In the last two years, the K Raheja-owned Inorbit malls across the country have built a reputation. It is not about their shops or food courts. Instead, they have become a hunting ground to spot acting talent among kids. Every May, Inorbit malls in Bengaluru, Hyderabad, Pune, Navi Mumbai and Vadodara host film-making workshops. Participants get to act in a short film, which is later shown on a big screen in each mall’s multiplex. While the future Ranbir Kapoors and Deepika Padukones hone their talent, the parents shop around.

Many of Inorbit’s peers have launched similar campaigns that make shopping at their outlets just incidental. Noida’s DLF Mall of India organised a high street fashion show in May. The show was a crowd puller with actress Aditi Rao Hyadri and others walking the ramp in outfits designed by the likes of Ritu Kumar and Anita Dongre. It helped that the garment exhibited in the fashion show was available in the mall’s own high-street.

This is not all. As they re-invent themselves, malls in India are trying to become community spaces and not remain just shopping centres. With parks and public grounds taken over for construction, especially in crowded cities like Mumbai, developers believe that malls are the emerging public spaces, ideal for spending time with family and friends.

“In Mumbai, where you don’t have good gardens or public parks, people end up visiting malls. So the aspect of social connect and malls being community spaces cannot be ignored,”says Sunil Shroff, CEO of Mumbai’s Viviana Mall, which opened in Thane in 2013.

While it is difficult to measure the exact impact of these measures, the increased footfalls in the malls show that the strategy is helping operators reposition their offering after the mall sector went through a boom and a bust in the last decade and a half. The operators, competing with e-commerce, are going all out - from reducing lease tenure for tenants, changing brand mix to focusing more on food and entertainment and even turning disabled-friendly.

“Developers have burnt their fingers by doing wrong malls. There has been a consolidation of players in the last two years. And they are not making the mistakes of the past,” says Ashutosh Limaye, Head of Research and Real Estate Intelligence Service for Jonas Lang LaSalle in India.

Though many malls continue to struggle and five of them have shut down in couple of years, there is an upswing in the mall pipeline. According to JLL’s Limaye, 70 new malls will come up in the next three years. Of these, 23 are in Delhi NCR, 15 in Mumbai and six in Bengaluru.

Getting the mix right

The first wave of malls that hit India in the 1990s threw up poorly designed structures with inadequate parking facilities and stores that replicated the markets outside. Not much thought was given to brand mix or even the location of the mall. Food and beverages were restricted to the top floor with a poor mix of well-known brands and street food stalls. Navi Mumbai’s first mall, Center One was one such property. Despite its early success, the mall downed its shutters in March 2015, after it failed to keep pace with the bigger, Inorbit and Raghuleela malls that had come up in the neighbourhood. The lack of entertainment options in Center One and absence of big brands was one of the factors that led to its closure.

The story of Delhi’s first mall, Ansal Plaza, which opened in 1999, is similar. It used to be packed and in 2003, the management even levied an entry fee of ₹100 to deter non-shoppers. But the iconic mall in Khel Gaon did not have a multiplex or food court. And with time, as newer and better designed malls such as Select Citywalk and DLF Promenade came up closer to upmarket residential locations, the popularity of Ansal Plaza waned.

Today, over 70 per cent of the space in Ansal Plaza has been converted into offices.

These failures have forced mall developers to address the issues. As Pushpa Bector, Executive Vice President and Head, DLF Mall of India, says: “Malls have come of age now. We are developing newer malls keeping in mind that there is e-commerce and there will be online retailing. So the space allocation for commoditised retail like mobile and electronics has reduced.”

Also, books and music as a category have gone out of malls as they can be conveniently purchased outside. The scenario is similar for stores selling electronics and mobiles. Malls are increasingly bidding bye to these categories. Anand Sundaram, CEO of mall management firm Pioneer Property Zone (PPZ) points out that on an average, the number of electronics stores in malls has gone down from 9 per cent in 2014 to 3 per cent now (See charts). Bector says DLF has doubled the space for entertainment to 40 per cent in its Mall of India, which opened in April and is claimed to be India’s largest shopping mall.

With the changing demographics and a much younger population, mall developers are also realising that they need to be more focussed on the F&B category. The biggest experience creator in a mall, is food. That is why at Viviana Mall, the menu cards at restaurants have the Braille option. The mall also has audio-tactile labelling system at all stores, enabling the blind to read about the shops before entering them.

