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G7 is one of 14-odd specialty malls that started cropping up across India five years ago. An estimated Rs 4,000 crore has been invested in setting up such malls. Unlike general format malls, such outfits offer consumers an exclusive shopping experience along specific themes such as electronics or jewellery. Globally, specialty malls account for about 25 per cent of the overall mall market. Notable global examples include the Emaar Group's Gold & Diamond Park in Dubai, electronics mall Funan in Singapore and Lowes in the US.
In India, however, the concept is yet to cut ice with consumers. Out of the estimated 5-million sq. ft of specialty malls under operation, only 500,000 sq. ft can be termed successful, says Susil Dungarwal, co-founder and chief mall mechanic of Beyond SquareFeet. The Mumbai firm has advised projects such as Forum, DLF Malls, UB City and Gold Souk. "The only two successful ones are DLF Emporio in Delhi and UB City in Bangalore," he says. DLF Emporio, promoted by real estate developer DLF Group, stocks 80 luxury brands including Louis Vuitton and Christian Dior across 200,000 sq. ft and claims conversion rates of 20 per cent. The 125,000 sq. ft UB City in Bangalore, promoted by Vijay Mallya's UB Group and real estate firm Prestige Group, sees around 5,000 footfalls on weekdays and 8,000 on weekends. But, as Dungarwal says, these are the exceptions.
The Bleak Picture
|FOREIGN LOOK: Spanish fashion label Mango is among the foreign brands present through specialty malls in India (BW Pic By Subhabrata Das)|
Like G7, many of the remaining 12 specialty malls are battling existential issues of some sort or the other. Not surprisingly, most of the promoters of these malls were reluctant to participate in the story. Dharmesh Shah, one of the promoters of Mumbai-based Quality Constructions that owns G7, barely answered our queries on the telephone. "We have just done a soft launch. A formal launch will take place in 2012," he said. Pressed further, he added that only 25 per cent of the mall's retail space currently has tenants.
In Pune, Ishanya, a 550,000-sq. ft furniture mall launched by Deepak Fertilizers and Petrochemicals in 2007 is currently in the middle of a repositioning exercise. Anand Sunaraman, CEO of Ishanya, could not be reached for his comments. The mall, says Dungarwal, is morphing into a European high-street shopping experience complete with cafes, food courts, kiosks and art galleries.
In Bangalore's hip Brigade Road, Eva Mall, an 1, 25,000-sq. ft women's mall promoted by Prestige Group, is diversifying into electronics and fitness products. It has tied up with Tata Group's electronics chain Croma and American fitness chain Fitness First and is adding a food-court. "Eva started as a women-centric shopping centre but people did not understand the concept," says S. Raghunandan, CEO (retail) of Prestige Group. Post-launch, the developers realised that men who accompanied women shoppers did not want to go to a women's only mall, points out V. Muhammad Ali, head of Forum, Chennai, a Prestige Group company for mall development. In Delhi, the Omaxe Group's Wedding Mall, a 175,000-sq. ft one-stop solution for wedding-related shopping, is trying to broad-base. It has tied up with Bharti-Walmart, the Bharti Enterprises and Walmart Stores joint venture, to set up an Easyday hypermarket. The estimated size of the wedding market in Delhi is Rs 10,000 crore per year, of which the Wedding Mall has been able to garner barely 1 per cent, says Dungarwal.
The current state of affairs in the specialty malls segment is at odds with the recent spurt in the number of general format malls. Over the past 10 years, 150 high-quality general malls (malls that have a minimum space of 100,000 sq. ft) have sprung up across the country. Of these, 50 have came up this year, says Anupam T., CEO of Mumbai-based LotisPI Mall Advisory. However, while general malls may have outstripped specialty malls in terms of sheer numbers, their performance has also been rocky (see ‘Falling Footfalls', BW, 10 October 2011).
The frenzy for setting up specialty malls started in 2005 with the launch of jewellery mall Gold Souk in Gurgaon, near Delhi. It was estimated at the time that by 2012, India would have about 500 malls of which 10 per cent would be specialty malls, says Purnendu Kumar, head (retail) of retail consultancy firm Technopak Advisory. However, the 14-odd specialty malls active today fall far short of those optimistic growth estimates.
Incidentally, the Indian consumer is no stranger to a specialty shopping experience and, in fact, embraces it with gusto. Niche markets have thrived in various Indian cities for decades. Zaveri Bazaar in South Mumbai is a 200-year-old gems and jewellery market that does business worth Rs 200 crore every day, says Kumar Jain, vice-president of Mumbai Jewellers Association (there are 23 jewellers' associations within the bazaar). The loosely strung collection of 50,000 independent shops in the bazaar stock 60 per cent of the 700-800 tonne of gold that India trades annually. Similarly, the 100-year-old Usman Road bazaar in Chennai sports dozens of stores, each 30,000-40,000 sq. ft, specialising in jewellery and sarees.
