Malls are in the business to achieve a good return on their investment and efforts as are retailers. Unfortunately, in more cases than we would like to believe, the Vanilla tenants are short-changed! Even more so if they are not part of a large chain or a multinational. This can potentially lead to a breakdown of relationship and even confrontation.

One way to avoid this is to draw up a reasonable agreement, one that is fair to all involved. The central basis being that both retailers and a Mall’s management are in this business together and one cannot thrive without the other. Demanding a fair arrangement via the legal route or government lobbying based on protection laws existing in the West, are other options.

However, I feel that a more practical, quick and sensible option would be to adopt a genuine ‘revenue share’ model. This means the retailer pays as rent, a fixed percentage of sales on a monthly basis without a minimum guarantee. Needless to add this arrangement should be reviewed / renewed after a mutually agreed period. There also could be parameters set with the overall revenue generation zone, category wise. Arbitrary, unilateral decisions is not conducive to a healthy relationship, I hope we all agree.

The rest of the agreement also needs to be modified to bring parity and true collaboration for future growth and stability:

• CAM charges need to get more transparent and uniform; they cannot vary substantially among Malls, without good reason
• Liability clauses should work both ways for failures on obligations or errors from both
• Infrastructure responsibility clearly lies with the Mall management and promised performance here needs to be assured.

With the true spirit of a joint venture, both Malls and Vanilla Retailers can flourish to maximise results, ensuring customer delight. After all, the customer is not only of the Mall or of the retailer alone. The customer is the same for both.

Utopian idealism? Maybe, after all that is the flavour of the season. So, let’s hope for the best. I readily concede that building and running Malls is not easy. But neither is running a retail store. That’s why true collaboration is the only way forward. One cannot dispute that.

The event was attended by 150 people, including RAI members and academic partners.
STOrai presents quotable quotes and glimpses:

“South India is the birthplace of both – retail and modern retail in India. It has 25% of the population of the country but 30% of the retail turnover” – said Bijou Kurien during his Key Note Address.  “South India has built strong vibrant brands – and malls recognize that they need local and regional brands as much as they need their national counterparts”, he added.

– Bijou Kurien

“Family owned businesses are an extension of the family environment for our staff” said M. Banumathi, Head Naidu Hall, Kovai, during the panel discussion on the Dynamics of Family owned businesses.  Her co-panelist, T.Shantakumar, MD, Kirtilals said “Professionals have a role to play as family owned businesses grow. However, the key to success for both sides is to ensure that the professionals are able to align with family culture and business values”.
Read More Here: http://goo.gl/f3flrQ

The panel on “The Art and Science of retailing” provided rich insights.
K.R. Nagarajan, Founder & MD, Ramraj Cotton spoke about his journey of converting the traditional ‘veshti’  into ‘occasion wear’ – something to be worn with pride and dignity , which resulted in a business which today spans 59 stores.  “The power of white is in its purity.  Customers who wear pristine white clothes for 21 days, find themselves unable to revert to colored clothes.  But white does not mean simple – we sell 2500 designs of dhotis – because customer tastes change from Kochi to Kovai to Kumbakonam”.
Read more here: http://goo.gl/WQb3KL

Nigam Patel, Director, Prozone CSC spoke about how tier 2 cities in India are attractive mall destinations.

“Managing a mall is a long term play – it needs patience.  We’ve also learnt that we need a mix of local and national retailers”.

His co-panelist, Girish Pande, COO, Fun Cinemas, concurred – “We’ve built malls in 9 tier 2 cities and we find these markets to be vibrant. Kovai Fun Cinemas sees 100,000 people per month, one of the highest in India.”

Read more here: http://goo.gl/vKbtyA

P Subramaniam, Consultant, RmKV Silks, spoke about the learning process they went through while deciding to move from high street to malls.

“Inspite of being a strong brand in Chennai and Tirunelveli the decision to set up a store in Brookefields mall in Kovai was taken after much debate – and was driven as much by market potential as by the lack of high street properties”.

Read more here: http://goo.gl/vKbtyA

The panel on multi-channel retail pointed out that for regional retailers – going online, or being present on social media is a non-negotiable.

“You either leverage technology or go out of business” – was how M. Ramakrishnan, MD, Thulasi Pharmacy  put it .

