Retail Entertainment Malls Offer Immense Growth Potential

Retail entertainment malls have all the necessary ingredients to transform into futuristic consumer engagement hubs in the urban landscape. They need not be very large in size, but they do need to provide the customer some unique experience alongside convenience and satisfaction, which will ensure repeat visits to the mall. Besides the top-7 cities, 13 Tier-I & II cities offer immense potential for growth of REMs.

Retail entertainment malls and shopping centres are a necessity for modern retail to ward off the challenge from e-commerce and other emerging retail formats. “There is huge potential for retail entertainment malls provided developers do good research on the catchment, apply their mind while deciding the tenant-mix, put in place a professional mall management team and finally engage with today’s mobile-savvy customers,” says Yogeshwar Sharma, CEO & Executive Director, Select Infrastructure Pvt Ltd.

“A certain merchandise costs the same, no matter which retail option you choose to buy it at, so why should someone come to a mall?” asks Ramesh Nair, CEO & Country Head, JLL India, and he provides the answer: “Given today’s scenario where a customer is spoilt for choice on their shopping options right from the comfort of their home to destinations, ‘entertainment’ is not a bad edge to have for retail malls to create an extra excitement amongst the shoppers.” The concept of retail entertainment is not new, even though it has started to gain popularity very recently.

Entertainment as anchor

“Malls, clearly have a lifecycle mostly determined by either its utility factor or its novelty factor. If a mall runs out of these, then mostly we see a mall space decline and eventually shut,” says Nair: “‘Utility’ is created by the merchandise aimed at providing ease of shopping or access and thus come in big-box retailing and multi-brand outlets. The Novelty factor is today created by the entertainment elements of F&B, Multiplexes Cinema and gaming arcades and other similar formats.”

“Digital retailing through e-commerce has created a retailing ease amongst its audiences which was what a department store or a big box retailer could do for customers in a mall. With the USP of multi brand and big box retailing demolished (by online retail), entertainment has become (the principle) anchor for malls.” he explains. Aimed at providing a variety of entertaining experience to the customer, the most popular of these is having a multiplex cinemas. However over a period of time, newer formats of entertainment have been introduced such as – Comedy clubs, karaoke centres, gaming arcades, even amusements park like features, he adds.


Malls are fast evolving into family entertainment centres (FECs) focused on creating experience zones. “The two primary focuses for making malls into family entertainment centres are firstly, to increase footfalls thereby creating necessary volumes for their occupant and secondly to prolong the period of time spent by customers. Both these have a direct impact on the revenues generated at a mall. In a revenue share model, where brands have an obligation to pay as per store revenues with the development company, the primary responsibility of the mall is to achieve critical mass to ensure shorter gestation period for their occupants,” says Ramesh Nair.

“Big-box retail, the department stores cannot be replaced by entertainment anchors – the two must complement each other,” says Yogeshwar Sharma of Select CityWalk: “It is also necessary to distinguish between a destination mall and a retail entertainment mall, the retail entertainment malls are more relevant than destination malls in today’s context as customers are less willing to travel long distances for shopping or entertainment.”

Growth Opportunity for REMs

India has a dominantly youth population, with about 50 crore people above the age of 25, who are mobile/ internet savvy, they are fairly brand conscious and aware of the latest fashion and product trends. More than half the 135.4 crore Indian population is in the 15-54 year earning age group. In spite of temporary set-backs due to implementation of bold reformist policies like demonetization and GST, India remains one of the fastest growing economies of the world, per capita income and purchasing power is also on the rise.

We discussed in our first Knowledge Series release (Retail Entertainment Malls – The Challenges) about the evolving consumer trends – what is noteworthy of the Indian consumers is that while making purchases they invariably seek to balance out on quality and value parameters. The middle class consumer may not be as much fascinated about aspirational expensive products as he or she is for the experiential products and services. This is where the REMs emerge as the future destination for shoppers.


