Keeping in mind the growing competition from online shopping portals, India’s largest real estate player DLF has set up a research and advisory team to suggest ways to design its malls in such a way that they would draw more footfalls. The research team will also assess the likely impact of e-commerce on physical stores in the malls over the next five years, and strategise accordingly. The report will be out in the next few months.
The company is also negotiating with many brands – both international and domestic – to add a clause in the agreements for keeping the price of products the same for physical stores and online shopping sites, people close to the development said. However, the brands can sell their products of the previous season at a discounted rate of 20-30 per cent on the online platform.
The move comes ahead of DLF starting its largest mall, DLF Mall of India, in Noida, which is scheduled to open early next year. A DLF Retail portal is also on the cards, which will have online sites for all its malls on one platform, aiming to provide users a targeted search for available products across different locations of its malls.
With internet penetration touching a new level, more and more users are taking to the online platform to buy goods such as mobile phones, accessories, books, music, among others. The growing popularity of online shopping has mall developers worried. Mall owners are now chalking out plans to deal with the online phenomena as well as to increase footfalls in certain categories such as food and entertainment that are not impacted by the online medium.
DLF has adopted a minimum guarantee plus revenue-sharing model for the benefit of tenants and operations of the mall. The Noida shopping mall will have seven DT star screens with a seating capacity of 2,000 and a food court that will have 1,200 seats. It has leased about 90 per cent of the new mall and it is learnt that about 200 brands have signed up so far. The company is expecting Rs 200 crore rental income a year from this mall, which is being built with an investment of Rs 1,100 crore and has 2 million sq ft of leasable area.
According to a report by CRISIL Research early this year, the impact of online retail is most evident in segments where product specifications are standard and differentiation low – such as books, music, and electronics.
Even in segments such as apparel, e-commerce firms have become extremely aggressive. They are offering discounts throughout the year and conducting shopping festivals repeatedly to play the volume game, the report added. “This is difficult for a physical retailer because of the added cost of lease rentals and higher inventory. If that was not enough, the exponential growth of online retailers has got them the attention of venture capitalists and private equity players; this makes their access to capital even easier,” it noted.
While the trend of online shopping has been gaining momentum and there has been talk of on the demise of the physical store, online shopping is still in an evolutionary stage because of low internet penetration, a senior CBRE analyst said.
Overall, malls across India are struggling to attract shoppers amid a slowdown in demand.