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Changing Story of Facility Management in Malls

A few years ago, news reports about malls were full of doomsday predictions: most are facing losses many are shutting down, those that survive are being repurposed for other uses, and online shopping will make malls obsolete. Today, the naysayers have been proven wrong. Malls of a certain size, which offer every single conceivable retail option and entertainment facility under one roof are witnessing tremendous footfall and booming sales.

Spread across a million square feet and with over 200 brands and 50+ food options, Viviana Mall in Thane is India’s largest mall. In a freeranging conversation, CEO Manoj Agarwal gave Mrigank Warrier the lowdown on why some malls work and some don’t, what makes a mall tick with customers, how good housekeeping can change customer experience, how such huge structures are cleaned and maintained, and what’s next in the story for malls and facility management. Excerpts:

Malls arrived in India with Y2K, and soon became a culture. From just three across India in the first year, hundreds sprouted up across the country, many set up by investors who had not studied the field or managed to anticipate future trends. Predictably, several malls shut down; some were even converted to hospitals!

The few malls that continued to struggle were impacted by the 2008 global recession, and downed shutters. Those that remained were malls which had been systematically envisioned, carefully designed and constructed to cater to a well-heeled demographic that wants a plethora of retail options. Small-time players have burned their hands and are staying away; all new malls are backed by serious investors with deep pockets, who are willing to spend and build mega-malls that are a one-stop destination for shopping, dining and entertainment, all under one roof.

A report by Edelweiss Securities Ltd forecasts that India’s organized retail sector is set to catapult to $166 billion (sector revenue) by FY25 from $55 billion in FY16. Favourable indicators like improving consumer sentiments, rising disposable incomes, urbanization and lower penetration of organized retail—are expected to fuel this boom.

The government too has framed policies that encourage the growth of this segment. Relaxing FDI norms in the retail sector over the past few years has reduced entry barriers into the Indian retail scene, motivating overseas retailers to expand exuberantly. This – combined with late mall closing times – has attracted interest from various Private Equity funds; this trend is expected to continue.

Such conducive conditions have led to the mushrooming of malls in recent times; an estimated 34 new malls will come up by 2020, totalling 13.6 million sq ft. ANAROCK Consulting Services has calculated that on a pan-India basis, India’s retail space is set to grow to 120 million square feet over the next three years from 100 million square feet now in the Grade A mall space, which will be spread across 250 malls. Of this total new supply, the top 7 cities have grabbed 72% share; Mumbai Metropolitan Region (MMR), Delhi-NCR, Hyderabad and Bangalore together will account for nearly 34 million sqft.

But the remaining 28% or 18.2 million sqft is slated to come up in tier 2 and 3 cities, which have managed to attract about 58% of the total retail investment of 2019, with Jaipur, Lucknow, Kochi, Bhubaneshwar and Nagpur taking centre-stage. Investors are gradually moving towards ‘development assets’ in remote locations, and they are looking to sow the seed for retail, wherever there is none.

Out of this total expected supply, nearly two-thirds or 40 million sqft will hit the market by 2020-end itself. These new malls will require a multitude of cleaning machines, chemicals and facility management solutions, and — considering their vast areas — vast numbers or amounts of the same.

What makes a mall successful?

Setting up a shopping mall involves assessing location, design, retail-mix, marketing, operations and more – this is both an art and science. Those who have got that mix right have not had to look back, like Viviana. Malls which are not able to focus are bound to face issues. Most malls which you hear about in the media domain all have a good image, good functioning, good sales and good revenue.

The most successful feature of a mall is location and catchment. Whoever has got this right in terms of positioning, access points or analysis of competition, or taken steps to satisfy through various offerings (retail and otherwise) are seeing a good footfall. It’s not enough to just open a mall in the right area.

Will online kill physical shopping?

Online and brick-and-mortar spaces have gotten well defined.

A lot of customers want to get the touch and feel of a product. Generic things can be ordered off the Internet, but if you want to see how a fabric falls on you, or how it fits, or how the screen of a phone looks or how it takes a photo, or what’s the voice quality of a device, and how it compares physically with other models; all this can happen only when you have a number of items of the same category in front of you. The same goes for footwear. You can buy a flip-flop from anywhere, but if you want something that is molded to the shape of your foot, you still need to visit a showroom, because sizes differ from brand to brand. This becomes very complicated if it has to be done online. I believe the online model is good, but not for when you have specific, personal needs.

When online players started, they offered a ‘showroom at home’, where you could order any number of things, keep what you liked and return the rest. Over time, they found out that this is not economically viable, which is why malls are here to stay. Online stores and malls will find their own niches.

Malls as a destination

With more and more retail brands coming into India, and a lot more focus on Food and Beverage options in malls, some malls have even doubled the area they have allocated to food courts and restaurants. While a single retail brand may have a presence in more than one mall in the same region, the F&B options are a major differentiated between malls.

Entertainment options are also increasingly being given focus. Today, malls have large multiplexes with different types of screens and premium seating and large Family Entertainment Centers. FECs are now evolving to be specific to particular age-groups. All this ultimately creates different experiences for customers, and experience is king as far as we are concerned.

Spoilt for choice

If you have neighborhood centers, they are focused only on the exact catchment they are targeting. They may not be a one stop shop, but they have enough options to cater to their clientele. But major malls, by definition, need to offer everything under one roof. Larger centers like Viviana and R-City in Mumbai, Ambiance in Delhi, Lulu in Kochi, or some of the Phoenix malls, occupy an area of approximately a million square feet with 7-8 lakh square feet trading area. With such an expanse, each is bound to be home all categories of retail.

Retailers with presence in malls number between 300-350; if a mall has 250 stores, it will have 60-70% of the brands available across the country under one roof.

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