Shopping Mall Specialists

The rise of Shopping Mall Specialists.

Over the last decade, Malls have heralded a retail revolution in India and proof of the matter lies in the rate at which Malls have been springing up, in every nook & corner of the country. But due to the lack of proper understanding of the Shopping Mall business, the resulting product, leaves a lot of questions to be asked. While malls are considered as the best bet on investment globally, India has seen too many debacles in this sector. Developing and managing Malls, requires a very different kind of thought process & approach, which is seldom seen here.

What is Beyond Squarefeet all about & why do you classify yourselves as “Mall Mechanics”?

Beyond Squarefeet, is the only Mall advisory company in India, to provide end-to-end solutions to Shopping Malls. We come into the scene, when a developer has a property with an intention of making a Mall on it. We start with the primary market research and financial feasibility, advice on the right size, the concept, the positioning of the mall. Based on the brief created post the market research and financial feasibility, we design the mall (Architecture & Interiors). Going further, we also do the B2B marketing, Holistic Lease management, Fit-out management; re-demise management and Mall Management of the mall. To put it in a nutshell, there is no service, which we cannot offer to any shopping Mall.

By “Mall Mechanics” we mean the people, who actually get under the hood, rather than just sit in an office and talk. We change things on the floor and we get deep into implementing processes & systems, bring in the efficiencies, reduce recurring costs, interact with customers & retailers, etc. While one team of ours works on enhancing the sales per sq. ft., the other technical team  works on reducing costs, thereby achieving better efficiency & bottom lines.

Is Shopping Mall Business a profitable Business?

Globally, shopping Malls give the highest rate of returns on investments, than any other class of real estate. However, unlike other real estate businesses, Shopping Malls work on a very different logic, approach and treatment. This business is meant for those developers, who have patience & have a vision of creating assets with long-term timelines. If you look at a bracket of 5-7 years, Shopping Mall assets, give you over 200% better returns, than any other class of real estate. Most mutual funds & REITS, invest heavily on Shopping Malls, making them a great investment instrument. Even in India, if you look at the latest acquisitions of Malls by many foreign funds, the returns earned by the developers are humungous, compared to their own residential or commercial real estate class, or even when builders have done strata sale of shops in Mall, in the same neighbourhood.

What are the key reasons for a Mall to fail?

Till the recent past, around 400+ Malls have been operational in India, out of which, barely 30 Malls can be considered as successful, from a holistic approach of bottom-line & asset value. Many projects have ended up being just structures, which are collections of unplanned retail stores with no scientific basis of adjacency and without any focus on the Target Customer.

The involvement  of Shopping Mall Specialists becomes the need of the hour, just by looking at the high failure rate of Malls in the country. While a Mall can fail due to plenty of reasons, a recent research on the subject classifies these as the top 3 reasons:

1. Layout / Circulation faults (mostly Design / Architectural)
2. Sold out Model (Strata sale Malls to many investors)
3. Poor Mall Management

Some other key reasons are, that most Mall developers plan to build a Mall before examining the need for the retail space or recognizing a gap in the retail space in that given catchment. Most Malls are designed giving emphasis to elevation at the cost of internal planning. In India, research and feasibility studies are hardly done before the planning stage. There is a hurry to sell / lease the space without examining the mix of retailers in the Mall. Pre-determined positioning is not done and there are unbalanced categorization, unstructured space allocation, unplanned zoning and tenant mix, insufficient parking, inadequate services, high Common Area Maintenance (CAM) and poor post-building management and most importantly, the developer ceases to be involved in the functioning of the Mall. With all such faults commonly seen across unsuccessful malls, the need for inclusion of Shopping Mall Specialists in the construction stage is pressing, as it not only saves money for the developer in the long run, but also helps build a successful Mall.

Even if you have a basic box structure, but tenant mix and the Mall layout is good, you can be assured of the success of the Mall. Generally architects are successful in selling the elevation/3D view of a mall to the developer. However, the intricacies of the mall layout are mostly overlooked by both.

Today, both the retailers and good Mall developers have realized that it is important to change their strategies for their mutual success. Both the parties have become more open to the thought of taking advice from experienced and professional Mall advisory companies who have gone through the grind of making successful Malls. Now, Mall developers don’t chase the leasing consultants or IPCs, instead they are on the look out for Shopping Mall Specialists like Beyond Squarefeet, who will help them to make a successful Mall from scratch.

What according to you are the Key things which a mall developer has to look at when he is thinking of making a Mall?

While every aspect of the Mall has to be closely monitored, following are the key important factors to be considered while planning a Mall

Location: Just because a developer owns a huge piece of land in some faraway location does not mean that he could build a Mall there. Or just because there is a huge residential colony around does not make it necessarily suitable for a Mall either. An ideal location for a Mall is a good catchment area, with good density of target customers, with excellent accessibility. A primary market research on the affordable levels of residents in the catchment area is a must. While deciding on the location of a Mall, it is important to analyze the kind of alternatives a resident in the catchment area has.

Access & Approach: While the feasibility of the Mall is made, it is very crucial that you examine the accessibility and approach to the Mall including the ease of access, road width, ‘U’ turns, and other hurdles in a radius of about 5 kms. This plan will help to understand and estimate the footfalls to the Mall in the coming years.

