Impact of Shopping Malls on the Local Economic System in Small Cities

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Table of Contents

  • Introduction
  • Why are the Mall Developers Shifting to Tier-II and Tier-III Cities instead of Metros?
  • Objectives
  • Review of Literature
  • Methodology
  • Sampling Design
    In-Depth Interview
    Focus Group Discussion
    Observational Design
    Data Collection
    In-Depth Interview
    Focus Group Discussion
    Participant Observation
    Data Analysis
  • Limitations
  • Ethical Considerations
  • Result and Discussion
  • Focus Group Discussion
    In-Depth Interviews
    Participant Observation
  • Conclusion


Officially shopping malls are defined as "one or more buildings forming a complex of shops representing merchandisers, with interconnected walkways enabling visitors to walk from unit to unit. Unofficially, they are the heart and soul of communities, the foundation of retail economies, and a social sanctuary for teenagers everywhere. In recent decades, the concept of the shopping mall, which has its origins in the U.S. and became a full-blown modern retail trend there in the post-WWII years, has proliferated across the globe. The five largest malls in the world now reside in Asia. China's New South China Mall in Dongguan stands at the top of the heap with 2.9 million square meters of space. Despite its ubiquity, the mall as it's been conceived for the last half century is at a critical inflection point. A storm of global trends are coming together at the same time to cause malls to change the role they play in people's lives. No longer are they primarily about shopping. Now, when consumers visit malls, they are looking for experiences that go well beyond traditional shopping. The shopping centre industry in India has witnessed quite a few up and downs. The retail sector registered moderate growth in 2015; besides, there was rising competition between online players and brick-and-mortar retailers. Online retailing witnessed significant growth with large amounts of private equity funding in this segment. However, online retailers are reporting heavy losses owing to deep discounts that they are offering. Further, as the market is becoming more competitive, consolidation is also taking place in the retail sector. Some big retail chains have merged and acquired other companies in order to achieve larger scale and efficiency. The last one and half decades in India have been an exciting phase in the Indian economy from the Mall development perspective. The country not only witnessed the birth and growth of shopping Malls, but has also eliminated the economically unviable ones. It has also bettered the existing ones, forcing the developers to rethink on their strategies for future. This has lead to clear demarcation of real estate developers who will specialize in building Malls and the others. With a clear definition and scope of work, the ones who stuck to building Malls have learnt to manage it better. While most of urban India has been covered with the required Mall spaces, the tier-II and tier-III cities promise a huge potential for Malls due to lack of it. Though some towns have had Malls, most of the towns are yet to witness and get used to one. Facilities are opening in down towns and in small cities where population is also dense.

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Why are the Mall Developers Shifting to Tier-II and Tier-III Cities instead of Metros?

Saturated Market: Metros are already saturated in terms of Mall coverage. Almost every locality in big cities has their own Malls. In fact many a times, it would be found that 3-4 Malls are next to each other in cities like Delhi, Mumbai and Bangalore. The vacancy in such Malls is also very high. A huge Mall in suburban Mumbai, which began operations a couple of years ago still has no anchor tenant! Land Acquisition: Malls require big portions of land. With the land prices touching sky-high rates, the land acquisition cost becomes a big prohibitive factor for developers to consider a large Mall in metro cities. This is also making it unviable for developers because of the lower returns, comparatively. Better returns: It is important to note that an average citizen in such cities want easy and organized access to retail / Shopping Malls. This attitude promises better returns to developer. If a Mall in metro gives a return of about 10-12 per cent, smaller city Mall gives 18-24 per cent. For a retail company, the overall occupancy cost is lower in smaller towns, thus increasing his profitability. Higher disposable cash in smaller cities: While an end consumer in metro earns more than his counterpart in a smaller city, he has very less disposable cash because of higher cost of living. Whereas people in smaller cities have more spending capacity and it is growing, giving scope for retail spends, which in turn makes it a viable option for both Mall developer and the retail company. An aspirational place: A Mall is a destination in a smaller town. It is an entertainment place and a community centre for people. Families want to go to a Mall spend some quality time because there is no other place in to go in a smaller city. In smaller town Malls have also become a place where you connect to the society socially with friends, relatives & known people. "In India, shopping dynamics are distinctly different than in the U.S. and other western countries. For example, shopping is a family activity — nearly 70% of shoppers always go to stores with the family, and 74% see shopping as the best way to spend time with the family. This Indian preference for family-oriented shopping along with pleasure and fun was found to be consistent across age groups, income segments, regions, and city sizes (Sheth&Vittal, 2007). The promising numbers: As per our estimates and finding, about 300 Malls are expected to come up in non-metro cities over the next 3-5 years. Besides the sheer number of Malls, they are also growing bigger in size. So far, Mall developers were looking at a Mall size of about 1, 00,000 to 1, 50,000 sq. ft. But now, they are thinking big. We find them planning a Mall of 3, 00,000- 5, 00,000 lakh square feet, clearly indicating a bigger appetite for retail space &other activities. Today, an average person in a tier-II or tier-III city is well travelled, has an increased exposure to all kinds of media and is aware of all kinds of brands across different segments leading to big retail spending scope.


