From roping in retailers such as Decathlon to re-configuring brands malls are forging deals to survive and some have even repositioned themselves to turn profitable
The mall business in India, stagnant for almost a decade, may now be seeing light at the end of the tunnel. Older malls are trying various strategies to stay afloat and attract new and fast-selling stores to take on snazzier, newer malls that have come up in their vicinity.
From roping in retailers such as Decathlon to re-configuring brands and squeezing existing shops to make way for new tenants, malls are forging deals to survive and some have even repositioned themselves to turn profitable.
In Mumbai, the 10-year-old Inorbit Mall revamped itself and offered a red-carpet deal to Swedish fashion retailer Hennes & Mauritz AB to compete with three-year-old Infinity Mall half a kilometer away. They shrank the floor space provided to Lifestyle and a couple of other stores and gave 20,000 square feet to Zara’s rival to drive footfalls.
“Inorbit saw an initial dip in footfalls of about 15% when Infinity came up in the vicinity,” said Susil Dungarwal, a retail and shopping mall specialist in Mumbai. “By taking proactive measures, they now have an average annual growth of 25-30%.” In Hyderabad, Manjeera Mall is getting sports store Decathlon with 10,000 square feet on the ground floor to attract customers after facing tough competition from three-year-old Sujana Forum Mall nearby.
Bengaluru-based Westgate Mall in Rajajinagar is getting Lifestyle and Home Center in a value outlet format with 10,000 square feet each. It had to re-position itself as a value mall after Orion Mall and Mantri Mall came up in the vicinity Malls are taking such steps when the retail industry lost 3.5 million square feet of space as five shopping centers shut down and 10 vacant ones were converted into offices, according to property consultant Jones Lang LaSalle.
With new malls such as Vega City in Bengaluru, The Pavilion in Pune and Grand Central Seawoods in Mumbai set to come up by 2020, JLL estimates the rivalry will only get stiffer. By the end of 2017, about a dozen malls might shut down, the consultant said.
Retailers, especially from the US and Europe, have been showing increasing interest in the India market, due to growing opportunities in this sector, real estate consultant CBRE said. Over 40 major international brands have entered the country over the past two years, CBRE said in a note in February.
Amid the flux in India’s retailing business, rentals for tenants in malls haven’t fallen. They typically increase by 15% every three years, according to industry experts. The lease period for an anchor store has remained unchanged at between 15 and 21 years, while for vanilla stores, the term has reduced from nine years to six years in some malls.
When a new mall comes up in the vicinity, the older shopping centers respond by differentiating their offerings and try to forge deals without affecting rentals. In one case, a mall in Bengaluru lured an anchor brand by offering to pay for doing up the interiors.
Malls are even getting in small retailers to differentiate their offerings. In Cochin, Oberon Mall suffered after the 1.5 million square foot Lulu Mall came up less than half a kilometer away, taking away customers and prompting retailers to vacate. The developers responded by spending about Rs 5 crore to revive the mall. They introduced Oberon Chanta, a collection of 20 small stores on the third floor, which previously housed a home furniture store.
Bengaluru-based Forum Neighbourhood Mall in Whitefield is focussing on getting lesser-known brands from tier-II cities to get an edge over VR Mall and Inorbit Mall in the neighborhood. Recently, the mall roped in Mysore-based hypermarket brand Loyal World. The management is now in talks with Mangalore-based brand Harsha Electronics. Total Mall in Bengaluru repositioned itself as a neighborhood mall that’s come to be known as Market Square since 2012. The mall was practically empty before that and it turned around in 2015 after Lighthouse Mall Management took up the project.
Ten-year-old Cosmos Mall in Bengaluru underwent a facelift and was repositioned as a neighborhood mall christened Brookfield Mall. Even after being in the right location, the mall was affected when Inorbit, Phoenix Market City, and VR Mall opened.
