With only a dozen malls surviving out of more than 200, I think the image of Indian malls is gradually fading.
This is the scene of the Indian Malls today and I suppose it will be enough for readers to consider what I am going to mention in the next few pages.
It has been almost a decade of shopping mall presence in India since the first mall appeared in the late 90’s – Ansal Plaza, New Delhi and since then the expansion really picked up in 2002 – 2003. In the year 2008 – the year of the economic slowdown, the development was less than expected and is evidenced by the fact that:
– 34 centers were opened (while the opening of 74 was planned at the beginning of 2008)
– 8,050,000 m2 GLA (while 1,800,000 m2 were expected)
In addition to the economic downturn, the problem is also coming from developers and retailers. For a better understanding of them, a detailed study of them is presented below:
- Developers – The greed for more
On one hand it is good to see Indian developers investing and providing excellent infrastructure to the country which certainly improves the overall picture but on the other hand it is disappointing to see the mistakes made by them for their own properties. Personally, I believe that a developer can agree to both Residential and Commercial at the same time, but when it comes to Shopping Centers (SC); They must not shoot at their own feet!
The following attributes will give a brief idea of the mistakes made by developers in the past:
- Bad site selection:
Selecting a location without even analyzing the primary catchment area is a commonly seen mistake. There are many cases in the country where the construction of a shopping center on the National Highways has been a failure.
- Vertical expansion:
This country has seen many empty multi-story malls. The ideal case is to have a shopping center with fewer floors, regardless of whether the size of the shopping center is small.
- Marketing issue:
Bad marketing is like a house built on sand: it will collapse any day. The first objective should be to position the anchor stores in their respective position and the second is to attract the vanilla brands using the anchors as a tool. It’s also important to note here that with a good floor plan and bad merchandising, things could still work, but a poor floor plan coupled with good merchandising can lead to irreversible changes.
- Lack of professional advice:
It is always better to have professional assistance before the start of the project than after its completion, which undoubtedly reduces the scope of the improvement and further increases the costs.
- Design issues:
It is rightly said that Easy plans usually work, the more complicated the harder it gets. There are many cases like: the strange floor plans, proving to be a hindrance for buyers, no seating arrangements, unplanned mix of tenants, not making a mall in the destination, low quality local shops or kiosks, etc. ., which is diluting the overall picture. of the project.
- Retailers – Irrational Decisions
The slowdown of 2008 has been a great lesson for Indian retail companies; they call it lately as a correction! Before 2008, the expansions had been huge, but now the buzz is “expanding but cautiously.” After reading the factors listed below, it’s safe to say that retailers have burned their fingers:
- youth expansion:
Before the 2008 recession, retailers used to expand frantically in almost every SC without giving much thought to factors such as location, acquisition analytics, long-term vision, presence of actual buyers, developer reputation and much more. This leads to the navigation problem for which retailers are still struggling.
- commercial skyscrapers:
During this massive expansion, retailers became comfortable paying high fixed rents, which resulted in high fixed operating cost. Equivalently, the slowdown had a direct impact on turnover that left retailers in a miserable condition. This resulted in unprofitable stores closing or renegotiating with developers to reduce rents.
Thus, the term Revenue Sharing was introduced; convince people of the fact that it is a Win-Win model.
- Brand visibility was more important than store profitability:
The expansion (before the year 2008) was accelerated in the most reckless way considering the fact that brand visibility* is more important than store profitability, leading to calamity for many.
*For retailers, the number of stores is directly proportional to brand visibility, while store profitability is the result of high turnover and low operating cost.
4. Poor store visibility:
In order to improve the visibility of the brand; more and more outlets were opened, which led to a poor selection of the project (shopping center) and location (store). This resulted in low turnover and wasted huge capital expenditure at each store. The selected locations were so poor that even with the best marketing and information tools; no one knew of the existence of these stores.
Therefore, it was a win-lose situation in which; the developer was successful enough in leasing their space but not the retailer!
The road ahead:
Next year will have a lot of consolidation. Existing smaller or empty malls will be converted to commercial or acquired by the larger players. The go-to-market strategy will improve as developers have seen enough and learned to reject the worst and select for the best. the slogan “everyone is welcome” it will no longer be entertaining and landlords will be more selective in the case of tenant mix and location assignment.
Conclusion:
To assimilate the above, comprehensive and professional asset management services are required to assist developers and create a good balance between clients, retailers and owners. It is possible through a correct succession of steps that go from a meticulous market investigation to the design of the property.
Considering the fact that the Indian property market has great potential and a long way to go; the current phase demands improvisation through professional consulting and other allied services. It is time to see how the owners make the best use of these services in the future.
And if all of this is incorporated, one can hope that Indian Malls can be back on a path to glory.
Author: Amanpreet Singh Banga, Business Manager, Segece India, New Delhi, India