Why are specialty malls being ignored? The store manager at the Adidas outlet at G7 Mall offers a unique perspective into why the mall sees so few customers. "It doesn't have a food court, which is why women can't bring their kids along," he says. Part of the problem at Pune's Ishanya also was the absence of an entertainment zone, including a food court. "Malls have to be a place to shop and spend time. As long as they are able to do so, they remain relevant," says LotusPI's Anupam.
This is a challenge that Aerens Gold Souk International's (AGS) Gold Souk may also face with its newer malls. Now, AGS has 1.58-million sq. ft of space across four malls in Gurgaon, Ludhiana, Jaipur and Kochi. It claims footfalls of 3,500 per day at the flagship Gurgaon outfit and a conversion rate of over 15 per cent. "We now have buyers coming from Delhi, Chandigarh, Jammu and Shimla. The high conversion rate encouraged us to go to Kochi, Ludhiana and Jaipur," says Subhash Verma, CEO of AGS, which owns Gold Souk. It is adding 1.16-million sq. ft at two malls in Chennai and Hisar. However, while Gold Souk Gurgaon worked because of the absence of a local gold retail bazaar, Chennai and Kochi may be tougher, says Anupam. The key, as evident from Zaveri Bazaar and Usman Road, lies in creating relevance.
"It is a matter of location and product mix," says Forum's Ali. Usman Road stocks the country's best Kanjeevaram sarees, apart from other varieties usually worn by traditional South Indian women. It also offers household products such as utensils and consumer durables, which makes it a draw for women, especially during the wedding season. Following the failed Eva experiment, when the Presige Group's Forum brand decided to set up Forum Value Mall in Bangalore's Whitefield suburb it took cues from Marathalli, a town four kilometres from Whitefield that is dotted with close to 100 factory outlets of well-known brands. "People drive in to Marathalli from several kilometres to shop at the factory outlets," says Prestige's Raghunandan. The 300,000-sq. ft mall offers over 100 brands at a discount. For instance, the Tommy Hilfiger outlet will stock denims only within the Rs 1,000-1,500 price range. Similarly, a Nike will not stock its Rs 9,000-plus range of shoes. The mall also houses a cinema multiplex, a central courtyard with an open-air café and several fast-food restaurants. It claims per day footfalls of 20,000-25,000 and conversion rates of 60 per cent.
Thorough pre-launch research helps in getting the product mix and location right. "In the case of specialty malls the research has to be deeper," says Dungarwal. Since specialist malls focus on a particular theme, it becomes more important to think through the product mix and offer variety to the consumer. The solution probably, as evident from the Forum Value Mall experience, is to drill deeper and come up with every kind of product offering that can be associated with the theme. Although UB City is a popular hangout for corporate executives and students, sources at realty services firm Vestian Global say the mall is not doing well. "UB City has the highest churn for the past six months. The rentals are close to Rs 300 a sq. ft, which none of the retailers has been able to pay. At least 10 retailers shut shop this year. The mall is yet to make any money," they say.
What's In Store?
|HARD LESSON: Bangalore's women's only mall, Eva, had to diversify into fitness products and retail electronics to attract buyers (BW Pic By Jagadeesh NV)|
Despite their current travails, it would be too early to write off specialty malls as a viable business proposition. "These malls could evolve over the next few years when we have enough malls in the country. Globally, specialty malls have thrived after the concentration of more general malls," says Jaideep Wahi, head (retail) of real estate advisory firm Cushman and Wakefield. This implies that the very concept of malls, not just specialty malls, first needs to penetrate deeper into the hinterland and gain critical mass. At present, specialty malls exist in Tier-I cities such as Delhi and Bangalore along with a smattering of Tier-II cities such as Pune, Ludhiana, Patiala and Jalandhar.
Changes in consumer behaviour are another factor. "One of the biggest challenges in India is that despite a huge population, consumption is not that high. Plus, in the case of items like gold, people still trust their neighbourhood goldsmith," says Shashikala Venkatraman, managing director of Mumbai-based mall advisory firm Sq.Ft Consulting. The other big challenge that specialty malls face, much more than general malls, is the pressure of real estate costs. Retailers in luxury malls in Mumbai, Bangalore or Delhi have to fork out as much as Rs 800 per sq. ft. Because of the niche positioning of the mall, footfalls in these malls are usually lower, says Venkatraman. Leasing out space to retailers who cater to its niche therefore becomes harder, especially given that a high-quality specialty mall typically should have retail space of around 200,000-300,000 sq. ft for products apart an entertainment zone.
Retailers, however, see value in having a presence in specialty malls. "Luxury malls create the right atmosphere with large ticket transactions," says Pradeep Hirani, founder of Mumbai's high-end fashion label Kimaya, which has stores in UB City in Bangalore and DLF Emporio in Delhi. Hirani claims the average conversion rates in these stores is 50 per cent. "Post recession, both these stores have become star performers," he says. There may be hope for specialty malls yet.
With inputs from Vishal Krishna and Suneera Tandon
(This story was published in Businessworld Issue Dated 05-12-2011)