Read More Here: http://goo.gl/KTZET6

Delegate feedback showed that RAI’s use of bi-lingual panel discussions met with much appreciation, something we intend to continue in future events in the South.

RLS saw the release of 7 Knowledge reports. Key insights are highlighted here – full details are available at http://rls.net.in/Knowledge_Zone.html

RAI – TCS: Retail Operations Benchmarking Excellence Survey (ROBES)

There has been an increased e-commerce adoption by consumers during 2013. Brick and Mortar retailers have begun to view multi-channel strategically, instead of considering their e-tailing counterparts as price predators.  This report benchmarks the multi-channel practices of 40 Retail brands against e-tailers.  Key insights which emerged:

• Brick and mortar retailers are looking at multi-channels as one of the top 5 priorities for 2014.
• Ecommerce channels (non-store channel ) of brick and mortar retailers are yielding higher growth, higher cash memo size, and lower returns.
• For example, on an average, brick and mortar retailers find that their online cash memo size is 12% higher than in-store.
• Online returns of Brick and mortar retailers are <3% – significantly lower than pure-play e-tailers.

For brick and mortar retailers, multi-channel is about “on-demand retailing” – about giving the consumer better access and deeper range. Unlike their ecommerce counterparts, it is not a ‘pricing’ game: most retailers have a uniform pricing policy across all channels.

RAI-KPMG: Emerging Consumer Segments in India

This report identifies new segments of consumers including – the urban time starved consumer, the rural ‘windfall’ consumer, the “Value conscious” customer etc.
Key insights:

• Leveraging technology is the key to reaching the consumer.
• Supply chain innovation is needed to provide ‘stripped down’ service models.
• Hybrid models – using a mix of online and offline are emerging.

RAI-AIMIA India Millennial loyalty survey

Millennials are defined as those between the age of 19 and 29, and are expected to be the generation that will force brands to change the way they build sustainable customer loyalty.

AIMIA loyalty survey profiles the buying habits of this segment of customers. Key insights:

• Today’s customers are more ‘social and vocal’: 60% of millenials use social media and 41% seek opinions of their network before buying.
• They are willing to share data, but need transparency on what that data would be used for.
• They are more willing to engage than their counterparts in other countries.
• They are interested in more than just cash rewards.
• They want loyalty programs to provide ‘faster’ rewards.

RAI –PWC: Total Retail:  A change is underway

This quantitative survey of 1000 Indian online consumers profiles buying habits.  Key insights:

• Online shopping is driven as much by “trust” as by “price”.
• Online is about convenience.
• The customer experience matters even in an online context.

RAI-GP2WW: Great Places to Work in Indian Retail

This ‘first of a kind’ report surveyed 50 retailers to answer the question “Which retailer is the best employer?”. The Great Places to work with uses a proprietary framework which includes employee surveys and interviews as well as representations from management.

Lifestyle International emerged as the top retailer in India, followed by Titan and Shoppers Stop.

RAI –JLL: Emerging trends in retail spaces

This report profiles cities which are emerging as retail destinations in Tier 2 India.

• Retail realty in India is driven by income growth, a demographic ‘dividend’ and the fact that available space is polarized as regards quality.
• Mumbai, Delhi and Bangalore continue to mature.
• Emerging markets include Pune, Chennai, Ahmedabad, Chandigarh, followed by Surat, Amritsar, Ludhiana and Jaipur.

RAI – WWF: Sustainability in India Retail

This report profiles global practices by retailers in terms of creating sustainability in the supply chain and business practices.  Key insights:

• The world is today consuming 1.5 planets worth of resources annually.
• Demand for certain commodities such as palm oil, milk and beef (buffalo meat) is threatening India’s biodiversity.
• Owing to its direct contact with consumers, the retail industry is in a position to drive change towards sustainability.
• Experience with mature markets shows that the ‘tipping point’ towards structural sustainability is when consumers adopt and are willing to pay for sustainable products.

The panel discussion on “Realty facts in the emerging cities for Retail in South India” had industry experts analyzing & providing insights about the topic

Panelists in the discussion were:

Moderator: Anand Sundaram, CEO, Pioneer Property Zone; Nigam Patel, Director, Prozone CSC; P Subramaniam, Consultant, RmKV Silks (P) Ltd.;
Shubhranshu Pani, Regional Director, Retail, Jones Lang LaSalle; Girish Pande, COO, Fun Cinemas and Mani Chinaswamy, MD, Appachi Cotton

Question from Moderator: Anand Sundaram, CEO, Pioneer Property Zone:  How do you choose a market to set up a mall?

