Saturday, 6 May 2017

(The Star) Mega thrivers

Why the top Malaysian malls will continue to do well

With some 40 malls gearing up to enter Greater Kuala Lumpur by 2020 – a dozen of which are boasting a net-lettable area (NLA) of one million sq ft, the local retail market is set to be both an interesting and challenging place.

And with online shopping gaining traction and already having an impact on brick-and-mortar shopping centres, some experts say the sector is looking bleak – a phenomenon that’s true not just for the Malaysian market, but internationally as well.

According to US-based real estate research company, Green Street Advisors, about 15% of the 1,100 malls in the US are expected be closed or “repurposed” within the next 10 years.

The Wall Street Journal, citing the research firm, has reported that department store chains would have to close hundreds of additional locations to regain the productivity (sales per sq ft) lost in the last decade.

Top KL mall: Suria KLCC maintains its dominant position as a top mega mall in Kuala Lumpur.

However, a senior analyst with Green Street in a social media post has clarified that despite all the “gloom and doom” talk, it is in fact a big misconception that malls are doomed.

Well, at least for those malls that aren’t prepared for what’s ahead. Green Street assigns a letter grade to malls ranging from A++ to D, based on factors such as location, nearby competition, anchor quality and demographics.

The senior analyst with Green Street said malls with an “A” grade are likely to survive and even thrive over the next several years.

On the local front, Grade A malls, or what many industry experts like to call the “top five mega malls” within the Klang Valley, are Suria KLCC, KL Pavilion, Sunway Pyramid, 1Utama and Mid Valley Megamall.

Chan: ‘The original five mega malls continue to thrive as they have a strong and progressive management.’

All of them have an NLA of more than one million sq ft.

Allan Soo, managing director of property consultancy Savills (Malaysia), puts the number of mega malls in the Klang Valley currently at eight – the new additions being Sunway Velocity, MyTown (both in Cheras) and IOI City Mall in Putrajaya.

The last three opened their doors within the past three years.

Staying relevant

Malaysia Shopping Malls Association advisor H.C. Chan says the “original” five mega malls continue to thrive and are sustainable because of their ability to adapt and change with the times.

“These malls always have a strong and progressive management. To stay relevant, they have between 200 and 300 marketing and promotional events per annum,” he tells StarBizWeek.

“Over the years, they have also undergone massive renovations and refurbishments to meet the demands of consumers.

That’s how they maintain a prominent profile and ensure they are better represented in the market.”

Chan points out that these malls are strategically located and easily accessible within their respective catchment areas.

“These malls are situated within matured, affluent and well populated areas. To cater to the large numbers, they also have ample parking spots, easily over 5,000.”

He adds that these malls have also evolved to become more than just “shopping destinations.”

“These places have gone beyond just being a shopping ground. Malls have become more than just a place for routine, functional shopping.”

Chan, who is also Sunway Shopping Malls & Theme Parks’ chief executive officer, emphasises that shopping complexes have become an “experiential avenue” for mall-goers.

“People go there for socialisation, engagements and refreshments. These may include going to malls to meet up with friends, getting a cup of coffee, working out in a gym outlet or watching a movie.

He says the number of food and beverage (F&B) outlets have grown tremendously in malls over the years.

“Today, up to 30% of a mall’s NLA comprises F&B outlets. In the past, it used to be in the single digits.

“Nowadays, F&B, leisure and services can make up more than 50% of a mall. The shopping element has reduced.”

Because of this growing phenomenon, Chan says the Sunway group has dropped the word “shopping” from its malls.

“Today, it’s just Sunway Malls,” he says.

Growing online retail

According to UK-based Centre for Retail Research, e-commerce is the fastest growing retail market in Europe and North America.

Eight malls: Soo puts the number of mega malls in the Klang Valley at eight – including Sunway Velocity, MyTown and IOI City Mall.

PwC, in its Total Retail Survey 2016, meanwhile, says about 93% of all South-East Asia consumers surveyed have made online purchases – many of them at regular frequencies.

Citing statistics, Chan says online retail had grown an average of 18.5% per annum over the past five years. This is comparable to physical stores, which had grown just 3.2% per year over the same period.

“E-commerce is still at its infancy stage, but there is a lot of latent demand. About 78% of people who prefer to shop online cite convenience as the main reason they do it.”

Chan admits there is no doubt that online retail will, if it hasn’t already, have an impact on the businesses of shopping complexes.

This is why it’s imperative for malls to constantly innovate and remain relevant, he says.

“What we need to do is to be able to provide good customer experience. Every shopping centre has to take a lead in creating awareness – not just at the mall level, but at the shop level.”

For the Sunway group, Chan says it has engaged a marketing guru to help it gain more awareness.

“Our concierge area is also being manned by an ex-stewardess, because they excel at customer service. This is critical... making it more personal and humanising it.

“Online lacks the human touch. You only see and hear.

In a physical mall, it’s about all five sense coming together.”

Since the fourth quarter of 2014, Chan says the consumer satisfaction index has been sliding. Compounded by the growth in online shopping, many physical retail outlets have since taken a beating in terms of sales.

“Stores selling apparels and accessories are the hardest hit. However, F&B, leisure and entertainment are all still doing well. Categories that leverage on the senses and the experiential are still thriving.

“Online retail will take a part of the market share. It’s inevitable. But if malls can continue to adapt and adjust, they won’t be displaced,” he says.