  1. How a shopping mall in a small city affects the local economy? To what extent it affects? What is the impact on the economic system?
  2. How the buying behavior pattern of the consumer changes?

Review of Literature

Although shopping mall development seems to be a part of a global trend, there exist socio-cultural influences creating local patterns in the use of the mall. These patterns differ with user characteristics, such as gender, age and occupation, as well as the time of visit (Erkip, 2005). From the business perspective, local economic development could also be an after effect of emerging malls. In fact, some firms are locally dependent and form business coalitions to stimulate investment in their local economy (Cox and Mair, 2010). Cities are no longer seen as landscapes of production but landscapes of consumption (Zukin, 1991). The mall has been transformed from a Fordist space that encourages mass consumption and sameness to a post-Fordist space that attempts to create social distinctions. Urban scholars have assumed that the mall is an outpost of the globalized economy that diminishes locality and human agency (Salcedo, 2003). The relations between urban change and economic development are thereby brought into focus in a period characterized by considerable economic and political instability. Importantly, culture of the population plays significant role. There is a role of cultural production and consumption in contemporary urban regeneration (Crewe & Beaverstock, 1998). The present study deals to examine the nexus between local economic development and emerging malls in small cities knowing the paucity of the relevant literature available.


The study is purely qualitative. It is a qualitative research where different methods are applied. Focus group discussions, in depth interviews (key respondents) and participant observation are conducted to elicit relevant information in the context of research objectives. In addition, to supplement the findings, a survey has also been conducted across different sampling units. The sampling design holds key to any study. In this case, convenience sampling and purposive sampling techniques both are used. Consumers visiting mall or shopping outlets and other institutional owners in and around the area constitute the sampling units of the study. Qualitative interviews along with FGDs are also conducted. The locale of the study is in Karnataka (three selected cities – Davangere, Humpy and Hubbli). Data analysis is done through Grounded Theory Methodology (in case of qualitative interviews and FGDs') and descriptive statistics (in case of surveys).

Sampling Design

Two types of sampling are used simultaneously for the sake of precision in data elicitation. Convenience sampling and purposive sampling both are deployed. There are different categories which constitute the sampling units:


Sl. No Category No of units sampled 1Transportation (auto rickshaw drivers) 202Fast food/Restaurant Chain 103Entertainment 44Kirana Stores (grocery) 25 5Street Hawkers 156Visitors of shopping malls 70

In-Depth Interview

Sl.No Category No of units sampled 1Auto rickshaw drivers 22Kirana Stores (grocery) 33Visitors of shopping malls 5

Focus Group Discussion

Sl.No Category No of units sampled 1Auto rickshaw drivers 1 FGD 2Street hawkers 1 FGD

Observational Design

This study is an exploratory type of research where the overall design is flexible. The study has been carried out in the state of Karnataka, wherein particularly there small cities have been selected keeping the objective of the study in consideration. They are Davangere, Humpy and Hubbli covering sampling units from at least 8 malls and the institutions in and around the areas. This study aims at exploring the literature gap. Shopping mall is considered as a vital economic unit to measure the local economy of an area as a whole. In fact, this research has been designed in such a way that it attempts to understand the changing buying behavior pattern of the consumer (a paradigm shift from unorganized retail stores to shopping malls) in the context of small cities. Multiple variables (independent) have been taken into account like employment status, age of married couples, structure of family, educational attainment and rise in income level for approximation to truth with regard to the impact on local economy (dependent variable). Outcomes are attributed through transportation industry (auto rickshaws), entertainment (movie theatre), restaurants, and street hawkers. Noticeably, environment in the mall, variety of products under one umbrella and glamorous setting have been taken into consideration to see the effect on consumers changed buying behavior. As it is a qualitative research, empirical data has been analyzed qualitatively to get a comprehensive view on the concerned issue.

