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Ecommerce boom spoils the party for shopping malls in India

The recently conceived brands are riding on the ecommerce wave in India but there is a section of business which has been adversely affected by the advent of ecommerce i.e. shopping malls. Malls witnessed a 20–25 per cent vacancy drop and 30 per cent drop in rentals in last one year, according to a study by ASSOCHAM and PricewaterhouseCoopers (PWC).

While shopping malls in India are registering a drop in footfalls, the Indian ecommerce industry continues undeterred and is expected to clock compounded Annual Growth Rate (CAGR) of 35 per cent and breach USD 100 billion mark in course of five years. The study has valued the current ecommerce industry at USD 17 billion.

On the consumer side, the ecommerce industry is registering 72 per cent rise in the average annual spending on online purchases per individual in 2016 from the current level of 65 per cent, the study said. The top trending categories on ecommerce include electronics, books, music, apparel, sporting, and outdoor goods, among others.

The growth rate in internet retailing in countries such as UK, US is clocked at 39 per cent and 48 per cent, respectively, since 2005. Here the factors such as high population density, high rental costs and long working hours can be attributed as the largest drivers of growth, according to the study.

Closer home in India, governmental institutions and private sector companies have contributed significantly to infrastructural development such as logistical supports, broadband and internet-ready devices, which are going to contribute to the surge in online purchases in India. According to the study, around 65 million consumers in India are likely to buy online in 2015, as against around 40 million in 2014.

“It is true that the online shopping has shown handsome growth while the brick and mortar malls are witnessing slowdown. It looks that the growth in ecommerce looks impressive because of quite a low base and increasing penetration of internet”, ASSOCHAM Secretary General D S Rawat said while releasing it.

From the consumer perspective, issues such as suburban sprawl, worsening automotive traffic, rising fuel prices and the increased difficulty of time management in modern families have made ecommerce the convenient way of shopping in India.

Mobile technology is also having a huge impact on brick and mortar retail, specifically. Ecommerce powerhouse – Amazon recently reported that roughly 8-10 per cent of their total sales are being generated by mobile devices, and expect this trend to continue upwards, according to the study.