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E-tailers writing books' epilogue at malls

Bookshops, electronics stores may be on their way out of malls as buyers move to online purchase

Mansi Taneja  |  New Delhi 

Do not be shocked if you walk into a shopping mall one day and find some of your favourite sections missing. Thanks to a growing competition from e-commerce companies, bookshops, electronics outlets and music stores could well be on their way out of malls.

With more people now logging on to online platforms for purchases, mall developers are feeling the pinch. "A change in the tenant mix is bound to happen, as some sections like electronics and books might get digitised completely. More space will now be given to entertainment and food sections in malls," says Pushpa Bector, senior vice-president (leasing & mall management), DLF Utilities.

In fact, over the past year, the overall share of books and music in the mall space has come down by seven per cent, while that of food, beverages and entertainment has grown 20 per cent, says Pioneer Property Zone Chief Executive Anand Sundaram. Electronics, however, is a mixed bag and the trend there is not very clear: While larger players like Croma are doing well, smaller ones have had to shut shop due to the online challenge, he adds.

Bookshops have already become few. Sachin Bansal-led Flipkart, which was launched as an online bookstore in 2007 and diversified into other categories later, was named the single largest book retailer by a Nielsen survey recently, ahead of traditional booksellers like Crossword. Books last year accounted for 20-25 per cent of Flipkart's sales in volume and 15-20 per cent in value, Bansal had earlier told Business Standard.

As for electronics, according to analysts, Flipkart's sales last Diwali were higher than those of any brick-and-mortar store in the country. Similar trends have been seen in developed markets like the US, too: Radio Shack, an American chain of electronic retail stores, recently announced it was closing fifth of its 5,000 stores after running losses.

In India's e-commerce universe, electronics account for 30 per cent of the total value of sales, according to a report by Technopak, a leading consultancy. A separate value for online book sales is not available.

Croma, one of India's biggest electronics chains, is focusing on its existing profitable stores, though it has an omni-channel strategy, where the share of e-commerce in overall sales is still in single digits.

Even in the US and the UK, where internet penetration is high and e-commerce accounts for a sizeable chunk of the overall retail, brick-and-mortar retailers have survived and made profits," says Ajit Joshi, Chief Executive and Managing Director of Infiniti Retail, which runs the Croma stores.

According to a CRISIL Research report 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. "Unable to match the huge discounts offered by online retailers, traditional booksellers and music stores are either shuttering outlets or folding up," the report had said. Even in segments like 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."

The CRISIL report cited the instance of music store PlanetM, part of Videocon Group's Next Retail, which has been closing stores since 2012. Between 2011 and 2013, it shut over 100 stores. As part of this restructuring, PlanetM adopted a kiosk-based model for expansion, saving lease rentals.

Over the past four-five years, competition from online retailers - Flipkart (in books, music and electronics), Myntra and Jabong (in apparel) - has eaten into physical retailers' revenues. Specifically, competition in the past three years has been intense, compelling many to go online, even as their net store additions have slowed.

"Categories where you do not need 'touch and feel' for buying products might disappear a few years down the line, except for certain specialised shops for targeted customers," says Vivek Paul, head (retail services), CBRE South Asia.

According to a leading developer based in the national capital region, the online boom will impact retail growth in Tier-II and -III cities the most.

Overall, malls across India are struggling to attract shoppers amid a slowdown in demand. Compared with a handful of malls in 2000, India now has more than 300 retail malls in leading cities. The current trend of online shopping has been fast gaining momentum and there is a constant banter on the demise of physical stores, yet online shopping is still in an evolutionary stage because of low internet penetration in the country, a senior CBRE analyst says.

While online shopping is convenient, there is still a need in the society to engage and connect, point out analysts. Shopping centres are no longer outlets to buy grocery or apparel but are evolving as activity centres in the social fabric of communities.



CHANGING PREFERENCES
  • Tenant mix at malls to change because of rising competition from e-commerce
  • Music, books & electronics stores might soon be moved out of malls; entertainment & food categories to get more space
  • Share of books & music space has come down 7% in a year, while beverages & entertainment category has grown 20%
  • Flipkart, Myntra & Jabong have eaten into physical retailers' sales in the past 4-5 yrs
(With inputs from Anusha Soni)

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First Published: Sun, July 27 2014. 00:02 IST
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