MALL FALL

 WHY RETAIL DESTINATIONS ARE SHUTTING IN AHMADABAD

Date: September, 2013

SUNDAY EXPRESS (supplement EYE)

By : AVINASH NAIR

The average mall vacancy (Empty space in malls)

National average is 15 %

Ahmadabad (33 %), the highest in the country                                                                                              Hyderabad (0.45 %)                                                                                                                                Chennai (6.48 %)                                                                                                                                         Kolkata (4.5 %)                                                                                                                                           Bangalore (11.68 %)                                                                                                                                   Mumbai (15.46 %)                                                                                                                                       Delhi-NCR   (15.69 %)

Rentals in malls in Mumbai and Delhi-NCR grew by up to 19 and 10 % respectively between January and March this year but they fell by 6 to 8 percent in Ahmadabad.

Close downs:

>Future Group has closed down three stores in Ahmadabad since 2008, and is now left with Just 2 outlets. The company insists it is in “consolidation phase" and cites a plan to launch 3 new stores by the end of 2014.

According to global property consultant Jones Lang LaSalle( JLL), nearly 7 lakh square   feet of retail space has closed down in the last three to five years in the Ahmadabad.

>In 2007, when Ahmadabad got the country's first, and largest, hypermarket 1, 65,000-square-feet Reliance Retail store that housed 95,000 product products, at the Iscon Mega Mall. More than six years on, the hypermart has shrunk to one-third of its original size.

>A similar fate has met stores run by Promart, Subhiksha, More and Spencers, among others Malls, too, are closing down. Fun Republic, the city's first "mall-cum-multiplex", downed its shutters in July 2011. Piramyd mall and Gallops mall followed suit.

>Piyush Kumar Sinha. Professor of marketing and chairperson of Center £or Retailing at IIM-Ahmadabad, blames it on "the real-estate model of retail". "It is killing the industry. From year 2000 to 2007, when big names like Birlas, Reliance, Adanis, etc., entered retail, everybody suddenly started seeing gold in the sector. Developers got into a race to build bigger malls and were more inclined to sell space to investors, rather than focus on developing their properties as suitable retail destinations," he says

What goes into making a suitable retail destination?

 "The location, the sizes and positioning of stores, and the brand mix” says Neeraj Tomar, head of Ahmadabad operations of Jll.                                                                                                                       

A good example of the right brand mix, according to Neeraj Tomar is -

Ground floor - House apparel and clothing-related accessories store                                                             Second floor - footwear, children's apparel                                                                                                   Top  floor  - toys on the, and food courts,  gaming zones and multiplexes .

As it helps improve accessibility and ease movement of customer traffic".

There were instances where a painter (selling his personal creations) occupied space between two footwear brands. Or where a chemist and an electrical appliance retailer were parked between international apparel brands," says Tomar

 Such inadequate planning led to fewer footfalls, thus forcing stores to wind up

Vacancy level

Malls such as Dev Arc, 10 Acres, Balaji Agora and R3 Mail were half-empty look. They began with very few or no retailers and continue to struggle for occupancy. “Except for Alpha one Gujarat’s biggest mall located in Vastrapur. The vacancy level in some of the malls is as high as 60-70 %” says Tomar

"Malls without infrastructural or mall management efficiency are forced to shut down thanks to poor economic viability" Retailers Association of India CEO Kumar Rajagopalan says

Malls to Shopping streets

Many brands have, thus, moved from the malls to "shopping streets" such as CG Road, Law Garden, Prahladnagar and Satellite Road. Dotted with standalone stores of national and international brands, these streets are now preferred over malls by many a Gujarati customer for whom shopping is more a functional exercise than entertainment.

Mall Vs Neighborhood vendor  

               

Rohini Joshl.a 52-year-old homemaker, who lives a stone's throw away from superstores like Vmart and Reliance Fresh in central Ahmedabad, relates her shopping experience. "We earlier used to go to mails and superstores even for our daily groceries. But we realized that we not only overshot our budgets, we also ended up wasting. Now we prefer our neighborhood grocer who caters exactly to our limited daily requirements and that too at price-points that are below the MRP. I also feel that the vegetables and fruits supplied by the neighborhood vendor are fresher than those available in air-conditioned retail stores and malls."

Shopping hubs are concentrated in the western part, which has the highest purchasing power. But that has also led to saturation there, and competition has killed many a mall such as Gallops and Piramyd

Learning from their mistakes:

>Reliance is opening stores in self-owned properties.

>Alpha GCorp, the Gurgaon-based developer that operates and manages Alpha One mall, the state's biggest and most successful mail that opened in October 2011, has adopted the "revenue-sharing model", in which the retailer pays to the mall owner or the landlord a fixed percentage of the profits generated by the outlet. "We currently have 98 % occupancy (the maximum for any mail in the city)," says Prodipta Sen, executive director, marketing, of Alpha G Corp, adding that the mall has seen 100 % growth in rentals in the last one year.

>"The market for retail in Ahmedabad is not right at the moment. So we have postponed our plans to build a second mall by a couple of years," says JP Iscon chairman Pravin Kotak who is planning to build a 10lakh-square-feet mall near Gota crossroads on the SG Highway

>Rajagopalan says the modern retail sectors now going through "efficiency tuning". "The sector has companies that are serious about retailing and  are in the business for the long term," he says. Retailers can take comfort from a study by Booz & company, according to which the size of the retail segment is expected to grow from $455 billion in 2011 to $731 billion by 2016.