Moderated by Anuj Puri, Chairman & Country Head, JLL India, the session at Retail Leadership Summit (RLS) 2016 on Connected Space: Customer Recency & Frequency included the following distinguished experts:
Gopalakrishnan Sankar, CEO, Reliance Footprint
Nikhil Chaturvedi, Managing Director, Prozone Intu
Rajneesh Mahajan, Executive Director, Inorbit Malls India Pvt. Ltd.
Siddharth Bindra, MD, BIBA
Anuj Puri, Chairman & Country Head, JLL India, said online retail is fully integrated. The digital platforms can be used to create unforgettable experiences. It does not depend on disruptive technology but also on other functions such as HR and marketing.
Speaking about Prozone Intu, Nikhil Chaturvedi, Managing Director said that from a mall a year in 2007 to mall a week in 2014 is a big swing for retail. Many of the vacancy at malls is designed in a way to fill in new brands. Most malls are running on optimal. India is the 5th worst country in the world for ease of construction. Before a mall is built, it gives IRR of 20% and after it is built, IRR drops to 14% and later stabilises at 10%. There is Development risk and stabilise risk is 100%. Till it remains, same people are going to risk their money.
Giving the retailer’s perspective, Siddarth Bindra, MD, BIBA, said that getting the right space is still a big challenge. If you go to a successful mall, rental doesn’t make sense and if you got those that are not successful like some of them in tier 2 and tier 3 cities, then renting there doesn’t make sense.
Panellists agreed that until the rules and regulations governing both retail and shopping centres are not sorted out, it will take time for things to improve.
Retailers also have the option of going to high streets. However, Gopalakrishnan Sankar, CEO, Reliance Footprint admitted that at least for his company a good mall is definitely the first choice for expansion. High streets are the 2nd best option.
Currently the supply of good malls space is still limited. The reason that mall developers are going slow on new developments, according to Rajneesh Mahajan, Executive Director, Inorbit Malls India, is that the size of assets has gone up 10 times. If you add real estate land, interest, construction costs go three times higher. Unfortunately, India is not China, where you can make a mall in 18 months. “We are growing at rate of 1-1.5 %. Asset value has become very high. Risk demand is high,” he said.
The current concern is for a population of 1.2 billion, there are not more than a dozen developers.
Deliberating on where did we go wrong or why did we not do it right the first time, Nikhil Chaturvedi, Managing Director, Prozone Intu felt that there was a hurry to do more than to do it right.
The panellists agreed that foreign capital is essential to grow. There is need of right environment in which capital creation happens.
Siddarth Bindra pointed out that retail is a very capital intensive business. And that there are cycles in business and there are periods when business grows. We need to infuse capital when business is growing. The story of retail will take some time to capitalise.
Addressing, the question that was on everyone’s mind about online being a threat to mall and physical stores, Gopalakrishnan Sankar admitted that online is serious business and that no one can get away from it. The online threat is close to 35% and online is going to scale up.
Online retail tracks at an individual level. Each customer is a single entity to online players. They can track preference, sales and volume. Traditional retailers have got to find a way to compete with online retail. Convenience is going to be important. We are not only struggling with infrastructure, roads, transport but also lack of structure in social activities.
But an evolution in retail is underway. People are looking for convenience, price and experience. And for experience they have to go to a mall.
Monish Chandan, http://monishchandan.wordpress.com
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