“In India retail is evolving and retail entertainment is a strong component of this evolution,” says Ramesh Nair, CEO & Country Head, JLL India: “Retail space density in India is low at less than 200 sq.ft per person and therefore at the face of it there is still a high requirement for retail malls. Having said this, we have seen growth in retail mall space steadily over the last fifteen years. Moving from 9 malls in 2002 to over 300 malls in the top seven cities of India.”

The above data is for the seven top cities – Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata. It follows that growth in incremental mall space was slowest during 2011-14 but shows signs of picking up once again. What is noteworthy for the larger destination malls is that there was substantial increase in the size of newly constructed malls from 2002 to 20011; delivery of larger projects slowed down in the interim period 2011-14 but has once again revived.

Differentiation from online

“The primary quality of entertainment retail is the ‘tangibility’ of the experience that cannot be replicated by other forms of retail; put in simply, to experience the thrill of roller coaster, one has to ride one!” says Ramesh Nair.

With e-commerce capable of providing at the customer’s doorstep almost all sorts of goods and services including gaming, entertainment, food, fitness, nursing, etc, what’s really left for retail entertainment malls, where can they actually differentiate? Well, it’s that one activity which got progressively undermined since the advent of television – that is, socializing. The community experience that used to be a routine affair in earlier times has got heavily curtailed over the years.

REMs can evolve as experience creators, as active hangout places, can provide holistic experience by engaging customers at an emotional level – this can be achieved by hosting celebrations like festivals, weddings, birthdays, friend-relative get-togethers, office staff meet, fashion shows, brand launches, trade events for premium fashion products, art & craft exhibitions, trade promotion by embassies, play zones – anything that online cannot provide as effectively. Social media, can be used to create awareness and pull for the next-gen shoppers. To achieve all this, professional management is a must for REMs.

Even in the sphere of retail mix, mall management is now encouraging tenant retailers to change their offerings with a view to differentiating from neighbourhood malls.

Foreign investment forthcoming

Creating quality infrastructure with unique design and recreation activities, improving the tenant mix to add variety and depth in products & services, adding convenience through digital solutions in order to make mall visit more engaging and satisfying – all of these call for higher investment. Thanks to a liberalized FDI regime, we can expect more global brand stores to open shop in India, and locating within secure environ of malls will obviously be their first choice.

Retail infrastructure has also been allowed 100% FDI through the automatic route and hence retail estate investment trusts will readily want to finance mall projects in the world’s fastest growing economy.

When the going got tough for mall operators, the wise among global real estate investors were busy buying properties at a huge discount; in less than a decade the same mall properties, with modified design, retail-mix and positioning are being sold at a premium of more than double the purchase amount. Global Investor companies are known to have taken over more than 50 Indian malls that were underperforming – this process will only accelerate in the coming years. Hence getting finance for new projects or for re-development of existing underperforming malls should not be a major problem.

As per JLL India, some $1.5 billion has already been invested into retail by PE firms between 2015 and 2017. Blakstone, through its India subsidiary Nexus Malls, is taking major stakes in various malls like Seawoods Grand Central, Ahmedabad One, Mall of Amritsar, Elante Mall, Treasure Island Next, Treasure Island Indore and Westend. There are several other such investors like Xander – Virtuous Retail, APG Asset Management and Canada Pension Plan Investment Board – Phoenix Mills combine.

Select CityWalk, New Delhi

Leveraging online technology

No denying that huge discounts by online retailers coupled with the growing popularity of digital transactions have impacted footfalls in malls. Yet large format chain retailers have shown that with planned and well researched adaption of new technology and new formats mall and shopping centre developers can retain the earlier charm and attraction – Big Bazar Gen Next is one such example.

Omni-channel mode is getting popular with Indian retailers and their online operations are leveraging new technology tools to measure profitability in terms of per sq.ft revenue; this same accounting method is now being extended to the brick-and-mortar format which is bound to promote more structured analysis in terms of location, rentals, sales and profitability.

