CHOOSING RETAIL LOCATIONS FOR SHOPPING

MALLS IN INDIA

EXECUTIVE SUMMARY

Background

Store location and real estate markets are two most important areas
of concern for a retailer by the virtue of the fact that real estate is the largest
fixed investment for a retailer. For a retailer, being at the right place at the right
time facilitates the development of sustainable competitive advantage.
For every kind of a retailing format there is a series of tradeoffs to be
evaluated, in terms of costs and value of site while selecting the location.
The location of the mall has become one of the decisive aspects of
the retailing business. The location of the shopping mall spells its success or
failure. A mall in a remote area would suffer from weak sales, poor cash flow and
increased marketing and advertising expenses. Whereas, put the mall in a good
location and the business will thrive with all the expectations of the retailer
surpassed.

REAL ESTATE IN THE INDIAN RETAILING INDUSTRY

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 Retailing is all about being at the right place at the right time.
Basically, it is all about three Ps - Property, Property and Property. While
deciding on a business proposition, real estate issues are the most crucial ones
by the virtue of the fact that real estate is the largest fixed investment for a
retailer.
Location related decisions in retailing are said to be the most
fundamental decisions because it facilitates getting the merchandise to the
ultimate consumer at the right place, at the right time, in the right quantities,
and at the right price.
Choosing the location is the most important decision made by a
retailer for a number of reasons. First of all, location is one of the key
considerations for the customer. For different requirements a customer's
location preferences may differ.
Second, location decisions are strategically important for the retailer because
they help in developing sustainable competitive advantage over the competitors
that cannot be copied at any cost.
Traditionally most of the retail locations were located on the High
Streets. High Streets have been the favourites of retailers because they provide
easy accessibility to the consumers. But, the exorbitant prices of properties on
the High Streets and lack of availability large space have compelled retailers to
opt for smaller properties.
As a result of consumers demand for better and more quality and
shopping ambience, retailers have started moving to the outskirts of cities in
order to provide the entire range of products in large retail formats. This trend is
moving at a considerable pace with most new malls – established or in the
pipeline – being located away from the High Streets.
In India, the real estate market has, for the first time, witnessed a
sustained downward trend in the prices of property in major Indian cities, in past
seven years. There has been a decline by 40 per cent to 50 per cent during this
period. This has led to a dearth of prime properties at prices that please.
Demand of property from retailers has been one bright spark in the property
markets in this period of softening real estate markets.
In the following paper an attempt has been made to study and
highlight the current property trends in the Indian retailing industry, including
highlighting the key problem areas and making specific recommendations to

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potential retailers, investors and real estate agencies.

CHOICES AVAILABLE TO THE RETAILER IN INDIA

Different retailing formats have different requirements of the kinds

of locations they look for. While choosing the site the retailer is required to
evaluate a number of trade-offs in terms of the costs and value of the site in
question. More importantly, the convenience-for-the-customer is the most
important factor for the retailer.

In terms of the location, a retailer has three basic options at his disposal. They
Are-

1. High Streets
2. Destination Locations
3. Convenience Locations

Besides these, the other forms of retail locations include carts,

kiosks, RMUs (Retail Merchandising Units) and tall wall units etc. The following
discussion would take into account all the three types of locations in the Indian
context.

High Streets
Initially, the retailing outlets in India were mostly concentrated in
the busiest parts of the cities, known as the High Streets or Downtown. These
locations are the hub of city's majority of commercial activities and witness
heavy traffic flow. In the Indian context, most outlets are located on the high
streets. The earlier high streets now mainly comprise of offices and centres of
commercial activities. Residential areas have a miniscule presence on the high
streets. Mumbai's Bandra has come up to be as the hottest high street in the
metro. The biggest advantage of high streets is the easy access that they
provide to the shopper.

Destination Location
Better known as the One-Stop Shop, a Destination Location is a
store that provides the entire gamut of merchandise to the shoppers. Shopping

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malls are the best examples of a destination location.
This concept is very common in India and has existed for a long
time now. But, the way its developers and the concerned agencies have
perceived it has been entirely wrong. In India, selling the property has been the
primary aim of the real estate developers and the government bodies concerned
with it. Basic facilities like parking, security and maintenance etc. were
overlooked in the process.
But, the things have been changing in the recent times. With the
organized retailing coming up as a booming industry, the attitude of the
developers, government bodies and corporates, towards shopping centers, has
witnessed a drastic change. With retailing industry taking a proper shape in
India, a number of projects of opening up modern malls are either on the verge
of completion or are in the pipeline. Best examples of modern Indian malls are
the Crossroads in Mumbai, Ansal's Plaza in New Delhi and Fun Republic in
Ahmedabad.

Convenience Location
Internationally referred to as the Mom-N-Pop stores, these are
typical neighbourhood stores. Catering to the daily needs of the customers, they
are generally located in residential areas. In India, the Kirana shops are the best
example of convenience locations.

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CURRENT TRENDS (FACTS & FINDINGS)
Be it any retail organization, the conventional technique of choosing
a retail location remains the same. There bound to exist certain differences in
terms of the level of integration with the site selection process. Site decisions
have to very quick and they cannot wait for any sort of study or tying up with a
merchandise plan, as any delay in execution could mean loosing out a golden
opportunity.
Following is a discussion on the current and emerging trends in the
attitudes of retailers towards site selection for shopping malls.

Shopping Malls: The Buzzword

Shopping malls are here to stay. Retailers have now realized the
importance of One-Stop shopping and entertainment facilities for the consumers.
Almost all the major retail chains, big business houses and corporates are
setting up malls of international standards in all major Indian cities.

