“Brick by Brick” – The Mallification of South Indian Retail

From L-R: K. Radhakrishnan, CEO, KB FairPrice & President, Future Freshfoods Ltd. (FFL); S. Raghunandhan, Chief Executive Officer, Retail, Prestige Group; Subhash Chandra, Chairman and MD, Sangeetha Mobiles Pvt. Ltd.; Shubhranshu Pani, Joint Managing Director, Retail, Jones Lang LaSalle; K. E. Venkatachalapathy, Chief Executive Officer, Arvind Retail Ltd, Megamart; CA Aroonkumar R R MRICS, Chief Financial Officer, Express Infrastructure Private Ltd.; Prashant Chopra, Director, PS Group & PSSrijan Realty and Rafiq Sait, Managing Director, Gatsby Collection Pvt. Ltd

The session “Brick by Brick” – The Mallification of South Indian Retail” @ CRS 2013 was moderated by K Radhakrishnan, CEO KB Fairprice,. The eminent panelists were S. Raghunandhan, Chief Executive Officer, Retail, Prestige Group; Subhash Chandra, Chairman and MD, Sangeetha Mobiles Pvt. Ltd.; Shubhranshu Pani, Joint Managing Director, Retail, Jones Lang LaSalle; K. E. Venkatachalapathy, Chief Executive Officer, Arvind Retail Ltd, Megamart; CA Aroonkumar R R MRICS, Chief Financial Officer, Express Infrastructure Private Ltd.; Prashant Chopra, Director, PS Group & PS Srijan Realty and Rafiq Sait, Managing Director, Gatsby Collection Pvt. Ltd.

Three reasons malls get built

“Malls usually get built based on geography (market potential), consumer behavior or speculation”                                                      

Shubhranshu Pani, Jt MD, Retail, JLL

Malls in the South

  • With 59 malls in pipeline, southern cities represent 56% of the country’s future mall supply between 2012 and 2016.
  • All India level, mall space per capita is 2 sq feet.  In Chennai its less than 1 sq foot per capita.
  • Bangalore has almost the same population as Chennai – but has 18.5 mn sq feet of mall space versus Chennai’s 4.5 mio sq feet.
  • Within the Bangalore market – mall performance is variable. The top 4 malls account for most of the market and are profitable. The others, including shopping centers are not.

 

5 things to get right while setting up a mall

 Factors determining the success of a mall:

  1. Location
  2. Mall Design
  3. Zoning and mix of retailers (local versus national, parking)
  4. Mall maintenance, promotion and tenant relationship management.
  5. Pricing – needs to be appropriate to the location.

 

“Without doubt, location is the single most critical factor for a mall to be successful.”

S Raghunandan, CEO, Retail, Prestige Group

 “You have to create a destination and an experience. At the same time your mix of tenants should be relevant to the local catchment.”

Aroon Kumar, CFO, Express Avenue Mall

 

Do all retailers need to be in malls?

 

 “We have 215 stores and in all markets except Chennai we are in the malls. In Chennai, we have not been able to find space, the number of available malls are few.”

Subhash Chandra, CMD, Sangeetha Mobile

 

“As a value retailer, the fundamental issue for us is whether the mall generates enough footfall to justify the rentals. We have 25 stores in Chennai, one is in a mall, and it does well.”

K E Venkatachalapathy, CEO, Arvind Retail, Megamart

 

“We are a stand alone apparel retailer – we find malls expensive.  Unlike other retailers for whom visibility in a mall matters, for us high street stores in Chennai give us better return on rent.”

Rafiq Sait – MD, Gatsby Collection Pvt Ltd

 

 What price rental?

  • Rent is a function of the quality of the product and cost of execution.

 “Rent as a cost has to be compared against total value delivered including profit share and the cost of providing power in markets like Chennai, where 90% of load shedding happens during peak shopping hours.”                                    

Shubhranshu Pani, JLL

“The biggest misnomer is that malls are expensive for retailers. Rent is 15% of sales, when sales are good nobody worries about rental.”   

S Raghunandan, CEO, Retail, Prestige Group

 “Retailers need to understand both catchment and merchandise range when they chose a mall. The propensity to pay is a function of the kind of turnover that retailers see.”

Prashant Chopra, Director, PS Realty (Grand Mall)

 

Malls v/s traditional markets

  • Malls will not replace traditional markets.  But they create new micro-markets.
  • The economics of traditional markets are sound and cannot be substituted.
  • Shopper habits in Chennai are still skewed to traditional markets.

 

“We  have learnt from markets like T. Nagar .  We were keen to have one of the brands from that market as our anchor – and that role is played by RmKV”

 S Raghunandan, CEO, Retail, Prestige Group

 

“Traditional  markets work on a cost plus model, keep overheads low and  because of historical shopping habits generate extremely high turnover”

 K E Venkatachalapathy, CEO, Arvind Retail, Megamart

 

“Malls are a good for entertainment – serious shoppers still head for the traditional markets. The historical / habit factor should not be underplayed”

Rafiq Sait – MD, Gatsby Collection Pvt Ltd

  

In Conclusion:

“Rentals will always be relative to location and potential.”

 S Raghunandan, CEO, Retail, Prestige Group

 

“As mall developers we can focus on design, tenant mix – but after that the retailer has to get their marketing math right.”

Prashant Chopra, Director, Grand Mall

 

“Malls help cater to new segments and demographics which are being created.”

Aroon Kumar, CFO, Express Avenue Mall

 

 “One of the areas where   retailers and malls need to collaborate is in making sure that renewals are mutually beneficial. Otherwise, “Mallification” can become “Maulification”

K Radhakrishnan – CEO, KB Fair Price

 “Malls and traditional markets offer different experiences, there is no competition between them”                                          

Shubhranshu Pani, Jt MD, Retail, JLL

 

The following two tabs change content below.
RAI
Retailers Association of India (RAI) is the unified voice of Indian retailers. RAI is a not for profit organization (registered under section 25 of Companies Act, 1956), works with all the stakeholders for creating the right environment for the growth of the modern retail industry in India. RAI is the body that encourages, develops, facilitates and supports retailers to become modern and adopt best practices that will delight customers. RAI has a three charter aim of Retail Development, Facilitation and Propagation.