Data Collection

Data has been collected mainly through questionnaires specifically designed for thorough quantitative and qualitative analysis. Three qualitative methods are followed: In-depth interview, Focus group discussions, Participant observation. Six research associates have worked extensively across three cities to arrive at a possible conclusion before the research objectives.

In-Depth Interview

An in-depth interview is a conversation with an individual conducted by trained staff that usually collects specific information about one person. In-depth interviews are often used when an agency doesn't know much about a population and wants to get preliminary ideas from the participants. Some agencies use in-depth interviews to obtain information that they can then use to develop quantitative surveys once they have a better handle on what's going on with their participants. The qualitative interview was chosen because "the subjects not only answers the questions prepared by an expert, but themselves formulate in a dialogue their own conceptions of their lived world" (Kvale 1996). There is no strict rule to the number of interviews needed in a qualitative study; nevertheless, Cresswell (2007) recommends that the number in phenomenological studies should consist of in-depth interviews and multiple interviews with participants, roughly 5 to 25 in number, who have all experienced the phenomenon.

Focus Group Discussion

Focus Group Discussion (FGD) is a method of data collection which is frequently used to collect in-depth qualitative data in various descriptive studies such as case studies, phenomenological and naturalistic studies). FGDs are effective in eliciting data on the cultural norms of a group and in generating broad overviews of issues of concern to the cultural groups or subgroups represented (Family Health International, 2011). FGDs are important data collection tool when the researcher does not aim to understand the own personal thinking of the respondents, but also wants to know how the respondents choose to discuss an issue in group environments (Bryman 2008).The main goal of Focus Group Discussion is to provide an opportunity for the participants to talk to one another about a specific area of study. The facilitator is there to guide the discussion.

Participant Observation

Observation is a systematic data collection approach. Researchers use all of their senses to examine people in natural settings or naturally occurring situations. Observation of a field setting involves: Prolonged engagement in a setting or social situation, clearly expressed, self-conscious notations of how observing is done, methodical and tactical improvisation in order to develop a full understanding of the setting of interest, imparting attention in ways that is in some sense 'standardized', recording one's observations. Audio Tape was used to record the conversations and transcription was done for both FGD and In-depth interview.

Data Analysis

Grounded Theory Methodology (GTM) has been used to analyze. The research team has found the concerned framework efficient and suitable for analysis in the context of the research problem. Detailed notes were taken from focus group, audio-recordings and audio-recordings of interviews were transcribed verbatim from digital audio recorders for analysis using the grounded-theory approach. Researchers made use of field notes with reflexive comments and observations made throughout the research process. Researchers also made theoretical ‘memos' that note how something in the text or codes relates to the existing literature. The main concepts or themes and sub-themes (open coding) have been discovered from the transcribed text and field notes, allowing the data to reveal its message instead of confirmation/refutation of a previously-developed hypothesis (Glaser, 1992). Then the research team went for ‘axial coding', showing the interrelationship of data in a model. This was further refined by ‘selective coding' where I figured out the core variables that includes all of the data (Creswell, 2003). This involved rereading the transcribed texts to accommodate all cases in the (substantive) theory. Grounded theory necessarily finds information in data, where the research process remains close to data during the initial stages and gradually moves towards higher levels of abstraction to develop a substantive theory (Charmaz 2006). The substantive theory will be "a set of concepts which define and explain a social phenomenon" (Silverman 2005), that is the effect of shopping malls on local economy and the factors associated with them. The theory developed through this methodology is able to describe, in a restricted sense, the complex interplay of factors in shaping the consumer buying behavior pattern. We may say that – if elsewhere approximately similar conditions prevail, the developed substantive theory will hold true (and nothing more than that) (Strauss & Corbin, 1994). Note that, ‘substantive' and ‘formal theory' are distinguished in grounded theory (Charmaz 2006). While substantive theory is empirically close and rooted in the study context, formal theory is an abstract conceptual understanding which can be applied to other settings to test its viability. In this study, research team has ended up in the development of ‘substantive theory' and has not tried to formalize it for higher level generalization.


