The phys­i­cal­dig­i­tal di­vide in In­dian re­tail

GROWTH Or­gan­ised re­tail is gain­ing ground and this can con­tinue if malls and e­com­merce learn to co­ex­ist

HT Estates - - HTESTATES - Anuj Ke­jri­wal let­ters@hin­dus­tan­ The au­thor is MD & CEO – ANAROCK Re­tail

The In­dian re­tail sec­tor is on a faster roll than­e­ver­be­fore. Rapid ur­ban­iza­tion and dig­i­ti­za­tion, ris­ing dis­pos­able in­comes and life­style changes - par­tic­u­larly of the mid­dle-class - are act­ing as booster rock­ets for the In­dian re­tail sec­tor, which is pro­jected to grow from US$ 672 bil­lion in 2017 to US$ 1.3 tril­lion in 2020.

Over the last two decades, the In­dian re­tail mar­ket has wit­nessed phe­nom­e­nal changes, evolv­ing rapidly from­tra­di­tional shops to large multi- for­mat stores in malls of­fer­ing a global ex­pe­ri­ence, and on to the highly tech-driven e-com­merce model.

These changes have re­sulted in un­prece­dented growth in over­all con­sump­tion with num­bers sug­gest­ing that con­sumer ex­pen­di­ture in In­dia will rise to US$ 3,600 bil­lion by2020fromUS$ 1,824 bil­lion in 2017.

An­other highlight of this growth story is that or­ga­nized re­tail is gain­ing ground. Grow­ing sig­nif­i­cantly at aCAGRof20-25% an­nu­ally, or­gan­ised re­tail pen­e­tra­tion is ex­pected to be over 10% of the to­tal In­dian re­tail mar­ket by 2020 as against just 7% cur­rently. The­o­r­gan­ised re­tail mar­ket is es­ti­mated to in­crease to 19% across the top 7 cities dur­ing the samepe­ri­od­fromthe­cur­rent 9%

igh de­mand for a su­pe­rior cus­tomer ‘ex­pe­ri­ence,’ pen­e­tra­tion of big brands into smaller town­sand­c­i­ties, en­hance­mentin busi­ness strate­gies and op­er­a­tions, along with the move­ment from unor­ga­nized to or­ga­nized busi­ness have been key fac­tors driv­ing this growth.


Lib­er­al­iza­tion in FDI poli­cies by the cen­tral gov­ern­men­thas­repo­si­tioned the In­dian re­tail sec­tor on the global map, at­tract­ing a large num­ber of global re­tail­ers into the In­dian di­as­pora and fur­ther fu­elling the growth of or­ga­nized re­tail in the coun­try. The gov­ern­ment’s de­ci­sion to al­low 51% FDIin­multi-bran­dretail and 100% FDI in sin­gle-brand re­tail un­der the au­to­matic route is the ic­ing on the cake which has at­tracted giants like Wal­mart to make a foray into In­dia. By eas­ing the FDI norms in the re­tail sec­tor over­thep­ast­fewyears, the gov­ern­ment has hit the bull’s eye.

The in­tro­duc­tion of the Goods andSer­vice Tax(GST) as as­in­gle uni­fied tax sys­tem in July 2017 was an­other ma­jor pol­icy over­haul that is at­tract­ing for­eign play­ers. The­gov­ern­ment’smove to pro­vide a sin­gle-pol­icy frame­work­for­re­tail, FMCGande-com­merce in order to of­fer a level play­ing field to stake­hold­ers is an­other step in the right di­rec­tion.

All in all, these poli­cies have opened a plethora of op­por­tu­ni­ties for the In­dian re­tail sec­tor. Grow­ing­trans­parency, ac­count­abil­ity an­dease­of­do­ing­busi­ness across sec­tors in In­dia has given a ma­jor fil­lip to its po­ten­tial to at­tract cap­i­tal. In fact, it has­been a ma­jor pull fac­tor for Pri­vate Eq­uity fund­ing in the re­tail sec­tor over the last three years.

