‘Mall’ed no longer

I’m not sure if I can pin point- but somewhere in 1999-2000 was when Crossroads came up at Tardeo in Mumbai as a product of the ‘Retail Revolution’ India was about to embark on. The earliest I recall is a cartoon in the papers with a motorist stating “Now I know why they chose this name, it has made it easier to cross roads here”- a statement marking the ocean of people who turned up to witness the mall.

It was a novelty. Where would you get the best brands, entertainment options and food under one roof? Soon there were malls and retail chains mushrooming across the city with each one bringing in its own speciality. For people like me, it was a quantum leap to look beyond Heera-Panna or other shopping centres. Indeed, a place to shop, watch a movie, have great food and not to forget plenty of parking space to give up worrying about the car- they were like a dream come true for all.

With floor spaces sprawling 1000s of sqft, these spaces offered the perfect platform for the brand invasion in India. Malls even got specialized to attract every section of the society- from the super rich to the one’s who saw the mid week low prices to their liking. A family weekend now was all the members in the family going out together to a mall which could keep them busy the whole day with fun filled activities, shopping for novelties to groceries, food courts with everything under the sun to offer along with a multiplex to make every weekend big.

Old mills in central Mumbai turned high streets and almost every realty developer in Mumbai who has the space at his disposal made sure a mall was a part of their project. One after the other, every mall was trying to outbid each other in terms of space and facilities. Retailers like Future group were in the media for opening up across the country, even in tier II markets.

But what all this development was doing was creating the classic imbalance between demand and supply with supply out running demand by miles. Adding to it was the economic slowdown in 2008-09 and the real estate market going bust adding in to the problems. Warning signs started showing up when shops in malls started to close down. I guess the first amongst them was the Citi Mall at Andheri which never came anywhere close to the high street shopping of Lokhandwala or the brands of Infinity Mall a few hundred meters ahead.

Today the retail revolution has gone from boom to doom in a matter of 15 years. No longer is Future group expanding with 10 stores in a month, as a matter of fact I see them consolidate the existing assets by redesigning their offering. Citi mall and Milan mall have closed down and K- Star and Kohinoor mall have unoccupied spaces outnumber the ones with business.

Which brings me to the question- how do some malls survive while some run out of steam even at times when consumerism is at its peak and fuelled strongly by our population force?

The answer lies in what we call the ‘Bubble’ in economics. In the early days of the retail revolution, the novelty of the concept attracted an avalanche of people interest to be a part of the wave paying premium for land and location. Retail survives on the two pillars of margins earned through bulk buying complimented by footfalls to turn the margins to profit. Footfalls come in depending on the kind of offerings and what differentiates one mall from the other. Also, malls attract a lot of window shoppers who do add to the footfalls but not always contribute to revenue. Besides as the number of options increases, the repeat customers go down.

Porter’s 5 forces model also comes into the play. While malls competed amongst themselves, they did not overthrow the traditional business methods of standalone shops in market areas. External threat also came in from online shopping portals. I read recently that an online shopping portal has revenues greater than Shopper’s Stop. Prime reason- bulk buying and the fact that shipping costs never come close to the establishment cost for a store in a mall.

Bottom line- much like Darwin’s theory, the survival of any mall will lie completely on how well it can manage their profitability through high rental costs, running costs, margins and the competition from online space.