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Realty facts in the emerging cities for Retail in South India – Retailers Association of India (RAI)

Realty facts in the emerging cities for Retail in South India

RAI

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:

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

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

 

RAI

RAI Realty

 

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

RAI

  • 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?

RAI

  • 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?”

RAI

  • 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.”

RAI

  • 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. “

RAI

  • 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

RAI

 

 

 

 

 

 

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

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


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