Retail Tenant Mix: This is one big stumbling block to the developers and retail companies. Many Mall developers find it fashionable to develop a luxury Mall, not knowing that the people in the locality may not be able to afford it. A developer has to realize that Mall is a localized business and he has to keep in mind the kind of retail mix he wants to have while planning a Mall. One big problem which most Malls face today in India is the choice of retailers, as there are limited brands & hence most malls provide similar offerings, as a brand mix.

Project Viability: For long, the developers and retail companies had a standoff when it came to deciding the rentals. It is a huge task to get the pricing right, but we do see a change in the attitude of the developer and retail companies. For instance, the Mall developers and retail companies have begun implementing what is now, popularly called minimum guarantee and revenue share arrangements.

This in a way puts the onus of sustaining the success of the Mall on the developers as well. With the trend picking up, developers have started realizing the importance of involving Mall Specialists. The Mall Specialists help in the design elements till tenancy stage and then in managing the day-to-day affairs of the Mall, with asset value enhancement, as a key driver.

Mall Positioning: Primarily, a Mall consists of various categories, the prominent ones being Shopping, Movies, Entertainment, Food and Services. To plan & manage all these category mixes in the right ratio, specialized skills are required which are acquired out of experience than book theories. Mall Development encompasses minutely planning all these categories, then creating the apt zoning, with the right percentages of the category mix, and spreading the mix in a scientific manner, based on the shopping behavior of the consumers, than just making clusters for each kind of stores. The positioning of a Mall, normally will determine how the zoning has to be done, which is based from the learning of the catchment & the percent of sales of each category in the catchment. The entire functioning of the Mall is tailored to echo the positioning of the Mall & each Mall will have to take a bespoke approach than just a cut copy paste of another Mall.

One very important thing that developers must cater to, especially when Malls have been inspired by international formats, is to remember their Indian consumers. It is imperative that the Malls are designed and positioned to cater to the consumer in India, keeping in mind the culture, social habits and characteristics of the average person. For example, Malls in India largely play the role of community centres. A holistic approach towards the Indian consumer will ensure increase in footfalls and eventually, both the developer and the retailer will benefit from them. Studies prove that a majority of the buying decisions of the consumers are made in the Mall itself and a professional Mall management takes full advantage of this impulse behavior of the consumer to provide planned positioning and strategic placement of the retailers.

Another very important factor is the common area. If a Mall has been well planned and developed, the CAM will be very low and will require minimum attention for the next 10 years or so. It is important that the developer takes the onus of the CAM in the initial stages so as to send the message to retailers that the developer is as interested in the success of the Mall as they are. A successful Mall is the onus of the developer and if he remains involved, not only will the reputation of the Mall be built, the retailers will also be happy.

What is Mall Re-orientation & how does it benefit Mall developers?

In many cases, if a Mall Specialist has not been engaged in the planning stage itself and the developer has ended up making mistakes with the Mall, Mall reorientation comes into the picture. Even though costlier as compared to Mall development at the planning stages, reorientation always helps salvage a failing project.   While there is very little one can do once the project is up and running but with the help of experienced and professional Mall Reorientation experts, the Mall can still be salvaged. While there could be many parameters of when a Mall/shopping complex can be declared as a failure, however the main attribute to a failed Mall is decline of customer entry (footfalls). The ideal approach to re-orient a Mall will be to understand the reasons for its failure and propose ways and methods to undo the damage done. The mall may have to be redesigned, restructured, reshuffle the retail mix, revise the plans considering consumer psychology, thus resulting in the consumer being enticed to spend more money. It has also to be clearly noted that, if done with a proper approach, reorientation of a Mall does guarantee the success of the Mall. This process of re-orientation can be more cost effective than building a new Mall all over again. The reorientation can bring in better footfalls, better occupants, better designing and hence better returns which will culminate into better valuation. 

We at Beyond Squarefeet have been involved in Re-orienting over 4 million sq. ft. of Malls & all the malls re-oriented by us have seen drastic changes in their success & enhancement of the asset value.

What precautions should any Mall developer take while developing a Mall?

The key perspective while making Malls is the convenience, visibility, accessibility and most importantly the time taken (shortest time taken) to reach a particular store. A Mall should never look like a maze and should be more like a progressively inviting carpet. As you move along, the consumer should feel a pull towards each store, it’s a psychological effect. And this pull happens due to the design and scientific zoning of the Mall. The layout has to be very customer friendly, allowing every retailer to have decent frontage, signage and store visibility because eventually Mall is about a retailer’s insight. For the end users, the inside of the Mall is more important than the outside of the Mall. Unfortunately, for most of the Malls in the country the elevation is made first and then the layout. The right way of doing a Mall is making the layout first and then completing the elevation.

Hiring the Shopping Mall Specialists like Beyond Squarefeet, at the initial stage, who will hand-hold you through the development & thereafter manage your mall, will not only save your investments but also the cost of learning. Developers, who have made a Mall, will understand this better than anyone else. You can go through the grind yourself & waste time, money & energy or you can be smarter by hiring the professionals.