They are glitzy islands in a sea dominant with moderate architecture. Within their steel and glass façade a heightened sensation of living it up is created. “Yes! We are happening,” feels the mass of movement within these air-conditioned new-age Indian palaces. Well the Indian public seems content to have a ball while in these malls.

Internationally shopping malls have been around for the last sixty years and have made a very late entry into India given that liberalization started back in 1991. Till the year 2000 there were just three shopping malls in India with retail space of 100,000 square feet. The U.S. with a population of 380 million has over 1200 shopping malls. India bursting with a one billion plus populace needs a minimum of 1000 malls in over 500 cities and towns to cater to the estimated demand. However estimates aside a solid business strategy can only enable profits in the dicey Indian retailing market.

The retailing industry in India is at present worth $205 billion and is growing at 5 percent per annum according to New Delhi based consulting firm KSA Technopak. Organized retail is a $6 billion market now and is set to touch to $24 billion by 2010. Such racy statistics is driving mall mania and has resulted in the launch of 39 malls in 2005 and 54 to be launched in 2006. By 2010, 300 malls are estimated to be operational in India with a majority concentrated in North India.

What is drawing the crowds here? It’s the prospect of a retail center that promises entertainment. ‘Retailment’ could be the word. An explosive combination of food, movies and stores promises footfalls into these magnets, but then is serious shopping being done here to generate profits? KSA Technopak estimates the ‘conversion rate’—the percentage of visitors who turn into shoppers—to be as low as 10–15 percent in Indian malls. But Neeraj Duggal, Head of Facilities and Resources, Forum Mall, Bangalore, debates “10–15 percent conversion rate is good because internationally it is 2–5 percent.”

Wouldn’t there be falling footfalls when prices are one-fifth for similar items retailed in the local shopping centers? The local street is the competitor for malls at present but the scenario could change later. “Inorbit Mall in Mumbai is more of a competitor to the $16 million Forum Mall in Bangalore,” says Duggal. Retailers are trying out various anchors in malls to draw in the crowds.

Multiplexes in malls are one of the anchors drawing crowds. Compared to the claustrophobic local cinema halls, multiplexes provide superior luxury for just $1.13 on weekdays. Weekends are obviously crowded here and the ticket prices shoot up but the crowds don’t mind. Multiplexes in Delhi average between 3,500 to 4,500 footfalls a day. A 1250 seater multiplex in India would cost around $2 million to construct.

Are multiplexes the answer for mall woes? The answer goes beyond the anchors, feels Duggal. The critical factors that contribute to the success of a mall include location, spending profile of the catchment population (population residing near the mall), anchors like multiplexes, food courts, cultural centers; and parking space. Anchors maximize the time spent per visit, number of stores entered per visit and scale up the average transaction value. “The solution to falling footfalls in malls in India is that the mall developers should build malls from the retailer’s point of view. Retailers ultimately make or break the mall. Falling footfalls in Gurgaon is because things developed too fast. Design too is critical, in fact a Gurgaon mall had its multiplex’s exit open onto the road – an anchor is meant to pull crowds into the mall!” says a bemused Duggal.

The relatively bleak scenario of falling footfalls will change, echo retail pundits. The statistics look positive: The target subset of the mall messiah is India’s middle class which is estimated to number 250 million controlling around 46 percent of India’s wealth. Spending power of the Indian youth is surging and it makes sense to target this segment as 65 percent of the Indian population is younger than 35. Only 22 million Indians are credit-card users and the number is expected to triple by 2008 creating a huge market to be tapped.

Cashing in on the trend and market potential, foreign retail chains are venturing into India with gusto. The market has attracted European chains as well; Marks & Spencer, Benetton and Mango are a few to name. Few U.S. based fast food chains like McDonald’s, KFC, Subway and Pizza Hut are also flocking to the malls. The pace of the development in retail infrastructure is poised to gallop with the Indian government planning to allow 100 percent FDI in stages in the retail sector. Opening up FDI for retail could attract investors from mature markets to bring in their expertise, experience, efficiency, technology and mega bucks into this sector in India.

Malls are getting bigger and bigger. Newer malls are being planned in the 500,000 square feet to 1.1 million square feet range. Take for instance Gurgaon in Haryana, which is set to get the 4 million square feet ‘Mall of India’ by DLF Developers. As of date, Golden Resources Mall located in Beijing, measuring 7.3 million square feet is the largest mall in the world surpassing Mall of America, the largest mall in the U.S. measuring 4.2 million square feet. Themes in malls are expected to be the next trend to rock the realtors.

Prestige developers (Forum Mall) have started ‘Eva’ a mall exclusively for women in Bangalore and plan to start a value mall called Ozone Retail Park in Whitefield, Bangalore with factory outlets for that experiential shopping for factory shoppers.

With the Indian economy growing at 6.5 percent plus, Indian malls are truly on the crossroads. We are at the same turn in history that the U.S. was thirty odd years ago when its economy opened to globalization. Mall culture, which precisely began around that time there, has survived. Will history repeat in India or is it just going to be a case of mall fatigue? Today with the boom, retailers are asking, “Can we afford not to be in the malls?” However if careful planning to sustain this growth is not done tomorrow they may as well ask, “Can we afford to be in the malls?”