The Indian Mall story... while new malls are constantly opening, we are visited by the scepter of vacant shops / lots in old malls, low customer offtake. Why is this so? I am not from the organised retail trade - but I am a mall regular, and can observe and think. Further, most articles I have come across look at Parking, Mall Size, Circulation of customers in the mall, Location, Competition from other malls, anchor brands and footfalls etc. However, this does not address the core issue, which is usually lost in all the above points. In my opinion what is required is to treat malls as any other product, and approach it from that point of view. Let me elucidate what I mean by that
When we buy / use any product, it is to satisfy a need - be it a necessity or a luxury. There is always a need that is being met at the core of any consumption. Essentially, it boils down to the theoretical 4 Ps of Marketing: Product, Price, Place and Promotion. The issues normally focused by business magazines can be said to be packaging issues, since they are not the core product. Parking, Facilities, Location, Mall Size, Circulation Design are all important parameters, but cannot be said to be the core product. What we must look at is, firstly, why does a consumer visit a mall? What is the basic need he/she wants to satisfy?The answer, quite simply:
- Entertainment
- Shopping
Not one of the parameters listed above have a direct bearing on either purpose of visiting a mall. In other words, they do not fulfill the core need that the target consumers have while visiting malls. What does matter is what does a consumer get to do while inside the mall? In short - the Tenant Mix. That, to my opinion is the be all and end all of Mall Design. What are the entertainment avenues on offer? What are the shopping avenues? At what price? They are the determining factors. I have visited various malls in a multitude of cities across India, ranging from Mumbai, Delhi, Indore. Pune, Raipur, Bhopal, Gwalior etc in the past 6 or so years - and can recall only 4 occasions when I spent in excess of Rs. 500. And what did I purchase? Titan Watch, Harra Suits for my wife, Color Plus Trousers and Peter England Shirt. One each - in a period spanning 6 years! That is it. Each purchase an established, quality brand. On all other occasions, my visits to malls have been to watch movies, or eat Pizza - in other words, entertainment. What is more, I do not know of any person in my friends who differs from me in purchase behaviour. And most critically, in all malls I have visited across India, shopping activity has been extremely muted as evidenced by number of consumers in shops or with shopping bags in hand.
The problem is at 2 levels... if a mall attracts good brands, then there is an issue of in-store product range and depth. Brands prefer to keep seperate ranges in Malls Outlets and normal outlets. The result is that people visit malls but purchase from other outlets since a complete range is available in outside shops. Frequently the range on offer in Malls is higher priced products while the economy range is made available elsewhere. The reason for this can be readily seen below
The second level of the problem is that there simply arent enough quality outlets on offer in malls, or are targeted at affluent consumers. A classic positioning problem, if you will. Let us consider a few product categories that consitute a typical household:
- Supermarkets: They typically have a catchment area of a few kilometers, and hence can attract customers only from the immediate vicinity. Even in this, most local supermarkets beat them hands down by simply augmenting service options. Example: at Gokul Supermarket, Raipur and Prem Cosmetic, Indore I can get a product replacement even upto a month after purchase; no-strings-attached home delivery; personalised service (I can request for special items and they procure same) etc etc. The learning: the local supermarkets have simply improved their service. Result? Average bill at my local supermarket is 2500, at malls? 100. Only 100. Add to that the simple fact that I can usually get lower prices at my local supermarket. That means, people like me dont spend money at Malls - not on groceries, anyway.
- Electronics: No purchase options available. Simple as that! These items are high involvement purchases, and consumers shop around. You just dont get enough options in a mall. This industry is noted for dedicated markets in most cities with all brands being available in a defined shopping market, making product and price comparison - including price discovery- easier. Only dedicated chains like Vijay Sales and Lotus have managed to make a dent. For that, you require huge space - usually 2 or more floors of space to display brands.
- Apparel: For the most part, the products are quite simply too high priced. A consumer can get equally good stuff outside malls. In the case of branded options - I can recall only Harra, Peter England, Color Plus, Levis. Children wears brands are a strict no-no, since local shops offer quality stuff at half the price. I know since I have used both. Further, some brands keep seperate ranges in malls and outside stores. And, we get better service from these mom-and-pop stores to boot!
