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Plan B Spells Growth: Indian malls shift focus to B-towns

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries with the entry of several new real estate developers in the recent years. The mall retail space is also seeing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities. While the main metros have almost become mature markets with over a decade of mall retail, it is still a fresh concept in the smaller cities which thanks to proof from online retail have proven to be a very viable avenue of growth and expansion.

Plan B Spells Growth: Indian malls shift focus to B-towns

India’s potential lies in the growth of smaller cities that have been witnessing a transformation in purchasing power and brand awareness over the years. While the metros will continue to witness emergence of new malls and lifestyle retail, almost a third of new development is predicted to take place in the tier-II and -III cities.

Change in lifestyle is a great aspect which drives the extension of the Mall culture across new markets in India. The entire business landscape has transformed, small cities with big investments are expanding and reinventing themselves from their very core. State government plays a vital role in the thrust behind development which lifts the buying behaviour of the market as well. In essence, malls work because, higher business values can be collectively achieved. Where brands don’t find viability in stand-alone retail outlets, yet have a market for their products, a collective in the form of mall is a win-win situation for all. Everybody, specially the consumers of course love the convenience of it.

The top tier two cities emerging with a good appetite for mall retail are Jaipur, Ahmedabad, Chandigarh and Lucknow to name a few. However, penetration into smaller cities needs an in-depth understanding to predict the buying behaviour of customers here which is still very different across regions basis geography and culture. Retailers have adopted Big Data Analytics to understand buying behaviour and sentiments of customers thus enabling a focus on customer-centric marketing which can’t survive basis a cookie cutter approach. A Punjab market poses a very different requirement of brand mix vis a vie a shopping centre in Cochin, Nagpur or Varanasi for that matter.

The obvious and easy move from the kirana shop to temperature controlled impressive mall spaces is no surprise but one needs to also get the pricing right. As we move down the layers of tier two metros and mini metros, though purchasing power may be on the rise, the price sensitivity is also equally proportionate.

The development of malls in tier two markets though in itself is no surprise given the unprecedented growth of the mall retail industry in India. Though it may not seem so from within the industry, the fact is that till 2001 there were only three malls in India. By 2013 this number blew up to 570 and continues to do so with over 700 functional malls in India today across multiple cities. The growth needs to be across mall formats, within cities and hence also spreading geographically to explain and accommodate this growth in demand and hence mall retail spaces.

How much revenue is however generated from the drawn crowd? Only crunching numbers in terms of footfall is not enough. If this number does not drive revenue and sales, we will scale down as quickly as we have planned a scale up. It has been observed that entertainment spaces play a more crucial role in these new markets to drive a stable income and influx of people without being only dependent on retail sales. F&B also plays a critical role in the same way. The food court and cineplex in most such mall spaces are the lungs of the mall breathing life into the remaining spaces. The retail mix is thus laden with entertainment and hospitality elements.

All these aspects kept in mind – with the right kind of retail format, mix of brands, emphasis on value for money, wholesome entertainment & hospitality – there is a big potential for further success of malls being developed in B towns.

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