As per data, In­dia’s re­tail sec­tor at­tracted US$ 147.40 mil­lion in­vest­ments in FY18, grow­ing at a rate of 35 per cent year-on-year from US$ 104.34 mil­lion in FY17.

Con­sid­er­ing the fu­ture trends of In­dian re­tail real es­tate, in­vestors are show­ing con­fi­dence by be­gin­ning to make high-value long-term­com­mit­mentsto­wards the sec­tor. This steady rise in in­ter­est from pri­vate eq­uity in­vest­ment com­pa­nieshasinevitably pro­pelled mall de­vel­op­ers to re-vamp and re-eval­u­ate their port­fo­lio by­in­clud­ing­fac­tors like prod­uct-mix, catch­men­tand­cus­tomer­ex­pe­ri­ence at the cen­tre of their busi­ness strate­gies for malls.

The­fact that or­gan­ised In­dian re­tail is still at a very nascent stage in com­par­ison­toUS(where it is 85% of their over­all re­tail mar­ket), In­dia thus presents a huge op­por­tu­nity. Sens­ing im­menseop­por­tu­ni­ties an­deasy pen­e­tra­tion into the In­dian re­tail di­as­pora, over­seas re­tail­ers are now­ex­pand­ing­notjustin­met­ros but even tier 2 and 3 cities like Ahmed­abad, Chandigarh, Lucknow and Jaipur, to name a few.


From gen­eral trade to mod­ern trade and to now go­ing vir­tual, the In­dian re­tail sec­tor has meta­mor­phosed­sig­nif­i­cantly over­the last decade. How­ever, it is im­por­tant to note that in such a large and di­verse mar­ket­place, the emer­gence­o­fone­for­mat­does­not ham­per the ex­is­tence of the other.

In fact, the unor­ga­nized mar­ket (per­son­i­fied by the ubiq­ui­tous ‘ki­rana’ shops) is grad­u­ally rein­vent­ing it­self to catch up to the hype around mod­ern trade. Mean­while, large multi-for­mat stores of­fer­ing global ex­pe­ri­ences to lo­cal con­sumers have firmly en­trenched them­selves in In­dia.

Whiletier 1 cities werethe­first to ben­e­fit from the boom of or­ga­nized re­tail, the trend has grad­u­ally per­me­ated into smaller towns and cities due to a rapid­lye­volv­ing con­sumer base and its ex­pec­ta­tions. Ad­di­tional fac­tors con­tribut­ing to growth here in­clude the ex­pan­sion plans of for­eign brands and in­creas­ing in­ter­est of lead­ing builders.

The­grad­u­al­shift in con­sumer shop­ping be­hav­iour led to the evo­lu­tion of multi-chan­nel re­tail in the coun­try. The new-age re­tail ex­pe­ri­ence has­blurred the lines be­tween brick-and-mor­tar stores, so­cial sell­ing and on­line re­tail to some ex­tent.

Rapid dig­i­ti­za­tion, the smart­phone rev­o­lu­tion and e-com­merce in In­dia have to­gether changed the face of re­tail. The re­sult is the grow­ing pop­u­lar­ity of multi-chan­nel and om­nichan­nel strate­gies that are redefining the re­tail ex­pe­ri­ence.

Overand­above,‘ex­pe­ri­en­tial’ re­tail­ing has­tak­en­prece­den­cein the brick-and-mor­tar for­mat. Be­sides in­fra­struc­ture, ameni­ties, catch­ment area and varied ten­ant mix, the key fac­tor de­ter­min­ingth­e­suc­ces­sof­mallsinthe fu­ture is its abil­ity to of­fer shop­pers’ an ‘ex­pe­ri­ence’ which will ul­ti­mately bring them back.

