3 things malls are doing to increase profitability

Key areas in which shopping centres are doing things differently than before to improve revenues, grow profitably

New Delhi: Over the past two decades, shopping malls in India have undergone a significant transformation, evolving from simple retail spaces to comprehensive lifestyle destinations in response to changing customer aspirations. Malls today have expanded their offerings to include entertainment, dining, and recreational activities, creating a more holistic experience for visitors. 

But creating the perfect shopping destination, is a never-ending assignment, expressed industry leaders at the Phygital Retail Convention 2024. And running a profitable one requires looking at some key changes that are underway. These include:

Rationalisation of space given to cinemas

Pre-pandemic, cinema used to be one of the main anchors, generating footfalls in the shopping malls. However, in recent times, many shopping malls have reduced the number of screens, giving space to other entertainment players. 

“After the pandemic, a lot has changed. Today, it is not necessary to have 10 or 12-screen multiplexes in malls. Cinema will make a comeback, but today we need different entertainment formats. At Vegas, we have a format called ‘Laugh Store’, a venue for stand-up comedy, which is attracting much better footfall than a cinema,” said Harsh Bansal, Co-founder of Unity Group & Vegas Mall.

According to him, Cinema should not be more than 10% of the size of the mall, if you are building 5 lakh sq. ft. or a million sq. ft. mall. 

“Cinema being a content-based business, has its consequences. A good movie brings enormous footfall, but an average or bad movie is not a good sign for the shopping mall,” explained Peayush Agarwal, CEO, V3S Vikas Surya Group. “The space can be utilised by an entertainment zone or a brewery, but these concepts are more suitable for the tier 1 malls,” added Agarwal.

However, changing the mix suddenly is challenging due to structural limitations.

“The way the multiplexes are built, it is not easy to convert. Hence, finding a flexible model for cinema can be a good strategy,” said Bipin Gurnani, President & CEO, Prozone Intu Properties. 

According to Gurnani, the design of multiplexes is operator-oriented and it is hard to convert for other operators or clients. He emphasized the need to work with operators to find a conducive, flexible structure which can work for both.

Bansal highlighted another upcoming trend—food with cinema. “Cinema operators are now focusing on spend per person (SPH) and are focusing on the food part as well. Around 70% of the food in the multiplexes is cinema’s earnings,” he explained. 

Category Mix

Consumer Durables and Information Technology (CDIT) is one category which has been doing well since the pandemic, as per industry leaders. This is followed by beauty and Food & Beverages. Fast Fashion along with athleisure are other categories which have picked up in the last two years. 

“We did around Rs100 crore this year from Croma in one of our malls,” said Bansal adding that for Vegas athleisure is doing well too and Vegas now has increased the store sizes of Nike, Puma, Skechers and Levi’s.

Gurnani drew attention to weddings as a category, which has a huge potential that hasn’t been leveraged by malls yet. “Wedding as a category is something which none of the malls are catering to. In Santa Cruz, Mumbai, there are stores for wedding shopping, doing Rs60- Rs80 crore annual turnover,” he said, adding that malls must find a model to cash in on the category’s potential.

Notably, Omaxe Chandni Chowk, which was launched six months ago, is turning out to be a huge success, because of the presence of home-grown brands selling accessories for weddings. 

Digitalisation and Data Sharing 

Today, technology can help retailers grow their business beyond footfall. Industry leaders believe that moving forward, every shopper, every brand, every business and every mall will have their AI. 

“This means much of the decision-making, recommendations and choices benefitting the shoppers are going to be controlled by AI, and that is going to create openness and transparency in the way retailers compete with each other,” said Sadique Ahmed, CEO, Pathfinder. 

“The only thing that is going to matter is the shopping experience. This is where malls will play a role in the kind of ecosystem they build to create memorable experiences. That’s the only differentiator. And AI is going to play a major role in exposing these elements to the shopper,” he added. 

The Future 

Speaking about the future of malls when compared to high streets, industry leaders feel that both high streets and shopping malls depend on different demographics for their success.

Both high streets and shopping malls will each have their future, as high streets are more of a neighbourhood market. These markets gain popularity, due to their low Common Area Maintenance (CAM). 

“CAM charges in high streets are relatively less as compared to the malls. This is one of the significant reasons why many brands are approaching high street markets. Whereas for shopping malls, CAM contributes to the majority of expenses,” said Agarwal.   

“On the other hand, shopping malls have the edge to catch people from maybe far-off places. They can attract people from a larger catchment. High streets work more for localised markets with lower costs, and malls are for the larger destination, due to their right tenant mix and components,” he added. 

Gurnani feels that for a new brand, opening a store in a shopping mall gives an edge, because malls have the footfall, which helps create a decent brand awareness. Brands that open stores in the high street need to spend on marketing to create a buzz. 

Both for the brand and a mall, profitability depends on the model. “When you are doing a leasing model, and you are concentrating on the brands, it becomes a win-win situation,” said Aman Trehan, Executive Director, Trehan IRIS.

Based on a panel discussion at the Phygital Retail Convention 2024 in Mumbai

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