Facilities matter

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So it may be a mall, after all..

Availability of space, not choice, dictates location
Availability of space, not choice, dictates location

Anjali Prayag

There is really no choice but brands have to go wherever they get space, counters Arvind Singhal, Chairman, Technopak Advisors Pvt Ltd, to the question whether Indian retail players should go the mall way or take the high street route to better sales realisations. His reasoning: India’s consumer retail spending is about $400 billion, or about Rs 16.85 lakh crore in 2008. If it grows at eight per cent which is the GDP growth rate, then the additional spending would be about $32 billion, about Rs 1.4 lakh crore. An average retail store generates about Rs 8,000 per sq. ft. revenue per year. This means about 160 million sq. ft. additional space needed, not taking into account the backlog. About 600 malls offering about 200,000 sq. ft. space each is coming up, expecting to offer a total of 120 million sq ft. over five years. Even with this, the deficit is 800 million sq. ft. in five years.

Retailers, therefore, have no choice but to go to the malls, though they would like to be on high streets because that’s where the traditional markets are. The ‘high street’ choice is also marred by the fact that there isn’t any kind of urban redevelopment when buildings are demolished and rebuilt, he adds. Add to this the lack of parking space, water logging, dirt and filth and consumer-unfriendly streets, and you have some brands going into malls only for these reasons.

Singhal does not agree that a brand’s performance depends on the mall’s performance. “Malls fail only because of poor location, bad design and poor facilities such as parking, food courts and entertainment zones. These are hygiene factors and brands have to decide before they commit themselves whether the mall owner is providing them.” These factors would definitely pull tenants and crowds and it cannot be that a mall has tenants and still fail.

He disagrees that malls attract larger footfalls and offer better conversion rates. “There are passers-by on high streets too, browsers without any shopping bags,” he reasons.

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(This article was published in the Business Line print edition dated September 18, 2008)
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