It’s been around ~2 years now, since I purchased something from a shopping mall or may be even 3 year! I can even count my fingers the number of times I visited one, apart from using them as landmark to meet friends or give road directions to a person who is lost.
This was not the story 8 to 10 years back, where our favorite weekend hangout place was shopping malls. Since, I was in Delhi/NCR, the most favorite place was Ambience Mall, right on the Delhi-Jaipur highway. An amazing state of the art 1,997,378 square feet shopping area with over 230 stores and food outlets and 4000 car parking space!
These shopping malls were popular weekend relaxation with bowling alleys, multiplexes, kids’ fun zone, and obviously cool microbreweries and ‘drinking places’ for guys, when their wives are busy shopping. There were years, when we visited some shopping malls on every weekend for years!
These were the places where I could buy first Samsung tablet, the day it was launched, buy the second TV, even when I didn’t need it but there were some cool discounts.
So, what happened in last 2 to 3 years? I think most of you have already thinking of online shopping portal or apps like Amazon or Walmart’s Flipkart etc. It’s the same story in United States or any other country Sears, JCPenney, Target Corp, Macy’s, all are facing the heat. My US trips were never complete unless I visited few of these. Some are filling for bankruptcy, some are closing down most of their outlets and some are trying to get into the E-commerce business as Walmart but most of these are late to catch the boat.
People’s behavior changes with time but not dramatically but over the period of time and some of these companies survived for last 150+ years but it seems they failed until recently to cope up with the change like Blackberry or Nokia in cellular phone market. Did these retails giants got too complacent about it even after looking at these tech giants or there is something else? One thing is for sure that change didn’t happen overnight, the cheese was moving slowly for quite some time now.
If you still visit some shopping malls now, they still have footfalls and you will still struggle to park your car during the weekends but if you want to calculate the sales per square feet, it much less than what it used to be. So, why people aren’t buying from the shops but going there? So, there are some deeper reason than just Amazon!
It seems the first company to understand the reason was Apple Inc. partly not the E-commerce giants. People visit the Apple store to experience the products, touch, feel, and see before making an expensive purchase and then buy it where it’s convenient, cost effective and the right moment, when they feel. It could be midnight, while working at their desk, or even discussed with their spouse, when they are in good mood!
So, the shops in the shopping malls are still important in the purchase decision but the role of the shops changed from selling product to selling experiences. Interestingly, most retail giants missed the change in behaviors and use the same key performance indicator like sales per square feet.
Then comes the real estate costs, which is also driven by footfalls and sales per square feet to increase the rent. The cost of real estate for the spaces in shopping malls are going higher, the real estate industry wanted their share from booming retailers and the size of the pie was just getting smaller and smaller.
Look at the small restaurants in the shopping malls, the new restaurants replace the old every now and then. It’s increasingly getting difficult to keep their share of profit, where real estate was eating up the major portion of the pie. The new restaurants, tries to think, they can be profitable but after few months or years of losing money, they give up too and another batch comes up. The real estate point of view, they keep getting the share but the long-term effect is going hit them too.
Now, every big retail giant closing doors or cutting down the number of shops in shopping malls will create more supply to space in the malls but the demands are not increasing unless, Amazon or other E-commerce sites decides to open up experience centers at these places.
It’s more difficult for the retail giants to keep giving high rent for theirs shops that does not sell much and offer a discount to products like-commerce companies, who has their storage facilities in remote low-cost areas and used their own low-cost shipping or logistics services.
What are the potential solutions? Either change people’s behaviors (rewarding them somehow) or adapt to change and use shops as experience centers. It’s important to keep the tie-up with real estate companies too, ultimately, they are going to face the hit after sometime as they are little above the value chain.
An ideal purchase experience creation would need a fun packed family day in the shopping mall, may be based on subscription, where people will get to see a movie at the multiplex, while their kids play at play zones, created and maintained by Toys”R”Us. After the movie, families can sit together and sip the finest beers from the microbreweries and get subscription based fine dining experiences and then there will be fewer experience centers, offer them to experience the different products and scan a barcode or QR code to add it in their shopping cart! The theme of the outings should change as frequently as every month with innovations so people don’t feel like they are having the same experience every month! This way shopping malls could be a place where both retailers and real estate companies can with and get equal share of the pie!
Abhijit Ghosh is the CEO of StanShare, in addition to an enthusiastic learner with deep understanding of both data, technology, and concurrent people management policies and practices. An exceptional achiever, well-rounded, multilingual, culturally aware professional with a strong background in building and leading multi-discipline, geographically dispersed teams to manage complex operations and automation. Specializes in highly cross functional collaborations with Operations, Finance, HR, Data Management in financial services industry. He has over 17 years of hands-on management experience in planning, creating, data products and solutions through design thinking. Extremely skilled strategist for robotics and cognitive automation solutions.
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