If you went only by the number of shopping malls in the country, you
would think the brick-and-mortar retail space in India is booming. By
the end of this year, India will have more than 87 million square feet
of shopping space in its malls, an increase of over 15% from last year.
The country already has 570 functional malls, with this number having
doubled over the last five years.
There is, however, one problem: buyers are no longer doing their shopping at shopping malls. What looked like India’s great retail growth story is turning out to be a tale of empty shopping complexes and stalled projects, with developers giving up midway instead of trying to make these projects profitable. The culprit, data suggests, could be online shopping.
Click away
Numerous studies and surveys have arrived at the conclusion that retail is booming in India, albeit online. Physical stores are the ones bearing the brunt of massive discounts and comfort that e-commerce has brought to the desks and palms of the youngsters who no longer feel it necessary to visit a retail outlet to buy something. In recent years, online retail has grown exponentially and the industry is poised to be worth more than $20 billion by the end of this decade.
A report by The Associated Chambers of Commerce and Industry of India pegs the compounded growth rate of e-commerce in India at 40-50% in the next five years. A survey report published by the ministry of consumer affairs points out that more than 80% of young people shopping online are less than 30 years old.
Those who are not shopping online so far are expected to give it a go in the coming year, according to a research report released by Forrester Consulting and the technology giant Google. More than 70% of non-buyers (respondents) from tier I and II cities said they plan to shop online in the next 12 months, the report added.
Empty malls
The surge in online shopping numbers is choking physical retail, industry experts suggest. A study by ASSOCHAM reported that more than 200-300 malls came up in the country in the last two years. However, it added that 80-85% of the space in these new malls is lying vacant.
According to the report, this problem is being faced by mall owners across the board, starting with metropolitan cities like Delhi, Mumbai and Chennai, followed by Ahmedabad and Hyderabad. In each of these cities, mall rentals fell by more than 40% owing to fewer footfalls.
At the same time, online shopping grew by over 350% in a matter of just one year, the report adds. "Apart from convenience, rising fuel price, security reasons, online discounts and availability with abundance of choices are keeping consumers indoors,” said DS Rawat, secretary general of ASSOCHAM.
Anchor stores
Even as footfalls dip, revenues continue to come in for some of the malls. The reason: anchor stores. Anchor stores are those specialised stores that offer exclusive products generally not available online.
Brands like Zara, H&M, and even Starbucks are acting as anchor stores for mall owners, who are rushing to sign them, at times with revenue sharing models and larger exclusive spaces. Evidently, the surge of online retail has also forced mall owners to set their priorities straight, as watching movies and dining out remains among the last few things that people cannot get delivered to their doorstep.
“The arrival of the mall syndrome has accelerated the growth of cineplexes as multiplexes are the anchor tenants in most of these malls," Shravan Shroff, managing director, Shringar Cinemas is quoted as saying by rediff.
Demographic opportunity
E-commerce might have already become a threat to physical retail and offline stores, but experts suggest there is more to come in the story as an even younger generation crops up. Only 17% of Indians are online as of now, a low number compared to other countries and only 9% of the online Indians currently engage in e-commerce, according to Accel Partners, a leading investment firm that is backing companies like Flipkart and BookMyShow.
However, these numbers are soon set to swell up exponentially as India hits the mark of 300 million people online before the year ends, leaving mall owners as well as retailers with the mammoth task of luring people away from their computers and phones to physical stores at a time when developers are slowing down on projects.
“[The] biggest shopping mall can feel like a pretty lonely place, majority of retailers said that they are holding back on new store openings and focusing on existing stores”, the ASSOCHAM report added.
There is, however, one problem: buyers are no longer doing their shopping at shopping malls. What looked like India’s great retail growth story is turning out to be a tale of empty shopping complexes and stalled projects, with developers giving up midway instead of trying to make these projects profitable. The culprit, data suggests, could be online shopping.
Click away
Numerous studies and surveys have arrived at the conclusion that retail is booming in India, albeit online. Physical stores are the ones bearing the brunt of massive discounts and comfort that e-commerce has brought to the desks and palms of the youngsters who no longer feel it necessary to visit a retail outlet to buy something. In recent years, online retail has grown exponentially and the industry is poised to be worth more than $20 billion by the end of this decade.
A report by The Associated Chambers of Commerce and Industry of India pegs the compounded growth rate of e-commerce in India at 40-50% in the next five years. A survey report published by the ministry of consumer affairs points out that more than 80% of young people shopping online are less than 30 years old.
Those who are not shopping online so far are expected to give it a go in the coming year, according to a research report released by Forrester Consulting and the technology giant Google. More than 70% of non-buyers (respondents) from tier I and II cities said they plan to shop online in the next 12 months, the report added.
Empty malls
The surge in online shopping numbers is choking physical retail, industry experts suggest. A study by ASSOCHAM reported that more than 200-300 malls came up in the country in the last two years. However, it added that 80-85% of the space in these new malls is lying vacant.
According to the report, this problem is being faced by mall owners across the board, starting with metropolitan cities like Delhi, Mumbai and Chennai, followed by Ahmedabad and Hyderabad. In each of these cities, mall rentals fell by more than 40% owing to fewer footfalls.
At the same time, online shopping grew by over 350% in a matter of just one year, the report adds. "Apart from convenience, rising fuel price, security reasons, online discounts and availability with abundance of choices are keeping consumers indoors,” said DS Rawat, secretary general of ASSOCHAM.
Anchor stores
Even as footfalls dip, revenues continue to come in for some of the malls. The reason: anchor stores. Anchor stores are those specialised stores that offer exclusive products generally not available online.
Brands like Zara, H&M, and even Starbucks are acting as anchor stores for mall owners, who are rushing to sign them, at times with revenue sharing models and larger exclusive spaces. Evidently, the surge of online retail has also forced mall owners to set their priorities straight, as watching movies and dining out remains among the last few things that people cannot get delivered to their doorstep.
“The arrival of the mall syndrome has accelerated the growth of cineplexes as multiplexes are the anchor tenants in most of these malls," Shravan Shroff, managing director, Shringar Cinemas is quoted as saying by rediff.
Demographic opportunity
E-commerce might have already become a threat to physical retail and offline stores, but experts suggest there is more to come in the story as an even younger generation crops up. Only 17% of Indians are online as of now, a low number compared to other countries and only 9% of the online Indians currently engage in e-commerce, according to Accel Partners, a leading investment firm that is backing companies like Flipkart and BookMyShow.
However, these numbers are soon set to swell up exponentially as India hits the mark of 300 million people online before the year ends, leaving mall owners as well as retailers with the mammoth task of luring people away from their computers and phones to physical stores at a time when developers are slowing down on projects.
“[The] biggest shopping mall can feel like a pretty lonely place, majority of retailers said that they are holding back on new store openings and focusing on existing stores”, the ASSOCHAM report added.
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