More so, the de­mand for high­qual­ity shop­ping ex­pe­ri­ences is spread­ing its wings to tier 2 and 3 cities with the mush­room­ing of malls there. The mar­ket is now shift­ing to of­fer re­tail real es­tate that meets global stan­dards and con­form to the needs of global brands and in­vestors. n


The mall cul­ture dates back to the early 2000s when there were just three malls in ex­is­tence in the en­tire length and breadth of the coun­try. Ther­est washis­tory as the shop­pers grad­u­ally de­vel­oped a pen­chant for shop­ping malls over the usual ‘ki­rana’ shops. De­spite many hic­cups in­clud­ing the re­ces­sion of 20072008 and the on­slaught of the e-com­merce busi­nesses, malls have be­come se­ri­ous busi­ness and are def­i­nitely here to stay.

To put it in num­bers, by 2017end there were re­port­edly more than600­op­er­a­tional mall­sacross the coun­try in­clud­ing nearly 250 malls across the tier I cities. In­ter­est­ingly, more than 30 new shop­ping malls, cov­er­ing nearly 14 mil­lion sq. ft. area, are ex­pected to come up across top eight cities by 2020.


Con­sid­er­ing that the fun­da­men­tal growth driv­ers of the re­tail sec­tor re­main in­tact, global in­vestors and mall de­vel­op­ers are very bullish onIn­dia. In ad­di­tion to ris­ing dis­pos­able in­come and pur­chas­ing power, rapid ur­ban­i­sa­tion, and other re­lated fac­tors, the other no­table in­di­ca­tors of a bright fu­ture for In­dian shop­ping malls in­clude: • Favourable poli­cies

• In­crease in glo­be­trot­ting Indi


• A grow­ing trend of holis­tic

shop­ping ex­pe­ri­ences • Lim­ited or­gan­ised re­tail pres

ence and

• In­creas­ing pen­e­tra­tion of for­eign brands such as H&M, Zara, Burger King, Ap­ple, KFC, Dior, Michael Kors, IKEA, to name a few.


Var­i­ous­fac­tors like de­sign, prod­uct, di­verse ten­ant mix, catch­ment area, ameni­ties etc. play a sig­nif­i­cant role in de­ter­min­ing the suc­cess of malls - but the most in­flu­enc­ing fac­tor to­day is the mall’s abil­ity to pro­vide an im­pact­ful ‘ex­pe­ri­ence’ to the dis­cern­ing buy­ers. This is also the fac­tor sin­gle-largest fac­tor that sep­a­rates mall shop­ping from e-com­merce.

Over the past years, sev­eral de­vel­op­ers ven­tured into re­tail space and built malls with­out a de­tailed un­der­stand­ing of the dy­nam­ics re­lated to the sec­tor. As a re­sult, these malls failed.

To­day, only ex­pe­ri­enced play­ers are­con­tin­u­ing­toven­tureinto this seg­ment by in­cor­po­rat­ing new-agetech­nolo­gies both­inand out­side. This is lead­ing to the de­vel­op­ment of high-qual­ity malls that are grad­u­ally edg­ing out those of lower qual­ity.

More­over, the cus­tomer is a more pow­er­ful king than ever be­fore. In­dian shop­pers to­day are more tech-savvy, as­pi­ra­tional and up­wardly mo­bile, thereby prompt­ing re­tail­ers to adopt tech­nol­ogy in order to en­gage shop­pers. Be­sides an en­dur­ing in-store ex­pe­ri­ence, faster check-out, bet­ter dis­plays and­dig­i­tal trial rooms, mal­lop­er­a­tors are pro­vid­ing ex­pe­ri­en­tial re­tail within the mall premise.

Fine din­ing restau­rants, cafes, theme-based en­ter­tain­ment cen­tres, QSRs, etc. havein­creas­ingly be­come pop­u­lar in lead­ing malls over­the­last fewyears. This in­vari­ably brings back­cus­tom­er­sand in­creases ‘mall loy­alty’.

Also, malls are no­longer mere shop­ping des­ti­na­tions. To­day’s top-per­form­ing malls are mixe­duse busi­nesses that in­cor­po­rate so­cial en­ter­tain­ment op­tions, pro­vide a unique ap­peal along with a cer­tain depth in the shop­ping ex­pe­ri­ence, and lie in prime des­ti­na­tions that are eas­ily ac­ces­si­ble by­both­pub­li­can­d­pri­vate trans­port.