The point is that most malls do not offer any good purchasing options. A consumer needs to purchase Groceries, Electronics, Apparel, Bathwear, Books, Small Appliances, Kitchen Items etc etc in a normal household - none of which are on offer at least at price points that consumers are used to. Please note that customers are currently spending cash on these very categories at certain price points, and in order to shift them you need to match the entire value proposition. Consumers will not spend more just because they are buying from a mall. Take the case of supermarts: with limited home delivery options given by most, perforce their consumer range is limited in the large part to wheeled consumers i.e. those having a car. And, critically, even in this segment they are facing competition from local supermarts who are frankly far smarter and nimbler, and more consumer responsive. With low overheads, these guys can afford to take on the big guys.
Simply put, it is a classic positioning case. You are offering products targeted at the affluent class, and are expecting volumes... Malls need to define their target markets clearly, and position themselves accordingly. That would mean attracting the right set of shops, good quality offerings (who is stopping malls from approaching top local retailers to set up shop? All you have to do is give them a reasonable offer from which they can make a profit) and then setting the other facilities in accordance to your positioning. If you expect volumes then kindly place some categories which are large sellers and ensure top quality stuff there. Top local retailers shy away from malls because of 2 pertinent reasons: one, they feel they will lose their existing clientelle built up over the years if they move, and two - they find rentals or the cost too high to make a profit. Try talking to any mall retailers. I did.... (One apparel retailer I spoke to - with 2 outlets, one in a mall and one in the local market was not able to cover costs in his mall outlet even in his third year of operation)
Secondly, you need to define your competition and understand them. The competition is not other malls but all such stores that have a share of the consumers' wallet. The consumer is already satisfying his needs through other outlets....in order to pull them away you will need to match the value proposition or better it. That is something that the mall industry is not attuned to thinking about. And, consumers usually regard malls as peddling costly stuff, an impression that is further buttressed by the shops that are currently in evidence.
And Thirdly & lastly, the unflinching focus on footfalls is pointless. Footfalls dont lead to sales, quality products at right prices with the support of the other 2 Ps are what close a sale. Footfalls will fall away once the novelty factor fades... then it is your tenant mix that will hold your clientelle. Even anchor brands will only help initially since the market is expanding. That is the key- the market is changing almost on a daily basis. Outlets are coming up everywhere... in Indore Treasure Island has Pizza Hut as its anchor brand. Then, the market opened - US Pizza at Vijay Nagar, and Dominoes at C21 Mall and Sapna Sangeeta Inox. Where there was PVR, now there are at least 5 other movie options available. Earlier there was only 1 MacD at Treasure Island, now there is a second at Vijay Nagar and a third near ICICI Bank main branch. Nirula's shifted from a mall to a busy business district in Sneh Nagar. The most critical point is that US Pizza, Dominoes,Nirula's and MacD have opened outlets in local shopping districts not in malls. Hence, the dependency on anchor brands can only be temporary at best. As far as entertainment is concerned, options are pretty limited and well - covered. We need to keep in mind that the share-of-wallet of Indian consumers is still very low for entertainment category.... education and recreating together account for 6% as per Mckinsey report. Furthermore, concentration on entertaiment alone could lead to a loss of clientelle.... One suggestion could be to monitor number of bills generated and average bill value category-wise to get a better handle on the state of affairs. These seem to me to be far more pertinent monitoring measures
In conclusion, it can be said that malls need to treat themselves as products, not as real estate shelves to be rented and sold. The entire product has to be designed well... and positioned appropriately. We have to keep in mind the realities of the Indian Market in terms of distributed retail market, Purchasing Power Parity, Per Capita Income, and economic scenario. Many a brand have misjudged India - business history is replete with examples. India is different- very different in business factors as well as cultural factors. Business Factors have a direct bearing on business realities, and Cultural Factors have a direct bearing on Consumer Behaviour and thus an indirect bearing on business. That needs to be kept in mind...
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