Despite India’s thriving retail scene, the country has recently seen a sharp increase in the number of small malls left vacant, casting doubt on the future of shopping malls.
In its latest report, ‘Think India Think Retail 2024’, real estate consultancy Knight Frank found the number of ghost malls rose to 64 last year, from 57 in 2022. A ghost mall is defined as a property with a vacancy of more than 40 per cent.
“Many of the small shopping malls are on the verge of closure,” said Gulam Zia, director of Knight Frank.
Smaller malls, averaging 100,000sqft, face a significant risk with 132 projected to become ghost malls despite retail space in major cities growing by 238 per cent last year.
The rise of ghost malls is not merely a symbol of declining customer footfall or a shift in consumer behaviour. It also carries a substantial financial impact, with Knight Frank estimating the potential sales loss at 6,700 crore rupees (US$801 million) in the last year alone.
The phenomenon raises questions about the viability of the traditional mall model in the face of changing consumer preferences and evolving shopping habits. While some experts argue that this may be a temporary setback, others suggest that it could be an indication of a more deep-seated shift in the retail landscape.
“Over the last six years, I have had countless conversations with malls, brands and retailers across India about the new codes of branded storytelling and how to best prepare for a successful future,” Christian Westphal, co-founder at SilverSpoon Consultancy, told Inside Retail.
“No topic is more challenging than the transition from ‘business as usual’ and the disbelief of change to the new reality of the evolving consumer mindset. This shift is driven by new buying behaviour from well-informed, digital-first, and demanding Indian consumers across various tiers.”
Westphal said young Indian consumers place a heavy emphasis on self-expression and demand value and authenticity in exchange for their loyalty and investment, forcing brands to elevate their personalised services and experiences. However, while many brands talk about this, few excel in execution.
“Brands and retailers must challenge their traditional ways of thinking and align themselves with the shifting paradigms to stay relevant, especially in a high-growth market like India,” he said.
“It is time for shopping mall developers and shop owners to reflect on this need to stay relevant,” said Westphal. “There is very little brand or product differentiation – similar brand identity, similar assortments, produced by the same pool of vendors, and similar marketing and branding.
“The road to hell is paved with good intentions, and so it is with many malls targeting the new consumer mindsets. There is a noticeable and worrying pattern: many malls continue to stumble on the same missteps by building barriers to this crucial demographic and playing it safe.”
The retail expert attributed the decrease in consumer footfall to multiple factors. These include poor design, ineffective management, lack of maintenance, uninviting exteriors, intense competition from high-end malls, insufficient retailers, and an unfavourable mix of brands.
“More consumers are flocking to high-grade malls due to a favourable mix of brands, services, and convenience compared to small shopping complexes,” he added.
“Furthermore, digital-savvy consumers are looking for seamless integration between a brand’s online and offline presence. If sales associates in brick-and-mortar stores cannot effectively convey the brand’s story that is consistently showcased online, this discrepancy can lead to consumer dissatisfaction and mistrust.”
Underestimating the importance of training sales teams on product and brand storytelling can be a risky gamble, Westphal emphasised. It’s not just about product knowledge; it’s about capturing the essence of the brand and telling an engaging story that aligns with the brand’s vision and values.
“Brand storytelling is the ultimate tool for differentiation in an increasingly crowded market. Therefore, brands must invest in comprehensive training programs to equip their sales teams with the necessary skills and knowledge. By doing so, they will be better prepared to deliver unforgettable experiences and engage with consumers on a deeper, more emotional level, fostering loyalty and promoting long-term growth,” he concluded.
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