Ad­di­tion­ally, the abil­ity to an­tic­i­pate the chang­ing con­sumer needs and adapt ac­cord­ingly makes malls suc­cess­ful to­day. Some of the most in­no­va­tive ex­ist­ing mall de­vel­op­ments world-wide of­fer over-the-top fea­tures such as in­door ski-hills, wa­ter parks, theme parks, science cen­tres, zoos, and shoot­ing ranges among oth­ers.


More than any­thing else, malls to­day have be­come brands - and to stay rel­e­vant, they have adopt­ed­new-agetech­nolo­gies for con­struc­tion as well as to in­crease foot­falls. Some of the lead­ing malls in NCR that of­fer a unique­ex­pe­ri­ence to con­sumers are in Noida and Greater Noida. DLF’s Mall of In­dia, for in­stance, has an in­door ski-range - Ski In­dia.

The Great In­dia Place, pop­u­larly known as GIP, has a wa­ter parkan­do­ne­ofthebestkid­splay zoneinNoida– World­sofWon­der and Kidza­nia. The Grand Venice Mall in Greater Noidais atourist des­ti­na­tion with a Vene­tian con­cept and of­fers gon­dola rides, ren­der­ing a dis­tinctly Euro­pean feel.

Other prom­i­nent malls in­clude DLF Prom­e­nade, Se­lect City, DLFCy­ber­hu­binGur­gaon, andAm­bi­enceMal­landDLFCity Cen­tre, Chandigarh which are do­ing ex­cep­tion­ally well. The se­cond-largest mall in the coun­try in terms of area, WorldTrade Park in Jaipur has a unique dis­play fea­ture wherein 24 pro­jec­tors cre­ate a sin­gle im­age on its ceil­ing.

If we move down south of the coun­try, Lu­luIn­ter­na­tional Mall in Kochi, touted to be the largest mall in the coun­try, is us­ing tech­nol­ogy to of­fer a dif­fer­en­ti­at­ing ex­pe­ri­ence. It is us­ing new-age tech­nolo­gies like geo-fenc­ing, bea­con tech­nol­ogy and Au­to­mat­icNum­berPlateRecog­ni­tion (ANPR) to in­ter­act with its cus­tom­er­sand­keepthemabreas­ton the lat­est ac­tiv­i­ties within the mall.

An­other case in point is PhoenixMar­ketCi­ty­inBan­ga­lore­and Chennai, a marquee de­vel­op­ment in re­tail real es­tate space that has es­tab­lished it­self as a life­style an­den­ter­tain­ment­des­ti­na­tion. The mall of­fers a holis­tic and pre­mium ex­pe­ri­ence for re­tail, en­ter­tain­ment and movies, and F&B.

Buoyed by the phe­nom­e­nal suc­cess of malls across the met­ros, tier 2 cities like Tri­van­drum and Man­ga­lore have also wel­comed the mall cul­ture in their city with the former see­ing the launch of Mall of Tra­van­core early this year.

The western re­gion of the coun­try too has seen sig­nif­i­cant suc­cess in their mall story. MMR is home­to­some­ofthe­mosti­conic shop­ping cen­tres in­clud­ing High Street Phoenix, In­fin­ity mall, among oth­ers.


In­dia is to­day one of the fastest grow­ing e-com­merce mar­kets world­wide, with mil­lions of new in­ter­net users tak­ing ad­van­tage of cheap smart­phones and high­speed data. Ac­cord­ing to re­cent mar­ket re­search, mo­bile-phone in­ter­net user pen­e­tra­tion in In­dia is pro­jected to reach 37.36% of the to­tal pop­u­la­tion by 2021.