Potential Demand From The Region And Competition

Potential demand, from the area under consideration, is a very
important factor that is taken into consideration while choosing a location. This is
done by making use of the data available on demographics and the demand for
various products from different sections of the society within the given region. A
number of Indian research agencies like NCAER, ORG-MARG and IMRB supply
such data to the retailers.

Accessibility, Terms Of Occupancy and Legal Considerations

Accessibility, terms of occupancy and legal considerations are three
key factors taken into account while choosing a site for a mall.
The location of the mall should be easily accessible by the
customer. The location of the shopping mall spells its success or failure. A mall in

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a remote area would suffer from weak sales, poor cash flow and increased
marketing and advertising expenses. Whereas, put the mall in a good location
and the business will thrive with all the expectations of the retailer surpassed.
Terms of occupancy play a major role in deciding upon a particular
property. Whether the property is to be leased on a long-term or a short-term or
is it to be purchased, are the fundamental decisions that the retailer has to take
right at the first thought of opening up a mall.
Legal considerations are also highly important in choosing a location as rules
and regulations differ from one place to another. A retailer may face stringent
legal formalities if he wishes to open a mall at the center of the city, whereas the
same may be lenient for the outskirts of the city.

Use Of Demographic Classification

While choosing a location for a shopping mall in India, the retailers
classify cities and regions on the basis of Socio-Economic Classes (SECs).
They also classify the prospective area in terms of urban population, income
level of households, bank deposits in the region, sales of consumer goods and
penetration of credit cards.

Decline In Real Estate Prices

A sharp decline in the real estate prices in major Indian cities in last
7 years has acted as a stimulant in prompting the retailers to come up with new
properties. This has come as a blessing in disguise for the retailers as they can
now acquire prime properties at highly discounted prices that were never before.

Emergence Of Family Entertainment Centres (FECs)

The One-Stop shopping and entertainment concept has given birth
to Family Entertainment Centres (FECs). All the upcoming malls are merging
shopping with entertainment by adding multiplexes and game parlours to
shopping malls. The purpose is to make the family visit the mall and offer them
all that they need ranging from entertainment, food, culture and shopping at one
place only.

Focus On Providing Add On Facilities

Indian retailers, now-a-days, are trying to offer as much of value

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and experience to their customers as they can. To facilitate this they are
pumping money in acquiring larger spaces so that they can make shopping a
much better experience by providing facilities like parking space and air-
conditioning etc.

Long-Term Leasing
Exorbitant prices of prime properties have made retailers discover
leasing as a much cost effective option. Still there is some resistance faced by
the retailers with regard to leasing. But, with the entry of established retailing
chains, corporate houses and international chains, the property owners are now
becoming optimistic towards leasing of properties to retailers. Retailers have
started considering leasing as the norm for the future.

Suburban Shift
The key trends in major Indian cities show an increasing population
shift to the suburbs. The market in the suburbs has a high potential for the
development of shopping malls that offer shopping-cum-entertainment facilities
to their customers. The retailers have already identified this and they are on the
move to grab their share. More and more retailers are trying to establish their
malls in the suburbs.

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THE ROAD AHEAD
Also known as the Sunrise Industry, the retailing industry in India
holds a bright future in the light of the benefits that it can get from the current
and emerging trends in the Indian property markets. Following is a discussion on
what future does the industry holds if it taps the opportunities offered to it by
the developments in the Indian property markets.

Emergence Of One-Stop Shopping Avenues

Retailers are now gradually realizing the need and importance of
One-Stop shopping malls for the shopper where, if not all, most of his needs
could be fulfilled. This has led to opening up of One-Stop malls, known as the
Family Entertainment Centres (FECs). Consumers can now have much better
experience in shopping and entertainment. Essel Group's, Fun Republic at
Ahmedabad is one of the best examples of a One-Stop shopping mall.

Expected Large Supply Of New Retail Space

With an ever-increasing entry of corporates and big business houses
into the retailing industry and emergence of new malls that meet international
standards, large supply of new retail space is expected. This would definitely act
as a stimulator in prompting existing retailers and prospective retailers to come
up with new properties.

Plummeting Real Estate Prices

As discussed earlier, plummeting real estate prices have come as a

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blessing in disguise for the retailers as they can now acquire prime properties at
highly discounted prices that were never before. In the last 6-7 years, prices of
properties in almost all the major Indian cities have declined by 40 per cent to
50 per cent. This has also stimulated the supply in order to meet the increasing
demand for properties at prices that please.

Long-Term Leasing
Property owners have now become optimistic about the long-term
leasing of properties for retailing since the corporates; big business houses and
international chains have started entering the Indian retailing industry. For
example, all the malls in Gurgaon are being leased by the retailers from DLF
Properties.

Opportunity For Global Players

With relaxations in the taxes and restrictions applicable to foreign
investors in real estate and operations in India and the depreciation of the Indian
currency against the US Dollar, global players now find it lucrative to enter
Indian retailing market by acquiring prime properties at highly discounted prices.
Marks & Spencer's was the first international chain to come up with a store in
India.

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BIBLIOGRAPHY
Levy, Michael; and A. Weitz, Barton. Retailing Management. New Delhi: Tata
McGraw Hill Publishing Company Limited, 2002.

Gilbert, David. Retail Marketing Management. Harlow: Prentice Hall, 1999.

Malhotra, Naresh K. Marketing Research: An Applied Orientation. Delhi: Pearson

Education, 2003.

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