Challenges faced by Retail Managers at Indian Malls

chillibreeze writer Uma Avantsa

Once the stores are leased out, the developers are not worried about the promotion any more. Though a few
malls organize some in-house promotional activities but that alone doesnt guarantee a good footfall. A
retailer at The Great India Place
Majority of the developers have done nothing about the branding,
marketing, budgeting, financing part of running a mall. This is hurting the
efficiency resulting in set back in the main business, - Rajneesh Mahajan
national head-retail services Cushman and Wakefield >> read more
The retailers are treated as cash cows instead of being considered an
integral part of mall - Amit Rai, Business Head of Oliver, an apparel brand.
There is a lot to be desired from the mall developers in India - Wong Kok Wing, a mall management veteran
in Singapore and South East Asian countries.

With over 100 malls operating in India and more than 300 being developed, the opportunities offered in the
retail landscape are immense. Mall space is expected to touch 60 million square feet by end-2008. With such a
huge supply of space, mall owners and developers in India need to focus on vision, scalability and processes
and create a distinct proposition for themselves in the market. The emergence of specialty malls is a step in
this direction.

Retailers today face many challenges, including increasing competitive pressures, thin margins, high occupancy
costs and unpredictable supply base that come in the way of their attaining operational efficiency and
profitability. As organized retail grows, the market will only become more competitive and developers will have
to work hard to differentiate. Faulty mall management along with inappropriate tenant mix would lead to poor
mall traffic and closure of individual stores in malls. Professional third party mall management service providers
are hence likely to come to the fore. They not only understand these business challenges, but also have the
ability to help retailers effectively deal with them.

Generally there are two types of consumers who visit malls focused buyers and impulse buyers. The time
spent by focused buyers inside the mall is relatively lower as compared with impulse buyers who spend a lot of
time window shopping. Malls which have entertainment zones and/ or promotional activities have larger foot
falls and more percentage of impulse buyers. Mall management becomes critical to attract impulse buyers. For
example, Ansal Plaza in Delhi has ensured its success through good promotional events and mall management
practices since its inception in 1999. Its amphitheatre which is dedicated to promotional activities has ensured
footfalls despite newer malls coming up in the NCR region.

Contrary to popular misconception that mall management is synonymous with facility management, mall
management actually takes care of the issues like:
- positioning
- zoning (tenant mix and placement within mall)
- promotions and marketing
- facility management (infrastructure, footfalls, ambience)
- finance management

Various business models are adopted by retailers/ developers while utilizing the services of a professional firm
as given below. The fees are either per annum or per assignment.

Business Key aspects Benefits for Mall Benefits for Mall

Model Developer Management
Contract Fixed fee Fixed cash outflows. Risk minimization
Model Higher inflows if mall is a
success
Revenue Percentage of Risk minimization Share of revenues if mall is a
sharing sales success which leads to
model higher income
Partial Fixed fee + Risk minimization (fixed Minimum payment
revenue percentage of fee less than that in the guaranteed and also portion
sharing sales case of contract) of revenues in case of
model success

There are very few mall management companies in India at present. Large real estate developers and retail
chains either have their own mall management divisions or have contracts with international consultants. In
developed markets mall management is an established independent service line. Till recently contract model
was the norm in India. But the revenue sharing model is increasingly becoming popular with retailers in India
due to the present economic situation.

India is yet to embrace the concept of third party mall management in retailing. Some of the issues could be:
- Planning the mall around anchor tenants
- Lack of market research by developers
- Tendency to lease out on a FCFS basis
- Perceive outsourcing as additional cost
- Lack of accountability for in-house promotional activities
- Improper planning for space (lack of parking space, single entry/ exit points)

With the slowdown of the realty sector, developers might give the mall management practice a thought in order
to ensure that the slowdown does not affect its footfalls. Mall market in India has become extremely
competitive especially due to the sudden boom in the real estate sector. Malls have come up in the Tier II cities
and rural areas as well albeit in a smaller and different format. With increasing competition from high street
retailers, developers are finding it difficult to achieve 100% occupancy rates.

A specialists retail property management skills enable property owners to receive the benefit of master
planning and development expertise which is critical to ensure that malls are strategically positioned for long-
term growth and success.

CASE STUDY

Southgate Mall in Australia is a good example of how a retail centre was transformed into a brand.

Southgate mall was built in 1983 and comprised of 58 specialty stores with a total built-up area of 250,000
square feet. Its anchor tenants are popular local department stores. During 1999-2000, Southgate gave the
task of complete makeover of the premises to a professional mall management company, which completed the
task commendably. The repositioning and refurbishment was undertaken with an investment of AUD 13 Million.

In 2006, an additional 20,000 sq ft of space was added to the shopping centre. The mall management firm
provided support to place lease tenants. This resulted in an additional income of AUD 620,000 per annum for
the property and potential additional sales of AUD 20 million. Further, the mall management firm reinforced
malls retail mix by emphasizing on fresh food offers. It launched Freshworld which helped in increasing
customer traffic by 11.4% and moving annual turnover (MAT)