One of the most threatening problems experienced by me was the lack of will of the participants to get involved in the study. Almost all of them were curious in knowing about the benefits which they could harvest from the study, which indeed was a very tough and strategic query for the research team to address. Another constraint was the time allowed by the respondents for completing the interview (often less than one hour).It was really a ‘hectic' job for the team to cover all the dimensions within such a short time span. Few of the factors which were predetermined as sampling criteria were also hard to figure out in the context of shopping malls, especially when the hunt was for various combinations of such criteria. Extensive travel in winter consumed time and energy, which might affect the quality of the interviews.

Ethical Considerations

It is extremely crucial to respect ethics in research. Throughout the study, the research team was immensely sensitive towards privacy issues of the participants, if expressed by them. Hence, in ethical grounds, anonymity has been maintained wherever requested, In fact, no photographs of human objects were taken which would have violated guiding principles of qualitative research.

Result and Discussion

The findings of this study are categorized in three segments on the basis of the methods deployed for eliciting relevant information.

Focus Group Discussion

In the city of Davangere, near SS Mall, there are two auto rickshaw stands where the vehicles are stationed. Research team explored the possibility of conducting a FGD session and ultimately after getting consent from the concerned union under which drivers are operating, a session was conducted. Most of them opined without any hesitation that the prevalence of SS Mall has been a driving factor in the context of personal income. Income has steadily risen as the inflow of passengers has increased over time due to the presence of mall. In fact, in weekends, the income level overtakes the combined income of weekdays. This extent of rise in their income is possible only because of the mall which attracts consumers on a regular basis. Noticeably, all the participants agreed with the fact that, if the mall closes down in future then they might leave their existing livelihood and venture into something new as shifting to a new route is hard to achieve as there are permit issues from the government. Interestingly, as the trip distance is short, it becomes highly profitable for the drivers and turn-around time is also very little. Another FGD was conducted where the participants were street hawkers near oasis mall of Hubbli (operating in unorganized sector). It took time for the research team to convince them and arrange a peaceful and hassle-free FGD. Interestingly, the presence of mall had impacted their lives in negatively. They used to earn more before the establishment of the oasis mall. In fact, their earnings reduced drastically. They opined that availability of wide range of products in the mall supplemented with the impulse buying behavior of consumer groups are the responsible factors for the downfall of their business. In fact, they felt that the glamorous setting in the mall acts as a catalyst in the process of purchase behavior. Noticeably, when asked about the cooperation from government, they unanimously agreed that capital input is necessary to improve the business process, may be in terms of layout design. Conversely, it has been found that they are able to run their existing business because of few traditional consumers who look for standardized quality products irrespective of brand value. Hence questions were posed very tactfully to understand the impact of the shopping malls in their lives and to trace out the reasons for which they are still into their existing business.

