India Shining. What About The Malls?

Franchiseek International Magazine: April 2005

"India Shining" is the new mantra, an ode to the growing economy, development and high investor sentiment that India has seen in the past 5 years courtesy political stability. Everyone is talking about India Shining across industries, let us take a view on the subject relating to a very attractive and growing Industry - Real Estate-Retail development.

It is evident that in today's era of mushrooming malls there are only a select few retailers will ramp home in the long term retail battle. A majority of retailers, in fact, are loosing business. It is surprising why these retailers are not thinking out of the box inorder to improve their sales.

It would not be wise if I were to criticize developers for designing majestic shopping projects (e.g. malls, multiplexes and FEC's) and taking the level of retail design to the next level. Rather, one must give them for commissioning these design marvels. However, we must understand that Indians are by temperament extremely price sensitive and these design marvels seem to intimidate and mislead the customers into forming their own misconceptions (for instance, that products are overpriced). Therefore, in order to sustain their existence in this glamour-laden milieu, retailers must provide something unique. We know that even record-breaking footfalls will not reap or generate enough volume for today's retailer to survive till the time there is differential pricing-product assortment.

Most of the malls of today barring a select few e.g. Phoenix Mills, Mumbai offer nothing unique to the end-user. We need to develop and grow this price sensitive market by offering 'value for money schemes'. This though, is easier said than done, and needs to be carefully studied and understood. Majority of the retailers today complain, and rightly so, that since their margins are so less how can they offer discounts and schemes - it would not be possible to run a business in this manner. I couldn't agree more, but can they justify low sales? unpaid employees? shutting shop? The answer is simple, in today's competitive market, retailers need to be experimenting with products, prices, schemes/offerings else they will not be able to survive in the market. Full credit goes to the hypermarket Indian badshah's Big Bazaar and Giant, who have understood and capitalized from the price sensitive Indian shopper. We asked a few Industry specialists regarding their comments on this subject.

Sanjay Kapoor, Managing Director, Satya Paul, is emphatic: "a large number of footfalls are not actually shopping but are at the mall for the ambience etc. Retailers need to provide a value proposition in terms of product and pricing taking into account the customer base that is actually walking into the mall. It is key to understand the customer first. Our retail industry is still quite nascent and very little data exists on the type of customer and their preferences. This will build over time giving a better insight on the customer." Mr Kapoor adds that "change is constant in a growing market and innovation is the key to success here - be it in innovation in the product, marketing, price etc etc." Indeed, Indian retailers need to learn from the US & European markets the art of mall and shopping experience.

At this point, one might wonder why would a customer specially drive to a mall, fight for parking, wait minutes in long queues for the elevator and then enter a store and pay a similar price for a similar product that he or she could have purchased from any high-street store nearby their place of residence? Well, till the retailer does not pull up their socks, offer unique concepts, pricing and products in these malls we will soon notice retailers shutting shops in these malls.

Mr. H S Kohli, CEO Ebony adds "More than differential pricing its differential product assortment that retailers have to devise for holding mall stores as opposed to high street stores. Mall stores should typically have a larger share of fast moving, average price-point and impulse-driven merchandise, as opposed to planned purchase (such as suits, marriage attires etc), unless we are talking of a specialty mall (such as home improvement or marriage related). It's already evident from strategies adopted by ethnic apparel retailers such as Meena Bazaar and jewelers such as Tanishq. Differential pricing may lead to channel conflict if one has multiple channels such as exclusive stores, MBO's, franchised stores etc., and therefore is avoidable".

Lastly, inorder to encash on "India Shining", we must reach out to the end-user/customer, generate unique MRP - "Mall Retail Pricing" only then will the customer be able to spend lavishly and shop freely in these malls.