Nigam Patel, Director, Prozone CSC

“Mall management is all about patience”

• First mall in Aurangabad
• Our concept of Ground + 1, large car parking, ‘dominant shopping center’ – helps us capture emerging markets.
• We need a good mix of local plus national retailers. It took us time to understand this in Aurangabad, but we’ve been able to apply this markets like Coimbatore.

P Subramaniam, Consultant, RmKV Silks

“Key questions for us : What is the ‘fertility’ of the market? How does the brand connect and consumer relevance operate in that city?”

• Each brand needs to look at its own areas of strength and how those can be leveraged
• RmKV has its roots in TIrunelveli (TN) – it’s a familiar and a family brand in that market.
• In spite of that – we had to analyze to understand why move to a particular city and not another city
• For example – our hypothesis was that Coimbatore is a ‘feeder’ market – catering to Salem, Erode, Tirupur, Pollachi, and Palakkad
• We are an established brand, but we had to answer some key questions when moving into emerging markets like Coimbatore

Girish Pande, COO, Fun Cinemas

“In deciding to open up a mall in a tier 2 city, we go back to the basics: Do consumers have money? Do they want to spend? Do they have other opportunities to spend?”

• We’ve opened 8 malls before Coimbatore and we’ve found that tier 2 markets give us much better success.
• Cities like Ahmedabad, Chandigarh & Lucknow – these are places where we see growth.
• Coimbatore has emerged as a flagship market for us – we have the highest ad rates in Coimbatore, and we see 100,000 customers a month at our multiplex.
• At the mall – the anchor retailers – Reliance / McDonalds are also doing exceedingly well.
• When we open a new mall in a tier 2 market, we go back to the drawing board and ask basic questions about consumption patterns.

How do you view the retail / mall opportunity?

Mani Chinaswamy, MD, Appachi Cotton

“Retail can build an ‘aura’ around niche businesses – malls provide footfalls.”

• We are a one-store wonder; a factory outlet in a niche ‘sustainable cotton’ market.
• Our ‘product’ is niche, high value handloom sarees, stoles, scarves etc.  The retail arm for us is a channel to absorb all the organic cotton produced by the contract manufacturers whom we work with.
• We’ve used the sustainability plank to create a “cotton trail” a visual imagery of how organic cotton reduces the ‘man-animal’ conflict.

How do you make malls more desirable than a high street – for retailers? Do they need to be?

Nigam Patel, Director, Prozone CSC

“Partner with retailers to make malls work in the long run.”

• Building malls is about making relationships with Retail work.
• It’s a buyers market – we need retailers more than they need us.
• Malls are more attractive than high streets – because they are a secure environment – with parking. Appeals to all three generations.
• But the mall business is about patience – and break evens are northwards of 3 years.
• Building partnerships with retailers which will ‘go the distance’ is important.
• When times get tough, it’s relationships and not LOI’s (Letters of Intent) which come to the rescue.

Why did you choose a mall in Coimbatore over the high street?

P Subramaniam, Consultant, RmKV Silks

“Strong brands in good malls act as a pull factor for consumers.”

• Three reasons:
  • Shopping has become experiential
  • Our brand challenge is to connect with the younger consumer – and malls give us this.
  • There was no good property (which matches our brand) available on the high street.

• Shopping has become experientialOur brand challenge is to connect with the younger consumer – and malls give us this.There was no good property (which matches our brand) available on the high street.

• Also the mall option was a way to derisk our investment into a new market like Coimbatore. The alternative would have been to build our own store. Given we were entering a new (albeit adjacent) market, we wanted the flexibility that leasing provided us with.

What do regional retailers prefer – malls v/s high street – in tier 2 cities?

Shubhranshu Pani,  Regional Director, Retail, Jones Lang LaSalle

“Brands have to balance high streets and malls. They have to bring the experience of malls into the high street stores and the personal touch of high street stores into the malls. “

• Number of malls coming up in tier 2 cities is limited. In the last 15 years, malls have covered only the top 50 cities. India has 117 cities with population > 4 lakhs – the tipping point for mall development.
• In the near future high streets will continue to be more dominant
• Brands prefer high street stores and stand alone stores, as long as mall capacity is limited.
• Once the malls comes in then brands will move.
• For any retailer – to expand into tier 2 / 3  – they have to therefore look at high street.

