I was surprised when I got a call from the manager of the local supermarket recently to tell me that they were running a discount sale over the next few days and as a valued customer to make sure not to miss it. In all the years that I have been doing my weekly shopping here, never had they called to announce their offers. This was a first!
As consumer preferences are shifting from buying products to buying services, retailers are becoming more proactive in approaching and bringing in customers. To drive footfalls, mall developers and retailers are collaborating to come up with unique experiences. Concerts, food fairs, free makeovers, book shows, events themed around cultural and religious festivals, artificial snow parks — it’s all happening.
Shifts in consumption
Consumption patterns have shifted over the past few years, especially after Covid. Sales data show that consumption is back in malls but what customers are spending on has changed. Earlier it was apparel and fashion that drove the sales. Now it is food, dining out, entertainment and experiences.
Malini, a communications professional, says that when her family decides to go out,they identify the Starbucks outlet, or a pizza place they want to go to and then pick the mall where it is located.
“The number of shopping bags coming out in the hands of customers of apparel, fashion and accessories have gone down,” says Abhishek Sharma, Director, Retail Agency, Knight Frank India. He points out that the share of food and beverage outlets has risen to 35-40 per cent from 20 per cent before.
This is not just anecdotal evidence. The numbers bear out this trend. In the last quarter of 2023, fashion sales of listed offline retailers dipped 5 per cent, electronics fell 7 per cent and so did grocery, according to a report by BCG India. Quick service restaurants saw a 12 per cent dip in sales after decelerating growth over the last several quarters. Jewellery was the only category that bucked the trend and showed growth.
Historically, organised retail outperformed the underlying category growth by a significant margin. This was the case till 2022. In 2023, there was a sudden change in this trend and while the underlying category growth was more or less stable with a slight downward bias, listed retailers saw a steep dip in their sales.
Mall movements
Consumption patterns at malls mirror this trend. At Phoenix Mills — one of the largest mall operators in the country — it was jewellery, gourmet dining and hypermarket that drove growth in the first nine months of FY24. The top performing categories were family entertainment centres such as Time Zone and Game Luxe and multiplexes across its malls. Consumption growth has lagged rental growth at malls. But entertainment and experiences have become a big part of the consumption basket in malls.
With 65 per cent of the population under 35 years of age and about half of the population under 25, “you will see that there will be more consumption on the experience side,” says Anand Ramanathan, Partner and Consumer, Products and Retail sector Leader, Deloitte India. “Gen Z and millennials don’t save as much, and they go in for experiences. They travel more. Their buying preferences are a lot less product-centric and more services oriented.”
‘Lock the Box’ book festival at Infiniti Mall in Mumbai
Even when buying a product, they look at what experience they can get out of it, he adds.
Abheek Singhi, Managing Director and Senior Partner at BCG India, points out that shopping at malls was always about the experience, but now that has escalated. “The nature of the experience has changed and it has moved to different elements.” Mall owners and retailers are doing different things to target different customer segments.
At Infiniti Mall in Mumbai, experiences have become a key factor in drawing in customers. “Previously people were looking for options in terms of multiple products. Now it has shifted to getting not just the look and feel of the product, but also how it will give a different kind of experience to the person,” says Gaurav Balani, DGM-Marketing, at Infiniti Mall. The Souled Store, for instance, that sells casual apparel has taken experiential clothing to a whole new level with prints that feature superheroes, cartoons and comics and characters from Netflix shows such as Stranger Things.
Last year Infiniti Mall launched ‘Lock the Box’, a book festival where customers can take as many books as they like that can fit into a box and pay a flat rate. Customers also got to meet their favourite authors. Encouraged by the overwhelming response it received, Season 2 of the event will launch in April this year.
Over 80 per cent of brands are common to malls across the country, especially in the tier 1 cities. To provide a novelty factor, malls are giving space to pop-up stores. These are niche, home-grown brands, that lease space for a short period from six months to a year.
“It encourages local skills, local entrepreneurs while allowing them to bring in a new product or category into the mall,” says Susil S Dungarwal of Beyond Squarefeet, an advisory that specialises in mall development and management.
Sarath City mall in Hyderabad has 15 pop-up stores. In a Delhi mall’s food court, there is a kitchen that gets a new chef everyday as people are encouraged to try their cooking skills here.
Small towns
The mall culture is now spreading beyond tier-2 cities to tier-3 and -4 cities as well, where a certain category of consumers have the spending power to drive sales.
“People in metros don’t understand the splurging that is happening in tier-2, -3 and -4 cities,” says Dungarwal. He says he is building a mall in a small town with a population of 35,000 people. “You will be shocked. We have a 2 lakh sq ft mall coming up and it is completely occupied. That is the kind of money people have in these cities.” They are spending on all categories — fashion, jewellery, on holidays and on leisure.
He cites the example of Thanjavur city in Tamil Nadu that has a population of around 3.5 lakh, where rents at an upcoming mall have trebled in a short period of time. “Every brand wants to be there, but unfortunately, I have space for only 68 stores and they are all leased. The way people are spending and accepting new brands is amazing.” They are spending on all categories — fashion, jewellery, on holidays and on leisure.
According to Dungarwal, the reverse migration of techies from metros to small towns seen during Covid has resulted in many of them staying back to work from home and making money online.
In Maharashtra’s Vidarbha region, ‘Tapadia City Centre’ in Amravati has all the leading brands in the country. At the mall, food has become a focal point for many of the activities. Women bond in the food court at kitty parties and eating out is a popular pastime.
Mall developer Madhur Laddha says that while apparel buying is for occasions such as weddings, anniversaries and parties, people spend on food and entertainment all the year round.
Consumer is King and Queen
People are spending more and saving less, but they have also become discerning, says Dungarwal. Retailers have to sell what customers want and knowing the customer is important, not only for retailers but also for mall owners.
If brick-and-mortar malls are the body, then the retailers are the soul, and both have to think about what the customer wants and work jointly towards that. The onus is on both the mall developer and the retailer to not only bring in the customers with well-designed comfortable malls but also keep them engaged for the long term with the products, services and experiences.
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Published on March 3, 2024