Personalised services

Like the e-commerce marketplace, mall managers too must think of providing more personalises services to customers. Many services are already housed in leading malls, the likes of valet services, navigation assistance, kids play and creche area, free wi-fi connectivity, loyalty programmes, ATMs, banking, currency exchange, ticketing, bill payments and so on; to this can be added fashion and makeover tips for specific occasions, healthcare tips, senior citizen zone, shopping consultants/ advisors to assist visitors in taking purchase decision, and the like. The basic idea is to facilitate higher interactivity through unique experiential services, besides selling products. Making use of voice-activated shopping technology is another vital option being explored by some of the top global retailers.

Beyond just movies & food courts

As stated earlier, movies and food can be enjoyed at home too, hence experiencing the same at a mall ought to be fundamentally different. In response to this, we now have the digitally evolved movies and food/beverages being served alongside; another option is where movies entry can be restricted as ‘adults only’, ‘family’, perhaps also as ‘teenagers’ – giving some reason to excite the customers, make them feel more comfortable and not out-of-place.

The government of India recently reduced the GST applicable on services of AC restaurants from 20.5% to 18% — a move that will benefit food caterers in the malls too. For differentiation in the food court, mall managers can plan dance and music programs that involve the customers and also reward the best performers – involvement could be voluntary, but to have it through drawing of lots will ensure more decency and a sense of feeling special. Customers can be given more options like deciding the cooking medium, spiciness of the ordered menu and so on. Promoting personalization and customization in all possible spheres ought to be the guiding principle.

Opportunity in Tier-I & II cities

“There is enough potential to accommodate at least 8 to 10 more large retail entertainment malls in the Delhi NCR, and so too in Mumbai and other metropolitan centres, the only difference being that in Delhi there isn’t space to have very large destination centres,” asserts Yogeshwar Sharma of Select CityWalk: “As for the Tier-II and III cities, we find good potential in Ahmedabad, Surat, Baroda, Jallandhar, Ludhiana, Lucknow, Kanpur and Bhopal.”

Ramesh Nair of JLL India also echoes the same sentiment: “The potential of growth is still strong across the main markets and tier two and three markets. Tier two markets specially provide a strong case, due to the fact that in these centres, aspirations have changed, the spending capacity have increased and most of these locations do not have alternate entertainment options. This gives development companies a lot of leverage in terms of creating destinations out of retail malls.”

AlphaOne (Nexus), Ahmedabad

Growth in the Tier-II & III cities will pave the way for a sustainable growth of organised retail, as per a recent joint study by the Confederation of Indian Industries (CII) and JLL India titled “Fuelling the Retail Revolution-The Paradigm of Emerging Cities”. The report has identified 20 cities (7 top cities and 13 emerging ones) that will lead the future growth of organised retail in the country.

Delhi-NCR still packs the highest potential for retail growth, followed by Mumbai and Bengaluru among the top-7 cities. Jaipur, Lucknow and Ahmedabad show highest potential among the next 13 cities, the future promising centres of retail growth.

As per the report, the retail sector in Tier-II and Tier-III cities has witnessed a much higher investment of $6.19 billion between 2006 and 2017 as against $1.29 billion that came to Tier-I metro cities during the same period. Emerging destinations like Lucknow, Jaipur, Chandigarh, Kochi, Indore, Nagpur and Bhubaneshwar are going to be the next big retail hubs.

“India’s appetite for retail entertainment will be directly proportionate to the growth in per capita GDP which is set to see a steady growth on account of positive outlook from various global agencies putting India’s overall GDP at over 7%,” says Ramesh Nair, and adds: “There is no prescription of the size of a mall that is ideal, as it mostly depends on the catchment area and available competition around the same. Notwithstanding the size of the mall, entertainment seems to occupy approximately 30% of the total space of malls which is a proportion we expect mall developers to maintain.”