Question:Partnership dynamics between malls and retailers

Shubhranshu Pani,  Regional Director, Retail, Jones Lang LaSalle

• In tier 2 markets, lack of space on high streets, and limited mall capacity means that strong retail brands may chose to build their own space.

P Subramaniam, Consultant, RmKV Silks

• Brands may not want to build their own stores in new markets – they will want to de-risk and ‘feel’ the market out before committing – i.e. a ‘low stakes’ approach.

Shubhranshu Pani,  Regional Director, Retail, Jones Lang LaSalle

• Mall managers / landlords are usually willing to partner with strong brands – and waive lock in’s.
• Regional brands in malls – this combination attracts maximum footfalls.

P Subramaniam, Consultant, RmKV Silks

• Consumer perception is that the prices in malls will be higher as compared to the high street –that facilities such as the air-conditioning, parking,  clean toilets will be priced in.
• We had to undertake a ‘uniform pricing’ campaign to deal with this perception.
• Consumers are willing to travel to malls to buy.

Girish Pande, COO, Fun Cinemas

“If you build, they will come”

• High streets with a long history (Linking Road – Mumbai, Connaught place in Delhi),  with decent parking will thrive.
• The issue is whether tier 2 cities can attract enough investments for new malls.
• Stores in malls take time to attract footfall. Unlike high streets where presence ensures footfall – malls cannot immediately compete with high streets where consumers have shopped for decades. Malls take 3 years to settle.
• As a retailer,  take a view on the future of your high street  – will it last 15 / 20 years?  What developments are planned? How will the parking problem evolve over the next decade?
• If you are not happy with the answers, move to a mall, if there is one available.

Audience Question: What should small retailers entering into malls be careful about?

Shubhranshu Pani,  Regional Director, Retail, Jones Lang LaSalle

“Malls can be trial and error – it takes 3 years for a store in a mall to settle. Once you settle, stay.”

• Look at the intention of the mall developer – they should be in the business long term, and want to run the mall.  They should have the infrastructure to maintain the mall.
• Who is the anchor?  The anchor tenant draws the catchment –  smaller retailers get the benefit of their ‘name value’
• In tier 2 cities – you need strong regional brands to be present. – check whether they are.
• Check that the catchment does not have other shopping centers / malls.  What is the consumption potential of the catchment? What is the income profile?
• Check the design of the mall / shopping center as a customer would – Is their parking? How does public transport work? Are there schools / colleges / markets in the catchment.

Question: Why do kiosks get ‘second hand treatment’ from malls?

“Malls are not targeted at kiosk owners but at retailers.”

• Malls are not in the business of kiosks.
• Depending on what is sold in kiosks – there can be issues of security, safety,  cleanliness and hygiene (food kiosks).
• 70% of Kiosk owners are often first time retailers – not often serious about he business and do not have financial wherewithal.   They need to prove credentials and are often asked for a deposit.
• Kiosks must not inconvenience long term tenants – hence sometimes, they are priced prohibitively –  to keep non-serious players out.

From L-R: Anand Sundaram, CEO, Pioneer Property Zone; Nigam Patel, Director, Prozone CSC; P Subramaniam, Consultant, RmKV Silks (P) Ltd.;
Shubhranshu Pani, Regional Director, Retail, Jones Lang LaSalle; Girish Pande, COO, Fun Cinemas and Mani Chinaswamy, MD, Appachi Cotton

Challenges in Retail Spaces

“To cut down the occupancy cost, something has to be done with electricity cost. There should be more effective use of open spaces” –

The challenge lies in finding retailers with right productivity mix – who can be a part of the success story of modern retail environment.  Unless this productivity increases they cannot match with high cost of real estate.

Small retailers are leveraging the ecommerce market place as sometimes the omni- channel model doesn’t justify the cost for them.

Shubhranshu Pani, JLL

What type of environment can help pull in customers?

“As far as design part is concerned, a mall space has to be segregated innovatively. Create zones wherein the brands get effective visibility” –

Ramesh Sanka, DLF Gurgaon

Revenue sharing model is one way by which real estate developers can to some extent lighten the burden of retailers

• Right Infrastructure and accessibility
• Design a mall such that all requirements  of a user are fulfilled under one roof at a time