“So the whole concept of keeping food at the top floor is changing. Food has to be much more accessible. Since malls are actually morphing into community spaces, they will have to mimic the high street more efficiently than they have been doing in the past,” says Suresh Singaravelu, Head – Retail, Prestige Group. The Bengaluru-based group has developed six malls, including in Mysore, Kochi, Hyderabad and Mangalore, while another six are under development.

Rajneesh Mahajan, executive director at Inorbit Malls, says they have been increasing the space allocation for food and entertainment. “Some of the retail stores in our malls have been converted into F&B space and entertainment centres as these categories are seeing good growth.”

For the retailers, the shift has complemented their strategy. “We also see whether the mall’s ecosystem is built around profitable stores and how much is the focus on mall tenants,” says Sadashiv Nayak, CEO, Big Bazaar. Adds Bidisha Nagaraj, Group President, Marketing, Café Coffee Day: “There is a tendency to spend more time shopping if the mall has good F&B options. Hence we believe there is a growing significance in offering a good line-up of F&B options at malls to encourage more return visits."

For the long haul

The realtors have realised that malls are not residential spaces that can be built and forgotten about. Vatika Group and Parsvnath, Delhi-based realtors focusing on residential projects, have exited the mall space.

Most malls in India had earlier been following the strata sale model, which implied that developers were selling each shop independently. This means the neighbour of a men’s clothing store could be a pizza shop and a kids store could be next to a luggage shop. Customers got bored.

Today, players like DLF, Phoenix, and Inorbit have dropped the strata sales method and can, therefore, control the quality of tenants. “When we sit down with our retail partners, we tell them also to make the stores more experiential,” says DLF’s Bector.

Malls now sign up leases for three to six years and not ten years as was the norm earlier. In Viviana Mall, the tenure for anchor tenant is five to nine years and for smaller stores it is three to five years. “The new leases for stores would be for three years,” says Shroff. A shorter lease not only maintains newness in malls, crucial to get footfalls, it also helps developers negotiate improved rates. “With time, any mall’s neighbourhood profile changes and it may move from an area of middle income to high income category. This would mean that value brands won’t be much good. So churning is required. Bigger brands also pay better rent,” says Limaye of JLL. Prestige group, which owns Forum Malls, had signed up tenants for nine years when it first launched in 2006. But now, non-anchor tenants are being signed up for six years. “We believe customer preferences will keep evolving and if you maintain status quo, the relevance of the mall will diminish. So it is best to have shorter lease,” says Singaravelu.

While Forum would prefer to have leases for even shorter duration, the tenants need to recover the capex they invest in stores. It is to draw the international brands or bigger domestic players that malls are now asking existing tenants to make way. Last year, Select Citywalk mall in Delhi moved Pantaloons from a 20,000 sq ft space to 8,000 sq ft. Swedish fashion retailer Hennes and Mauritz AB (H&M) opened its first Indian store there in October last year.

Sharing the booty

Also, the concept of rent has undergone a change. Since a fixed rent doesn’t incentivise a shop owner to perform better, malls have now switched over to different models. DLF takes a minimum guarantee or revenue share of a store, whichever is higher. Ditto for Viviana Mall. Forum malls takes a minimum guarantee along with a revenue share as the management believes that it should have a share in the upside. The percentage of revenue share is not fixed and varies depending on category, brand and store size.

But the average revenue share for a category like cafes is 17.5 per cent, fine dining restaurants 13 per cent and for ethnic fashion 11 per cent.

Bector says the idea is to make money through the higher revenue share. “We coordinate a lot more with brands and ensure that they are in sync with us and improve sales.” DLF Mall of India, which has been leased out 92 per cent, is estimated to yield ₹250 crore in rent annually. Yet, it is early days for even successful malls to talk about profitability. Malls are a long gestation business and require eight-nine years to stabilise. “It is not a quick liquidity option for developers and break-even takes time,” says Shroff.

Taking a leaf out of the e-commerce experience, malls also want to know their customers better. “The success of e-commerce comes out of tracking every buyer at an individual level and giving suggestion. We are trying to apply that learning to the mall situation. It is a challenge for us as we need to get data from our tenants to find out what individuals are doing, but the brand may not be interested,” Singaravelu says.

Viviana too is trying to personalise the mall experience. It engages with visitors through social media and every year, it hires interns for over two months to conduct customer surveys in the mall besides taking information from retail partners.

“There will now be a huge shift from mass marketing to individual marketing in malls. We need to give more choice to customers,” Singaravelu says. Perhaps then, there will be no dearth of shoppers for the malls.

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