Future of Retail Malls in India

The Shopping mall culture in India is relatively new.  It started from 2005 and now almost all major towns in India with a population of one lac or above have atleast one Mall.  Their number now stands around one thousand or so.   Gradually,   the numbers are increasing.  Some of the prominent and iconic malls of India  are Select City, Delhi, Ambience Mall, Gurgaon, Elante Chandigarh, Lullu Mall, Kochi, Sarath City Capital Mall, Hyderabad, HiLite Mall, Kozikode, Phoenix Marketcity Mall, Bangalore, Phoenix Marketcity Mall, Chennai, Mantri Square Mall, Bangalore, The Forum, Bangalore. Phoenix Market city Mall, Mumbai, Great India Place, Noida, Pacific Mall, Delhi and so on.

The shopping Malls provide large employment directly and indirectly.  In Malls, the  customers enjoy more an experience rather than mere shopping.   Average customer spends minimum 3 hours in a Mall.  Besides, normally visitors in a Mall environment are mostly in groups like family or friends.  So they have multiple options of entertainment viz coffee shops, pubs, restaurant, cinema and of course shopping itself.  And as such the popularity of the good shopping complexes have grown leaps and bounds.  In case of extreme hot or extreme cold weather the shopping malls become ideal destinations for day long hangouts as these complexes are centrally air conditioned. 

After advent of modern shopping malls, there was fear that high street retail will vanish.  It was also feared and mom and pop kirana stores will also suffer badly and slowly but surely they will also be finished.  But reality is something different in India.  In fact the high street retail has also evolved, kirana stores have adopted to the new reality and they came out with new avtars of modern retail. Now the front counters have gone in stand alone shops, side counters have come up.  Customers have choice of picking up the stuff of their choice unlike earlier time where customers used to wait for shop keepers to show the options.  Most of the high street shops are centrally located.  The Kirana shops are traditionally found place close to residential colonies where customers including children can go easily and bring the stuff fast.  As against this, the big retail malls are normally found place either in new townships within city or at the outskirts of the city where huge land parcels are normally   available. 

The construction, development and running of a shopping mall poses big challenges.   In India, the land prices are exorbitantly high.  Running of an air-conditioned shopping complex is a tedious task of balancing various expenses like power, security, maintenance, parking, etc.  This adds to overall cost to the retailers. While the margins are thin, its very difficult for the retailers to sustain after bearing the cost of rent and common area maintenance expenses.   Therefore, there is very high degree of churning in the  Malls.   There are very few Malls in India which are successful and rocking.  At the same time at least 50 percent of the properties in India which were meant for Mall remained incomplete.    In Punjab alone, there are minimum 25 such properties which were started between 2006-2013 have not yet seen the light of the day.    Some Malls were initially started but subsequently failed and now they are simply vacant or underutilised.   The main reasons for their failure is very high cost of funding, poor selection of the site, dispute between landlord and developers and in some cases the developers simply ran away after feeling the heat of the market.  The vacant or under-utilised assets are national wastage and therefore, serious attempts should be made to put them to use.

Now the World-wide Pandemic of COVID 19 has forced government to lockdown the complete economy except essential services.  After two months of lockdown government of India has taken measures to open the market again.  But unfortunately, the shopping complex and multiplexes are at the last priority.  Its generally believed that these are places were virus may spread due to closed environment and fear of overcrowding.   This is where the problem has started.  Malls have their fixed expenses of maintenance.  Retailers do not have any source of income and as such they stopped payment of rent and CAM.  There is huge tussle going on between Mall owners and retailers.  Many retailers have given the notices of vacation of the premise as uncertainty of lockdown will pile up their liabilities.   Going legal way is not a solution.  The situation is extra ordinary, a pandemic, a natural calamity, a government action, forceful closure and so on.  The Court will have to go through many aspects to arrive at a decision.  This may take years together to decide.  Better, Mall owners discuss with the retailers their problems and find a solution before the situation goes out of control.

The Pandemic has opened the gate of high street retail again.  While the Malls are still closed, government has given relaxation for high street shopping albeit with certain restrictions on timing and days.  But the retailers have now realised that on high street they can at least remain afloat.  In Mall death is sure shot in case of such lockdowns. 

The COVID 19 has taught us that the life will not be same again.  Malls will be requiring adopting new methods, new technology, social distancing norms, sanitization and so on.  Even after opening, the next six months will be crucial for retailers as a few customers will find entry in the Mall.  The restaurant and Cinemas may still take longer time to get permission.  And therefore, the major entertainment factor will be missing in the Malls.  Now it’s up to the Mall management to restructure their maintenance expenses and help the retailers with rental discounts for some time.    This is the only way retailers can survive and, in the process, Mall will thrive. 

Pradeep kumbhat

30.5.2020