New Delhi: Star City Mall had a lot going for it. It was right next door to Mayur Vihar, a middle-class Delhi neighbourhood with a large number of upwardly-mobile young families. The closest supermarkets, department stores, and multiplexes were a good 5km away, across the Uttar Pradesh border, in Noida.
In 2009, a Metro station opened right next to the mall and that should have put the seal on its success. Yet, Mayur Vihar’s residents continued to prefer to shop and eat out in Noida or in south Delhi. Retailers started fleeing the mall. Reliance Retail Ltd’s Reliance Super, announced as the anchor tenant of the mall with much fanfare in 2006, abandoned the mall earlier this year.
Today, Star City has been reduced to a building that offers office space and banquet halls for functions.
Why do some malls succeed wildly while others—almost seven out of every 10, by some estimates—fail?
With most of the 180 malls in India either making do with a handful of retailers or having been completely abandoned, it is evident that developers don’t have the answers.
Only about a quarter of the estimated 180 malls in India are making money, said Santhosh Kumar, chief executive of operations at real estate advisory Jones Lang LaSalle Property Consultants (India) Pvt. Ltd. While 35% are just about making ends meet, the rest are losing money.
So, what does the 25% have that the others don’t?
Retailers and experts say it’s a combination of factors: location, the catchment area around it, the right retail and product mix, design and maintenance. And yes, size, some of them say, does matter.
Location, catchment area
B.S. Nagesh, member of the board of Shoppers Stop Ltd, and one of the first executives to make a mark in organized retail in India, said location and catchment area are the first factors his company considers when it decides to sign a lease agreement with a mall developer.
Other experts agree. Most name Forum Mall in Bangalore as among the best located in the country. It is on the arterial thoroughfare that links the city’s central business district to Electronics City. On either side of the mall are affluent residential neighbourhoods such as Koramangala and BTM Layout.
But location is only the first step. Even a great location may not see a mall succeed unless the developer addresses the needs of the primary market— the catchment area—with the right products.
“For any shopping centre, the most important thing is to address the needs of the majority of the catchment around it,” says Neeraj Ghei, director of Delhi’s Select Citywalk Mall. “You have to analyse the catchment.”
Prestige Group researched the market before building its first mall, Forum, in Bangalore. It hired CB Richard Ellis to study households in Koramangala and its neighbourhood besides other parts of the city to understand the ideal mixture of retailers and services the mall would need to offer. The mall needs to be a sort of community rather than just a destination for shoppers, says V. Muhammad Ali, head of mall operations at Forum. “You have to tailor a mall for the catchment rather than forcing a mall on the catchment,” he says. That approach seems to have worked for Forum.
Similarly, Delhi’s Select Citywalk in the Saket area decided it would focus on affluent women in south Delhi. “To make this a preferred destination for the south Delhi woman we had to capture and reflect her character and her soul,” says Pranay Sinha, managing director of Star Shopping Centres Pvt. Ltd that is working on malls in various cities, and the former chief executive of Select Citywalk.
A large part of the mall was dedicated to smaller stores and the developer convinced several retailers of ethnic apparel and accessories including Zardozi and Fabindia to set up stores in the mall; the idea was to replicate a typical market such as South Extension or Greater Kailash, where many women from south Delhi shopped. This was complemented by international fashion brands such as French Connection, Mango and Esprit.
“It’s very difficult for one shopping centre to address the needs of every possible customer. If you try to mean something to everybody, you are bound to make a mishmash,” says Ghei of Select Citywalk.
The science behind it
There’s a science to designing and managing malls, say experts.
“There is a lot of expertise required—the way it’s designed, the displays, the shops,” says Anshuman Magazine, managing director of real estate consultant CB Richard Ellis South Asia Pvt. Ltd. And part of this design is to make it possible for visitors to see as many shops as they can, where they stand, says Star Shopping’s Sinha. In a well-designed mall, this number is 15-20, encouraging visitors to walk around to see what’s on offer, he says. The emphasis, adds Select Citywalk’s Ghei, has to be on the shops, not the mall’s architecture.
And it has to be on a significant number of shops (which brings us back to the issue of size). Noida’s Centrestage Mall, which opened for business in 2003 was initially much sought after by retailers. Four years later, a much bigger mall, Great India Place, opened across the road and Centrestage saw a flight of customers. Although Centrestage has a five-screen multiplex, Trent Ltd’s Westside department store is the leading retail attraction. Great India Place boasts a Big Bazaar hypermarket; Pantaloons, Shoppers Stop, Lifestyle and Max department stores; a sprawling Home Town do-it-yourself outlet; and several other large stores.
This variety is important, say experts. Bangalore’s Forum has an 11-screen multiplex, a 30,000 sq. ft food court and restaurants on all floors. Developer Prestige is now opening its first mall in Chennai, which will have two 50,000 sq. ft anchor stores. It leased space for one to Lifestyle, a department store. It avoided leasing the other to another department store, signing up instead with RmKV, famous for its traditional silk saris and ethnic apparel. Kumar of Jones Lang LaSalle says Centrestage, once a hotspot, has now been reduced to a “convenience mall” with the number of people visiting it dropping by 40%. “People will mostly go there for a specific purpose” says Kumar.
According to various retailers at the Centrestage, the mall attracts around 6,000 visitors a day over weekends; Great India Place gets around 150,000. Woodland, located on the ground floor of Centrestage, closed its outlet earlier this month. As did Levi Strauss. Both brands have stores in Great India Place. A spokesperson for Centrestage did not respond to an e-mail questionnaire sent last Monday.
But there may be another issue why malls such as Centrestage don’t succeed in the long run: ownership.
The early and mid-2000s in India saw a great mall rush with developers seeing them as the best way to maximize profits. Developers looking for quick returns built malls, sold them piecemeal to dozens of investors and exited, leading to multiple owners.
Magazine of CB Richard Ellis says that until recently, almost 95% of the malls in India were owned by multiple owners, sometimes in the 10s, sometimes even in the 100s. Maintenance and upkeep became the biggest casualty of this. Centrestage suffers from this problem. The promoters of the mall, the Chadha Group and Shipra Estate Ltd, sold almost 80% of the 350,000 sq. ft mall to various investors. “If a mall doesn’t have single ownership it loses direction,” says Magazine.
Nagesh of Shoppers Stop echoes Magazine’s comments and says 60% of the malls that failed in India did so because they had multiple owners.
Shoppers Stop ensures that the developer plans to hold on to the mall before signing on as a tenant.
“That’s a big factor because you are going there as a tenant and if the owner himself is not an owner...you don’t know what the fate of the mall is going to be,” says Nagesh. “Who will run it and who will maintain it?”
Experts say India’s most successful malls—Select Citywalk in Delhi, Forum Mall in Bangalore, Inorbit Mall and High Street Phoenix Mall in Mumbai—are owned by single companies.
“The retailers are doing phenomenally well in these malls,” says Anuj Puri, country head of Jones Lang LaSalle.
The lessons have been learnt by developers, say Nagesh and Magazine. “If you look at some of the last few malls that have opened, I would yes, things are beginning to be okay,” says Nagesh, referring to new proporties such as the Inorbit Mall in Pune, City Centre Mall in Siliguri and Mantri Mall in Bangalore.
“These are the new malls which have been (made) sustainable. From the real estate perspective, malls make money between the seventh and 15th year,” said Nagesh. “So, unless you have a long-term perspective, a mall cannot be successful.”
Most developers are beginning to look at malls as long-term investments, Magazine says.
It took several decades for companies in developed countries to understand mall management, experts say. India, in their opinion, has come a long way in just one decade.