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The Mushrooming of Shopping Malls in Malaysia – Demystifying The Secrets of A Successful Shopping Mall

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By Simon Loh

Malaysia is blessed with a myriad of fascinating tourist attractions and an abundance of fantastic shopping malls, all of which contribute significantly to the local economy as well as enhancing the image of Malaysia as a popular tourist destination abroad, especially within the Asean region. Malaysia has become increasingly popular among tourists and travellers alike, rivaling the likes of Singapore as a top shopping destination. Malaysia is fast positioning itself as a global shopping hub with the emergence of new shopping malls all over the country. The establishment of the KL (Kuala Lumpur) Golden Triangle in the heart of the city is seen as the advent or dawn of a new era in Malaysian shopping. Malaysia truly Asia, indeed!

The mall’s success demystified
Concurrent with moving toward high per capita income nation and modern lifestyles, shopping mall or shopping complexes, have become more attractive or appealing to people living in the cities or the urban folk, hence, the fast mushrooming of shopping malls all over Malaysia, particularly metropolitan areas, specifically in the Klang Valley. One of the fundamental or key elements is producing the right mix or ratios of tenant occupancy over tenancy floor space. The other is establishing and affirming a brand name that will linger long after the actual shopping experience. Last but not least, create a niche market for shoppers and diversify the product portfolio (i.e. producing a multiple range of merchandise on offering). This final aspect is essential as to maintain a modest or respectable market share, as well as a sizeable or decent profit margin for the developer and the operator. With malls mushrooming annually, competition to attract shoppers is intensifying and formulating the right strategies which may make or break the business, could spell the difference between commercial success or failure. Ultimately, it boils down to having the best “location”.

The feminine equation in malls
Half the battle is already won when shopping malls produce the right tenancy mix once they understand their catchment areas in question and the respective demographic profiles of their prospective shoppers. Understanding the impact of the fairer sex may be crucial to their operations as well. It is a well-known and established fact that female shoppers form roughly eighty percent of those who shop, and women have a natural tendency to spend more time shopping, irrespective of whether a purchase is made or not. Regardless of the gender difference, shoppers in general also tend to spend more time ‘window shopping’ which in many cases sometimes translate into legitimate purchases, lest a solid and strong marketing strategy is put in place by mall operators. Women often enjoy shopping as a necessary pastime or their so-called ‘retail therapy’. The blokes (or men) on the other hand prefer to hang out at ‘watering holes’ (i.e. pubs & lounges) to wind down after a hard day’s work or play. The awesome purchasing power of womenfolk should never be underestimated.

Niche branding and competitive advantage
Modern shopping malls have registered tremendous growth, in sync with the exponential growth of the Malaysian population. Bigger and better shopping malls have emerged, ranking between 200,000 sq. ft. and 300,000 sq. ft., whilst the more recent “megamalls” which have a built-up area spanning as large as 2.5 million square feet or more, with numerous shopping centres around while new forms of retail formats have spawned and mushroomed. Chief or notable examples of these are Midvalley Megamall, Berjaya Times Square and IOI City Mall. Shopping malls compete from their product offerings which include excellence in services, competitive bargain prices, attractive sales promotions and exciting mall atmospheres. Consumers are also more knowledgeable and self-aware, with discerning tastebuds, individual preferences and shopping behaviour, thus becoming ever more sophisticated due to their higher disposable incomes as well as the impact of globalisation. Shopping itself is no longer confined to purchasing goods and services, but has evolved into a form of recreation. Visiting shopping malls has also become a family pastime and leisure activity, rather than a purely straightforward economic transaction.

Traditionally, consumers are attracted to malls through the promise of a wide assortment of stores and merchandise available in a single location or under one roof. The maturation (and possible saturation) of the mall industry has led to a tendency for many malls to closely resemble one another, with many malls offering comparable products at competitive prices. Due to the increasingly crowded shopping mall marketspace, many malls have lost their personal touch or unique identity. As a result, shopping malls must tailor themselves to meet the consumers’ social motives and longings, as well as to suit their experiential needs and tastes by putting in recreational amenities and amusement facilities such as cinemas & cineplexes, bowling alleys, theme parks and dining outlets. Some anchor tenants of shopping malls have also remodeled themselves after café lounges, art galleries and even apparel stores. For instance, Suria KLCC is a huge six-level crescent-shaped shopping mall. Whilst, Alpha Angle calls itself the “shop-play-see-eat” shop. Meanwhile, Mid Valley Megamall is described as the “All in One Mega Centre”. On the other hand, One Utama calls itself the “Shopping and Entertainment Under One Roof”.

Today, the modern marketplace is highly competitive and consumer markets have become more sharply segmented than ever before. Shopping malls have to change in concept and positioning in order to target a particular sector or a different kind of consumer. Given the importance of branding as one of the most valuable intangible assets in today’s business context, a successful brand commands a price premium and elicit much consumers’ response towards the brand. As a result, shopping malls must design and implement their marketing activities and program itineraries to match their brand requirements. With more shoppers visiting their favourite malls each season, the chances for them to make a successful purchase will be even greater. First and foremost, shopping mall operators must identify and scrutinise the shoppers’ behaviourial patterns and how these might vary among shoppers across different shopping malls. Secondly, shopping malls must also identify and understand the shoppers’ brand loyalty towards the shopping malls in question, so as the malls’ brand recognition or prominence can be managed, measured and mastered.

Sustaining the future of shopping malls in Malaysia
Potential mall investors will have to take note and be mindful of the following yardsticks in order to evaluate the profitability of any mall, suburban or otherwise. That is, the mall’s occupancy rate, mall’s optimum income at market rates, the ageing factor of shopping malls, consumer traffic and sales volume, as well as a lean and minimal-risk operational costs. High occupancy rates in a mall does not necessarily guarantee profitability unless all tenants are paying rental at optimum rates. Certain malls offer long-term rent-free periods to ensure maximum take-up space, which in the long run leads to a dip or decrease in revenue collection. If the management is able to rent out more than seventy-five percent of space upon opening day, with a minimum rent-free period offered, there is a better chance of future sustainability for the mall. A prompt return to optimum rental rates thereafter is imperative to ensure profitability. In summary, Malaysians’ voracious appetite for new retail, F&B and entertainment experiences is expected to contribute to the steady growth of the retail sector for many more years to come. For investors, it should not be a question of whether to invest or not, but just which location to invest in. In conclusion, in business, It is always “location, location, location!”