This rep­re­sents a huge po­ten­tial in terms of dig­i­tal and­mo­bile buyer au­di­ence. Ad­di­tion­ally, over­all in­ter­net au­di­ences in In­dia arees­ti­mat­ed­to­sur­pass635 mil­lion on­line users by 2021, thus, paving way­forin­creases in on­line shop­ping.

As per es­ti­mates, on­line re­tail is pro­jected to grow to US$ 73 bil­lion by 2022, grow­ing at a CAGR of 29.2% to the back­drop of a shift from tra­di­tional re­tail to on­line chan­nels by mil­len­ni­als. In fact, e-com­merce in In­dia is grow­ing faster thaninother­coun­tries­like Australia, Ja­pan, China and South Korea.

Be­sides in­creas­ing in­ter­net pen­e­tra­tion, other fac­tors con­tribut­ing to the rise of on­line re­tail in­clude ay­oung­pop­u­la­tion aided by eas­ier ac­cess to credit and­pay­men­top­tions, high-speed in­ter­net, 24-hour ac­ces­si­bil­ity and con­ve­nient and se­cured trans­ac­tions, among oth­ers.

Re­al­is­ing the po­ten­tial of on­line re­tail, re­tail­ers are also lur­ing cus­tomers by of­fer­ing prod­ucts at dis­counted prices es­pe­cially in the con­sumer­durables sec­tor. Op­tions like cash-on­de­liv­ery and man­u­fac­tur­ers’ war­ranty have added fuel to the fire. Cash- on- de­liv­ery has be­come the most pre­ferred pay­ment op­tion with over 30% of buy­ers opt­ing for it in In­dia.

The gov­ern­ment’s plan to al­low 100% FDI in e-com­merce, un­der the cri­te­rion that all prod­ucts sold must be man­u­fac­tured in In­dia, aims to gain from this lib­er­alised regime.

Thus, the on­line re­tail busi­ness is a New-Gen for­mat which has high po­ten­tial for growth in the­n­ear­future. After­con­quer­ing phys­i­cal stores, re­tail­ers are now for­ay­ing into e-re­tail­ing in a big way. Be­sides hav­ing phys­i­cal stores, they are also shift­ing fo­cus on on­line for­mats so as to lure buy­ers.


Witht­head­ventofe-com­mer­cein In­dia, shop­ping con­verged into mo­bile de­vices in the form of web­sites and/or apps. At the click of a but­ton, one could buy just any­thing from gro­ceries to ap­parel to elec­tron­ics an­dal­most any­thing else. For a while, it ap­peared that ‘couch potato shop­ping’ was gain­ing promi­nence and that e-com­merce will even­tu­ally dis­rupt the en­tire brick-and-mor­tar busi­ness.

How­ever, this is not en­tirely true. While it did cause some dis­rup­tion, it was not enough to have a sig­nif­i­cant and last­ing im­pacton­the­con­ven­tion­al­re­tail for­mats. Ini­tially, the heavy dis­counts of­fered by e-com­merce sites lured buy­ers and im­pacted malls that reg­is­tered a slight dip in the over­all foot­falls and sales.

Con­sumers came back to malls as they missed the holis­tic re­tail ex­pe­ri­ence. More­over, they sawthat­malls are no­longer just shop­ping des­ti­na­tions but places where they can un­wind and­geten­ter­tained. Withthedis­count sea­sons be­com­ing a vogue even across malls, shop­pers are all geared up to feel the ex­pe­ri­ence whether in malls or in the vir­tual world, as per their con­ve­nience.

How things will un­fold for malls in the times to come re­main­stobe­seen. Thechang­ing busi­ness en­vi­ron­ment, favourable pol­icy shifts and the en­try of nu­mer­ous global play­ers in­di­cate that a resur­gence of shop­ping malls in In­dia is def­i­nite. The­need­ofthe­houris­tode­velop good qual­ity malls that can at­tract oc­cu­piers for the longterm so that the en­tire value chain of the re­tail sec­tor ben­e­fits.

