Retailers in India are increasingly pushing outside the country’s capital cities in a hunt for new consumers.
Real estate investors have noticed.
Over the last three years, malls in India’s second-tier cities have attracted 58 percent of total retail investment. Jaipur, Lucknow, Kochi, Bhubaneswar, Nagpur have been among the biggest winners.
The uptick in investment has followed a similar move from retailers, which are spreading their operations further afield from cities like Dehli and Mumbai, where they have traditionally focused their attention.
“From garment sellers to home furnishing brands to leading grocery stores, all kinds of retailers are actively looking at the future potential offered in smaller cities as they seek to tap into more remote populations,” said Pankaj Renjhen, Managing Director for Retail in India at JLL.
Examples of companies with plans to expand from the country’s major capitals to secondary markets include ethnic garment maker Fab India, and bridal wear brand Meena Bazaar.
Still, not all malls are faring well. A recent report by JLL India shows that investment has been predominantly focused on superior quality malls in secondary cities that enjoy strong transport links, infrastructure and rising levels of disposable income, all of which are serving to attract interest from both foreign and domestic developers.
Online vs offline
To stay ahead of the curve, India’s malls will have to adapt to the changing consumer landscape.
A growing presence of online shopping platforms and aggregators have allowed vast parts of the country to access goods that might otherwise have been unavailable.
As a result, successful malls in the country’s secondary cities must adapt, says Renjhen. “Consumers still like to physically see a product before they buy it, which gives smart malls developers the chance to carve a potentially lucrative niche.” Done right, it improves the customer experience, and ultimately footfall.
India is not alone in its belief in the sector. Late last year, Europe’s biggest listed property firm, Unibail-Rodamco, acquired Australia’s Westfield Corp. for US$16 billion, creating one of the biggest mall operators in the world.
Both of the groups’ malls are designed as leisure destinations, set to maximize the consumer’s experience with everything from sophisticated technology to a broad range of dining options and entertainment.
The deal highlights the evolving landscape of retail and the increasingly complex relationship between offline and online.
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