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Tapping the potential of organised retailing

Tapping the potential of organised retailing

Author | exchange4media News Service | Saturday, Jan 31,2004 6:52 AM

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Tapping the potential of organised retailing

India stands at 2 sq ft per capita of retail space. Dubai stands at 6 and the United States stands at 23. In the next 36 months, Dubai is projected to touch the US figure. In the same time frame, India will move to 3 sq ft.

Going by the figures, the potential in India for organised retailing is enormous. And certainly there are players who expanding to establish a footprint in the unchartered territory. The going has been reasonably smooth, given the fact that, organised retailing with concepts like shopping malls, retail stores, food courts and entertainment, have caught the fancy of Indian customers for now. But going ahead, the malls will have a tough time ahead as more of them join the fray. Infact the tough times ahead will be a result of what the malls are not doing right, right now. And the nascency of organised retailing still gives them enough time to recover.

Sanjiv Anand, regional director, Asia/Middle East, Cedar Consulting, said that organised retailing has been largely seen in big metropolitan cities, with movement now seen in other cities. But even in city like Mumbai, Mr Anand says there are challenges which have to be tackled. Citing the case of Dubai with its shopping malls, which attracts hordes of tourists, Mr Anand said that one of the reason for success has been unrestricted entry to international retailers. “FDI (foreign direct investment) is needed in retail in India for the malls to survive. It is critical for international retailers to enter the market in India to ensure that space is taken in the new malls which are coming up,” said Mr Anand.

However there is another school of thought which feels that FDI in retail is not needed as the Indian players have been aggressive in their expansion plans and therefore make up for the absence of international retailers. Here Mr Anand argues that the Indian retailers and their expansion plans will just not be enough to fill up the mall space which will be generated in the time ahead. “If you look at the trend, the Indian players are regional in their expansion and we have very few pan national retailers. Thus the situation warrants that more retailers come in and establish shops in malls,” said Mr Anand.

While the issue of FDI in retail is a central policy decision, there are other issues which is more in the hands of the mall developer. Thus a right or a wrong decision rests solely on the developer, which will have a long term effect. The liberalisation of the economy from 1991 has resulted in the consumers having more choice as far as products are concerned. Thus an array of products displayed by the retailers at the malls is definitely enticing. But the mind set of the developers towards mall development needs a change, feel industry watchers. “If the mall doesn’t run, then we will re-develop it and sell it as residential property,” remarked a developer on the fortune of the mall set up by his group. This lackadisal attitude, lament industry experts, could be a bane for mall development.

“Mall development has to move from the space selling attitude which currently wraps the industry. It has to been in the light of a business proposition which will pay dividends if nurtured well. While some players have got it right, a large section still believing in selling space or property development,” said Professor V. Gibson, associate dean and head, Welingkar School of Retailing.

And this mind set of space selling has also resulted in a very confusing definition of shopping malls in the country. Globally, shopping malls are in the size of excess of 500,000 sq ft space, while in India, even a 80,000 sq ft is termed as a shopping mall. “A mall has to have at least 200,000 sq ft of gross leasable area (GLA), whereas in India, spaces lesser than that pass up as malls but are in effect shopping centres. Adequate space ensures that the mix is proper which is not possible in smaller spaces,” said Mr Anand. Agreed Professor Gibson, who said that smaller players are using the word mall to sell their space and the responsibility ends there.

Even the bigger players, in the race to sell space sometimes get the tenant mix wrong, added Professor Gibson. The tenant mix is the composition of the players within a mall. The mix comprises of anchor tenants, food courts and entertainment which could be family entertainment as well as multiplexes. Scientific layout in a mall ensures that formats of the same category are in the same line or floor thus ensuring easy accessibility to the customers. The formats have to compliment each other.

K N Iyer, CEO, retail, Crossroads, was of the opinion that the situation is much better as compared to the early stages of mall development in the country.

He said that there has been a definite change in the mind set of the mall developers, who are more serious about the tenant mix now.

“Earlier not much attention was paid to the tenant mix, but now the new mall developers have realised the importance and the benefits of cumulative attraction,” said Mr Iyer. And cumulative attraction is important especially given the fact that the customers especially women like to do comparison shopping and retailers of the same formats stand a better chance of attracting footfalls and then converting them collectively.

Thus a lot needs to be done for India to catch up with the rest of the world in mall development. Sure, the other centres globally have had a head start and organised retailing is just beginning in India, but the fact remains that India can learn a lot from their progression, which will save it from the early growth pangs. And surely from the estimated 150 malls which are to come up in India, many of them will fizzle out, but the ones remaining would be those who have taken the lessons of proper location, right tenant mix, leasing arrangements, use of technology and a global mindset, to hear.

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