Retailers are now looking to set up shop in high streets as they step away from shopping malls due to poor returns on rental costs.
“Customers prefer the high street as it is easy to get in and get out whereas, in a shopping mall, you have to allot fixed time for shopping. Parking is a time-consuming affair. If the shop is not located on the ground or first floor, your focus will get deviated. Moreover, customers get personal attention and discount on the quoted price at high street which forces them to visit the shop again and again,” Sarita Hunt, Managing Director – Chennai and Coimbatore- JLL, a major property consultancy.
Also, shopping malls have undergone a change over the years. Earlier, they were meant purely for retailers. Then, they started housing theatres, fast-food joints and restaurants and entertainment spaces.
Also, with more shopping malls coming up, the footfalls and sales were getting affected as competition started biting.
‘Licence with expiry date’Hyderabad-based Neeru’s Ensembles Pvt. Ltd., a leading retailer of women’s ethic wear, waited nearly three years to find an anchor shop in a busy commercial outlet in Chennai. Currently, the family-owned Neeru’s, which boasts a turnover of Rs.200 crore, has 24 outlets spread across Andhra Pradesh, Telangana, Bengaluru, Pune, Chennai and Dubai. Only four of them operate under the franchise model.
Talking to The Hindu , Mr.Avinish Kumar Director, Neeru’s, said: “We are a well-established brand in the women’s ethnic wear segment and are doing good business through our own outlets. Over the years, our sales have not come down. However, it is a different story when it comes to shopping malls or retail outlets. Besides, signing an agreement with shopping malls is like getting a licence with an expiry date.”
“Five years ago, it was said that shopping malls would be future of retail. The establishment of one more mall in the vicinity will spell doom for both of them in terms of footfalls and sales. But, exclusive stores would continue to grow with the help of loyal customers. In Chennai, we waited for nearly three years to get real estate at the place we wanted,” he said.
Location of the outlet in a mall also mattered. Most retailers wish their outlets to be located either on the ground floor or first floor and preferably close to the entrance in order to attract the attention of visitors.
Also with many curious onlookers doing little else but window-shopping during the weekends, the retailers had enough reasons to look outside malls for business space.A representative of Five Star Chicken, a quick service restaurant chain in Chennai, said that since most outlets are managed by franchisees, the latter prefer to have it in residential areas.
“We are also not keen on entering shopping malls. Ours is a quick-service restaurant and it does not make sense to have it in either second or third floor of malls. The rentals will be too high and it will make a big difference to our price list as we maintain a uniform price for food items at all our outlets,” he said.
First-mover disadvantage?Another retailer said it made sense to locate an outlet either on the ground floor or first floor, preferably as an anchor store. His worry is what would happen, if one more shopping mall crops up in the area. “Wouldn’t it be a disadvantage for the prime mover?” he asked.
Kanchana Krishnan, Knight Frank India, Director - Chennai said: “A retailer’s decision to be whether in a mall or high street or both will depend on various factors such as location, footfalls, parking and nature of product. Malls are well organised, have better infrastructure and offer plenty of choice while high street offers better customisation and personalised experience.”
Harish Kumar, Managing Director, Neeru’s Ensembles, said that they were planning to open 10 more branches during 2016-17 in places such as Tirupati, Raipur, Udupi, Coimbatore, Rajahmundry, Kurnool, Nellore and two more in Chennai. Mostly, it would be under company-owned franchise operated model so that they could have control over the sales.
“High streets will need to adapt to the new retail landscape and attune themselves to the evolving trends. With the e-tail wave catching up, re-inventing the brick-and-mortar space is extremely important and today we are witnessing both malls and high street retail adapt to the changing consumer’s requirement,” Ms. Krishnan said.
Sanjay Dutt, Managing Director-India, Cushman & Wakefield, said, “Prominent main streets that provide high brand visibility and footfalls that fit their strategy have witnessed high demand from retailers.” However, the demand for well managed and high-footfall attracting malls has also been high, according to him. Cushman & Wakefield’s report for the quarter ended December 2015 on retail space demand and occupancy shows that across 8 cities in India, rentals for malls have either remained unchanged or have gone down compared to the previous year. Only Mumbai has seen an increase in rentals in malls in the Lower Parel, Vashi and Goregaon areas. Mr. Dutt said, “While retail activity is picking up, Ahmedabad, Delhi-NCR and Pune continue to witness high vacancy rates owing to a glut in malls that has outpaced demand from retailers. This, in turn, is driving vacancy levels across the country.”