A clear mea­sure of in­creas­ing fo­cus on the re­tail sec­tor is that pri­vate eq­uity (PE) play­ers and wealth funds in­vested over US $800 mil­lion in In­dian re­tail mar- ket in 2017. As it was, quite a few badly-con­ceived and ex­e­cuted malls did fail. That said, one les­son learnt is that there is a dis­tinct need for devel­op­ing mul­ti­chan­nel re­tail­ing rather than just re­ly­ing on the tra­di­tional meth­ods.

Mean­while, the fact that on­line big­gies like Ama­zon and Alibaba are in­vest­ing in off­line stores in­di­cates that brick-and­mor­tar­busi­ness is not go­ing any­where in spite of the ‘ on­line as­sault’. When cus­tomers want an ex­pe­ri­ence, they come to stores. Thus, on­line and off­line re­tail have started work­ing to­gether in one ecosys­tem.


To de­fine it, om­nichan­nel re­tail­ing is afully-in­te­grated ap­proach that pro­vides shop­pers with a uni­fied ex­pe­ri­ence across both on­line and off­line chan­nels. It ex­tends from brick-and-mor­tar lo­ca­tions to mo­bile-brows­ing, e- com­merce mar­ket­places, on­site stores, so­cial me­dia, and ev­ery­thing in be­tween. Most om­nichan­nel re­tail­ers have a phys­i­cal as well as dig­i­tal pres­ence and pro­vide seam­less, ef­fort­less and high-qual­ity ex­pe­ri­ences to con­sumers.

The an­swer may not be a sim­ple one. How­ever, if we con­sider the con­sumer trends, it does seem so. Sev­eral re­tail­ers to­day are us­ing var­i­ous chan­nels to con­vert their leads into loyal cus­tomers. In­fact, they­seek­toestab­lish a con­ver­sion point at ev­ery step of the cus­tomer’s jour­ney.. This could be on hand­heldHde­vices in the form of an app, on­line, in kiosks, or in a brick-and-mor­tar store. Thus, to be suc­cess­ful, a busi­ness needs to uti­lize ev­ery avail­able chan­nel and pro­vide a seam­less and con­sis­tent user ex­pe­ri­ence.

There are mul­ti­ple rea­sons why­omnichan­nel­re­tail­ing­could be the fu­ture of e-com­merce. Re­tail­ers are bet­ting big on fac­tors like cus­tomer per­son­al­iza­tion, bet­ter data on cus­tomer be­hav­iour and main­tain­ing a con­sis­tent brand im­age. Be­sides en­abling cus­tomers to ac­cess brands from any­where they are, om­nichan­nel­re­tail­ing­val­ues­the con­sumer ex­pe­ri­ence above all else while­beingable­to­track­data and pro­vide even more tai­lored so­lu­tions mov­ing for­ward.

Over and above, for om­nichan­nel to be suc­cess­ful, most brand­sare­mak­ingth­ingssim­ple and more ac­ces­si­ble to cus­tomers, with­out any con­fu­sion. This is paving the way for om­nichan­nel re­tail to carve a niche for it­self in In­dia - and the world over.



Re­tail­ing to­dayis def­i­nitely more thanjust­mere­brick-and-mor­tar, and re­tail­ers who are ag­ile enough to adapt and rev­o­lu­tion­ize their way through changes will con­tinue to grow and thrive in the fu­ture. Be­sides tech­no­log­i­cal ad­vance­ment and dig­i­ti­za­tion, the fu­ture of re­tail will see di­verse busi­ness ecosys­tems blend to­gether not just to de­liver the best to their con­sumers, but to gain a com­pet­i­tive edge over the oth­ers as well.

As a re­sult, re­tail­ers will ex­pandtheir hori­zon, seize more op­por­tu­ni­ties and cre­ate their own unique ecosys­tem that will even­tu­ally pro­vide a more thriv­ing shop­ping ex­pe­ri­ence for dis­cern­ing cus­tomers.


More than any­thing else, malls to­day have be­come brands and to stay rel­e­vant, they have adopted new­age tech­nolo­gies to in­crease foot­falls

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