Interview with Sushil Mohta, Chairman & Managing Director, Merlin Group of Companies
India is the 5th largest preferred retail destination globally. Sushil Mohta Chairman & Managing Director, Merlin Group of Companies briefs on the new and innovative ideas of retailing the real-estate sector has adopted.
Following an analysis of the Indian Retail Industry, India is among the highest in the world in terms of per capita retail store availability. The retail industry in India has witnessed commendable growth over the past 9 or 10 years. As a result, the traditional and unorganized family-run retail shops are facing stiff competition from the Indian and International retail chains.Retail industry in India is expected to grow to US$ 1.3 trillion by 2020, registering a Compound Annual Growth Rate (CAGR) of 16.7 per cent over 2015-20. According to A. T. Kearney, international Management Consultant, “India is the second most attractive retail designation globally, among thirty emergent markets.”
With the new and amended FDI policy of India, it is now easier for foreign brands to set up their stores and kick-start operations in India. This has heightened the demand for retail space. Few of the new foreign entrants in India are H&M, IKEA, Wal-Mart, Carrefour, Bally and many more.
Newer formats of retail space being experimented with
We are now seeing the creative utilization of unused mall spaces and even parking space to incorporate newer retail categories to attract consumers and drive additional revenue. Microbrewery, Fun Dining, Virtual Reality, Kids Educational centers are some of the newer formats. In addition to F&B, entertainment and retail, service industry is getting more and more presence. For e.g. tattoo, nail art studios, salons, spas, dry cleaning services, mobile recharging booths, Ola and Uber booths etc.
- Introducing novel categories and brands in spaces that were not utilized properly earlier, thereby generating footfalls in those micro-areas
- Utilizing parking space and other ancillary spaces for advertisements, publicity and promotional events
Enhancing advertising opportunities and thereby driving additional income through floor graphics, standees, plasma screens and similar media
- Casual Leasing: Leasing of kiosks, vacant space or carts to children’s play area, tattoo stations, foot spas, etc.
Developers focus on retail projects as part of their portfolio
Developers are increasing their focus on mixed-use office-cum-retail realty formats. The combination of retail and office complexes is fast catching on.
With introduction of REIT, the larger real estate companies are now looking into real estate assets with an eye to transfer them to REIT in future whereby they can keep a control of assets as well as liquidate their investment to a large extent. Because of lower interest rate, rent securitization has become easy making funds available against rental income.
Shopping Malls have become an important ingredient for large scale development. In a large size development, the actual cash flow required for development of a mall becomes available out of the sales proceeds of residential part on one hand and the Shopping Mall becomes an attraction for people to buy homes on the other hand.
The changing trends in consumer behaviour
The number of consumers making purchases online has dramatically increased in last few years making internet marketing to be the most suitable marketing strategy. Buying behaviour of consumers in India is greatly influenced by celebrities, their activities and movements. People in India are becoming more and more responsible towards the environment and this increase in environmental awareness has a great impact on their purchase decision. Products are being bought and sold based upon their eco-friendliness these days. Omni channel is a new way to reach target consumers because of change in consumer behaviour.
The new trends in Mall concept, planning and designs
India being a fast-paced market, developers are now designing their malls in a manner that allows a certain degree of flexibility and dynamism. In this way, they can introduce newer attractions from time to time.
Mall developers now regularly track the performance of brands in terms of sales per square feet so as to assess whether the brands are utilizing their space optimally. It has been evident in the industry that many brands are reducing their store sizes in order to maximize per square foot productivity. Intelligent superior mall design is a vital element for healthy circulation that provides good frontage and accessibility to all stores. Today, the priority is to enhance the per-square-feet productivity of the mall while simultaneously providing value to consumers.
The mall sizes are increasing and evolving into “destination malls” for guaranteed success. The future is for malls which will have large number of brands, hyper markets, departmental stores, MBO (Multi Brand Outlets), different kind of F&B and offerings, service outlets and of course most importantly entertainment and amusement. Professional management of the mall along with “focus on customer convenience” will be the key attributes for success.
Malls have the ratio of 10% Buying and 90% Leasing now a days. Major reasons are:
-Buying is going to cost you a lot more upfront than leasing.
-Will you outgrow your space and need to move in the next few years?
-Do you want to deal with the added hassle of maintaining the property?