who often explore other stores. Their broad product range caters to diverse needs, enhancing mall appeal. Moreover, these stores often host sales and events, boosting overall mall engagement and profitability,” Ravinder Choudhary, Vice President, Vegas Mall explained.

However, with the emerging trend of food courts, F&B (Food & Beverage), Family Entertainment Centre (FEC), gaming zones, cinema and events in malls taking precedence, the role and impact of department stores have taken a back seat in terms of footfall and revenue in the last few years.

Department stores have been facing a dearth of footfall with online e-commerce and their heavy discounts becoming popular among consumers. Brands like Zara, H&M, and Croma as anchor stores have also taken away the exclusivity factor of department stores format being the only anchor stores in malls.  The lockdown period during the Covid -19 pandemic turned out to be another phase where the department stores had to face maximum heat.

Do department stores still have a similar impact on the success of shopping malls? We ask some of the leading shopping centre players…

Still valuable to malls?

For Inorbit malls, the significance of department stores remains intact as a generator of revenue and footfall by virtue of the wide customer base they attract.

According to Rajneesh Mahajan, chief executive officer, Inorbit Malls, in addition to offering a wide range and price points under one roof, what makes department stores popular among consumers is the multiple discounts and deals they offer around the year which gives customers value for their money. Besides, their established loyalty programs and marketing prowess have their own rub-off effect that contributes positively to the footfall of the mall. “These factors make department stores highly relevant and significant for malls,” Mahajan said.

“In growing markets like India, especially in tier 2 and tier 3 markets, the popularity of such stores is unparalleled,” he added.

For Infiniti Malls, department stores attract a considerable 8 – 12% of total footfall, drawing in customers in large numbers.

“The symbiotic relationship between our enterprise and department stores is fundamental to our success. Their substantial revenue contribution and ability to enhance customer satisfaction reinforce our position as a retail destination of choice,” Gaurav Balani, deputy general manager – Marketing, Infiniti Mall said.

Sameep Pathak, chief executive officer-malls, Oberoi Realty too feels that department stores are important to malls. “Department stores are one of the major requirements in the mall. They carry maximum footprint or square footage, and if strategically placed, they drive footfalls to those areas,” Pathak said.

However, Pushpa Bector, senior executive director, DLF Retail shares a slightly different perspective. “Larger fashion brands (single brands) are doing much better than the department stores. However, department stores, when guided by the right anchoring, definitely have a market for themselves,” she said.

Occupancy in Malls

The allocation of space to department stores in malls has undergone change over the past few years. Here’s a look at the current scenario at some leading malls.

Infiniti malls: Recognizing their significant impact on customer satisfaction, sales, and conversion rates, 12-20% of the total retail space in Infiniti Malls is dedicated to department stores.

Inorbit malls: At Inorbit malls, around 20-25% of the total mall area is dedicated to department stores. “The decision is totally dependent on several factors, with the size of the mall being one of them,” Mahajan explained.

Vegas Mall: Vegas Mall has dedicated a space of 85875 sq. ft. to department stores.

Department stores as Anchors

Traditionally,  department stores have been anchor stores at most malls as leveraging the large promotional budget of these stores, in combination with the mall’s own marketing efforts, bolstered promotional endeavours and effectively reach a wide audience.

“These large, well-known stores attract substantial foot traffic, benefiting smaller mall retailers, hence employing department stores as anchor tenants significantly bolster shopping mall success. Department stores’ presence enhances the mall’s appeal and improves tenant variety, increasing sales and sustained growth,” Choudhary from Vegas said.

According to Balani, when department stores are anchors, a mall can benefit from its reputation elevating the overall recognition and brand amplification of the mall in which it is situated. “This, in turn, cultivates a sense of loyalty and allegiance among frequent shoppers, further benefiting the mall’s growth,” said Balani.

However, in recent years the trend has been changing. Explaining how, Mahajan of Inorbit Malls said, “These stores do play a role in attracting footfall to an extent, but in certain theme-driven malls, they might not be present at all,”

He cited the example of a mall centred on luxury fashion brands. According to him, such a mall might prioritize high-end boutiques and designer flagship stores as anchor tenants, aligning closely with the theme.

In such cases, department stores with a more general merchandise assortment might not align with the mall’s unique identity and may not be as necessary for its success.

“Having departmental stores as anchors totally depends on the positioning of the mall, which in essence means considering factors such as the mall’s location, size, layout, design, tenant mix, and the overall shopping experience it aims to provide,” explained Mahajan.

The Right Balance

Anchor stores can create increased competition for existing retail outlets within the mall. The heightened prominence of the anchor store may divert attention from other retailers and pose challenges for smaller businesses. “Therefore, striking a careful balance between the anchor store’s advantages and addressing potential competition concerns becomes crucial in ensuring the sustained prosperity of all tenants within the mall,” Balani said.

In the case of multiple department stores in the mall, the uniqueness of each store must extend beyond its intended clientele and should encompass a wide array of factors, including the assortment of products offered, the overall shopping experience provided, and the specific price points at which these products are presented.

“Each department store possesses its own distinct positioning within the market and is designed to cater to specific and diverse sets of customers,” pointed out Mahajan.

Moreover, the categories of merchandise available within each department store can exhibit considerable variation, contributing significantly to the overall differentiation among these establishments.

“This inherent diversity, both in terms of the products themselves and the overarching shopping ambience they cultivate leads to differentiation between these stores and that is how a balance is created with respect to the presence of multiple department stores at a mall,” Mahajan of Inorbit Malls explained.

“The right balance enhances the mall experience, attracting a broader customer base and maximizing success,” Chaudhary from Vegas felt.

“Maintaining a balance with multiple department stores in a mall involves strategic tenant selection, ensuring diverse offerings and target demographics. Varying brands, price ranges, and product categories prevent redundancy,” he added.