“It lacked design and cinema halls. In a 1.5 lakh square foot space, they just had Pantaloons and Taco Bell running like high street stores with their own entrances,” said Neeraj Duggal, managing director of Lighthouse Mall Management company. “Now 80% of the mall is operational with an Inox, new brands, pubs, and salons.”
REWORKING MALL MANAGEMENT
Experts said great mall management plays a significant role in maintaining footfalls and sales. According to Pankaj Renjhen, managing director of retail services at JLL India, developers have realized that good mall management and services like free parking, baby care room and a mall helpdesk are some ways to keep footfalls stable and boost growth in same-store sales.
He said F&B and entertainment contribute to about 15-20% of the total mall space compared with 5-10% three to four years ago. “Some malls are also going to the extent of getting fashion consultants on board to assist customers,” he said.
HOW TO REMAIN RELEVANT
Diwanshu Mittal, assistant vice president of retail at JLL, said there is a need for smaller malls to churn their brand mix and bring in new shops and stores to help them remain relevant. “Malls can also change their positioning and convert to a neighborhood center to cater to a particular catchment. For example, a Gold Souk or an F&B mall or a mall with big box retail,” he said. Experts said that with high streets across the country dying out, the neighborhood mall concept is booming.
Malls around the country are also getting in luxury brands to differentiate themselves. Select CityWalk in New Delhi is now a premium mall and houses brands such as Burberry, Armani, and Aéropostale. Ambiance Mall in Gurgaon will welcome Michael Kors in a couple of months. Dungarwal said cities are reaching saturation point in terms of a number of shopping malls. “Mumbai has had no growth as there are no new malls since the last three years, although developers like Maker Group and Shapoorji Pallonji are planning to enter the mall industry,” he said.
Malls such as West End, TDI, CitySquare, and Westgate in New Delhi started about 10 years ago and have seen footfalls slide with the emergence of newer malls like the Pacific Mall in Subhash Nagar and Unity One Mall in Janakpuri. TDI gave a portion of their ground-floor space to Westside, which brought in significant footfalls but failed to bring back its former glory. These malls have limited branded stores and retail outlets, with mainly wine and beer shops and food outlets such as Wimpy’s, Burger King and Subway. Other than that, the buildings are relatively empty. Although some of them have movie theaters, they are hardly visited.
Experts said of the 450-plus malls in the country, 70% were low-grade malls. Even though new malls are coming up, they will be ready only by 2020-21.
Mittal said supply was very limited in New Delhi because only a few developers such as DLF, Unity Group, and Bharti invested in retail. Only one mall is coming up in the next two years in the capital – Vegas in Dwarka.
CONSUMERS ARE KINGS
With malls, everything counts, especially the perception of customers. Along with malls, customers have changed. Keeping in mind their necessities, they have learned to prioritize and visit malls according to time, availability and leisure.
Annie Varghese, a college student in New Delhi, used to visit CitySquare Mall in Rajouri Garden before its sheen faded. “The place lost its appeal as I grew older and they never had anything new to offer anymore,” she said.
Varghese now shops at Pacific Mall in Subhash Nagar, which houses brands such as Forever 21, Charles & Keith, Zara and the newly introduced Decathlon. “Apart from being closer to my home, Pacific has big brands, a food court with class and a great multiplex for movie buffs,” she said. Consumers in India tend to go for larger brands and better spaces with variety more than smaller spaces.
Purab Kulkarni, a banker and father of two from Noida, said visiting the new, big malls was an experience. “With the boom of world-known retail chains, brands, and activities, it has become a whole new experience. We can celebrate festivals here with our kids as the decorations and activities put up for shoppers are impressive,” he said. He added that Christmas was his favorite time to visit malls with his family. The growing popularity of online shopping is also a threat to retail malls.
According to Boston Consulting Group, while the number of stores may be still be increasing among best-practice retailers, overall productivity per store is stagnating— or declining. To meet this challenge, stores may have to be re-imagined to create richer shopping experiences that reflect their customers’ needs and shopping preferences, BCG said.