In-Depth Interviews

Unorganized grocery stores (kirana stores) were chalked out across three cities having establishments in and around the shopping mall area including localities where area is densely populated. "I find my business affected greatly after SS mall opened in this area along with multi-brand retail outlets like Spencers & More……in fact, those who I assumed to be hard core loyal customers to us are now buying their daily necessary goods from them" (Mr. S. Murthy, Owner – Arjuna Stores, Davangere, 03.01.2018) It is evident from this quote that shopping malls not only affected the street hawkers centering garment industry but also grocery stores in many localities with regard to daily food items. But the question before the research team was not only to gather insights regarding the extent of impact but also the reason for which customers changed their buying behavior pattern(hard core loyal to shifting or split loyal). This query was addressed by another businessman of humpy city; "……..may be the amenities consumers get in the mall like movie theatre, food court where they can chit-chat and have fun are reasons for their shifting from us…and also the discounts they get from multi-brand retail stores as those stores purchase materials in bulk….." (Mr. D. Iyer, Owner- Iyer Variety Stores, 07.01.2018) So, investments in shopping malls in popular locations are directly proportional to shift in consumer base from grocery or unorganized stores to organized outlets.Indeed, consumers do not want only quality products but a basket of services under one roof. After exploring the issue from the perspective of kirana stores and street hawkers, research team now wanted to unveil the possible reasons for changing buying behavior of the consumers. Keeping in view the in-depth nature of the interview, research team targeted week days and also afternoon noon where generally busy consumers who are in hurry would not come. "I find this place just awesome….what else do you want when you get food, daily household items and other amenities…and that too in discounted price" (Mrs. P. Venkata – resident of Davangere, 03.01.2018) Interestingly, it was found that not only the rise in income level of consumer group is a driving factor but also the flamboyant setting inside the mall and convenient accessibility of all the items are responsible for this buying behavior pattern of people. But the research team wanted to go deeper and gain insights into the issue which to an extent was achieved in the next interview. "….not only the discounted price and brand matters…. I had to visit this place quite often because of my child… he is just fond of the play station and fast food here…and as I come, I buy daily household items from here only" (Mrs. L. Sharma, resident of Hubbali, 20.01.2018) This time the team obtained a completely new and unexplored angle in the study. As the interview went in-depth, these kinds of factors came out. Importantly, children play a crucial role in shaping the buying behavior of mothers who are the epicenter of purchasing household goods in terms of decision making. In this case, it was observed that as the lady had to come to the mall because of her child, almost forcefully, she preferred buying things from there only. Coming to the pros and cons of shopping malls, the research team chalked out the idea of assimilating view points of various segments or variables of this study. ""….indeed it is a blessing for me as I struggled to make both ends meet before establishment of this mall….and why me only…in fact, short trip buses have been started as a result of huge passenger inflow" (Mr. D. Parekh, Auto Rickshaw Driver Humpy, 09.01.2018) It s evident from his reaction that how greatly he has been benefitted from the establishment of mall. Interestingly, public transport as a whole has received a new dimension. Conversely, small unorganized retail outlets got hit. "….it is a curse for me…sometimes I think of closing down this facility and give this commercial space for rent…." (Mr. M. Deepak, Owner, Mahadev Stores, Humpy, 09.01.2018) It was clear to the research team that the growing malls took a toll on the small retail owners. Interestingly, the dimension of this study is widespread due to the vast nature of the impact shopping malls poses across different sectors. "My shop is running because of the mall nearby…if it closes down, then I will be closing down this facility" (Anonymous, Restaurant owner, Davangere, 02.01.2018) Restaurants have been found running successfully nearby shopping malls due to the increased number of visitors. Interestingly, young students and married couples like to consume food in every outing which was supported empirically in another interview. "How can we not eat food when we are out from our home….even for few hours" (Anonymous, College student, 02.01.2018) Thus culture change of city population can be attributed as one of the reasons for growing restaurants and eat out joints near shopping malls. "My wife loves shopping and we come here in every weekend" (Mr. M. Murthy, Davangere, 02.01.2018) It has been understood that the employment status and span of marriage along with age of the couples are key factors and impose a profound impact in shaping the dependent variables. In the above case, the man wanted to buy things for her counterpart as she loved shopping. Moreover, the employment status and disposable income are other key drivers. "….I do not get time in weekdays and thus want to enjoy in the weekends with my family" (Mr. S. Rajan, Hubbli, 09.01.2018) Clearly it is understandable that the type and nature of employment along with disposable income are factors associated with the study. Had the man been involved in a low pressure work, his urge to enjoy life and spend more for buying quality time would have been less.

Participant Observation

In qualitative research, reflexibility of the researcher is highly important as it might unveil relevant information. For instance, while conducting interviews it was noticed that few consumers were buying items in shopping malls to satisfy the wants of their counterparts. Thus a key take away from this method is taking things into consideration which are completely out of the box in the context of conventional factors. In the above case, it might be concluded that structure of the family plays significantly in forced purchases of luxurious items in shopping malls. Our findings suggest the following: Sl. No Category Likely Impact 1Transportation Positive 2Fast food/Restaurant ChainPositive 3Entertainment Positive 4Kirana Stores (grocery)Negative 5Street HawkersNegative7. Recommendations

  1. Government investment could be made in unorganized retail stores through some development schemes for these MSMEs.
  2. Proper shelters to street hawkers could be given to improve their business process and enhance their income
  3. Shorter trip vehicles could be started in and around the shopping mall area to avoid heavy traffic of the customers in the context of accessibility and availability of the vehicles.
  4. More private investments could be made in small shopping malls to attract consumers which would encourage large cash inflow.
  5. As city life is driven by globalization and culture change, entrepreneurs could be encouraged to open their facility (entertainment/restaurant) nearby shopping malls.


It is vital to understand that substantive theory holds true in a particular setting only when the variables associated with are present. It refers to a notion that it is highly context-specific and thus cannot be grounded for higher level generalizations. ‘Shopping Mall' is a possible cause which is supplemented by changed culture of the city population and accompanied by the complex interplay of five factors viz. structure of family, educational attainment, rise in income level, employment status and age of married couples in the area. The consequence is the impact it poses on ‘local economic system' which is attributed through positive and negative outcome.

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