Details

Themes: Retailing
Period : 1999-2000
Organization : Crossroads, Piramal Enterprises
Pub Date : 2001
Countries : India
Industry : Consumer Goods & Services

Crossroad's Retailing Lessons

In the first week of August 2000, visitors to Crossroads, a retail mall, saw a polite notice informing
them that a mobile phone, a credit card or a club membership card would act as an entry ticket.
People without these new age accessories would have to pay Rs. 60 as entry fee, for a coupon
redeemable against purchases made at any time.

Within days, the number of visitors to the mall fell by more than 70%. Many of the visitors felt it very
insulting to prove that they possessed a credit card or a mobile phone.

Traffic continued to fall even after the ban was lifted two months later. It hovered around 6000-8000
a day, as against the initial walk-ins of 30,000-40,000 on weekdays and up to a lakh on weekends.
Disappointed with the low traffic, Fountainhead, a bookstore, opted out of Crossroads.

Shyam Ahuja, famous for his carpets and dhurries, vacated two-thirds of the space. Other unhappy
tenants too, started renegotiating rentals.

The 'Shoppertainment'
Crossroads, situated near Haji Ali in South Mumbai, and spread across 1,50,000 sq.ft., was launched
by Piramal Enterprises1 in September 1999. The chairman of the group, Ajay Piramal aimed at
introducing the concept of 'shoppertainment' to the Indian consumer through Crossroads, complete
with food courts, recreation facilities, and a large car parking space. The mall was created on four
levels, offering jewelry and children's goods; gifts and women's wear; houseware; and men's wear.

Prior to the establishment of Crossroads, Piramal Enterprises had set up a Roche factory2 at that
location. To utilize the real estate in a better way, the group considered many options with the help
of consultants McKinsey and KSA Technopak. The surveys by these agencies revealed that the urban
population always sought a shopping environment that let a family spend time together. Keeping
this in mind, the group developed the Crossroads model. Crossroads was Ajay Piramal's answer to
the malls like London's Harrods or New York's Macy's. (Refer box).
1] Piramal Enterprises was a Rs 20 billion group with interests in pharmaceuticals, textiles, healthcare, glass
containers, auto components, cutting tools, ferrite etc. Some of the leading companies in the group included
Nicholas Piramal India Limited (NPIL), The Morarjee Goculdas Spinning & Weaving Co. Ltd., and Gujarat Glass
Limited.
2] A Swiss pharmaceutical company, which Nicholas Piramal India Ltd. (NPIL) acquired in 1993. NPIL was formed
after Piramal Enterprises acquired Nicholas Laboratories in 1988, to enter the healthcare business.
 Harrods, situated on the Brompton Road in Knightsbridge, London, is the world's
best known stores. Harrods was established as a family business by Charles Henry
Harrod in 1849 after taking over a small shop in London at 8 Middle Queen's
Buildings. Harrods started as a grocery store with the import and sale of tea as its
mainstay. Later, it expanded into a wide range of goods including furniture,
perfumery, chinaware and glass. By 1902, Harrods acquired much of the
surrounding land, developing into a large department store with 80 departments
and a staff of approximately 2000. By 1911, with the completion of the current
building, Harrods had established itself as the world's most famous department
store. In 1959 the entire Harrods Group was acquired by Scotland based company,
the House of Fraser. In 1994, Mohamed Al Fayed, the then Chairman of Harrods,
floated all 56 House of Fraser stores, excluding Harrods, on the London stock
market. Once again, Harrods was an independent family owned business.

The shopping arcade of the mall, spread across 60,000sq.ft., offered 125 top Indian and international

Macy's is a popular name in departmental store retailing in the USA. Macy's was started as
R.H. Macy & Co. in New York in 1858. The company's landmark store, Macy's at Herald Square
in New York, a part of Federated Department Store was started in 1902. Macy's product
offerings were under various categories including household goods, women's wear, men's
wear, jewelry, lingerie, cosmetics, and fragrances.

brands in fashion, jewelry, footwear, watches, etc. It also had an in-house department store,
Pyramids, that offered about 150 brands. Pyramids was the biggest store in the mall, followed by
Pallazzio, which had 80 brands of jewelry, watches, and other accessories. Other brands available in
this arcade were Levi's, Lee Cooper, Adidas, Lacoste, Swarovski, Reebok, Nike and Benetton. Outlets
of Indian designers like Rohit Bal, Ritu Beri, and JJ Valaya were also a part of this arcade. (Refer Table
I).

The mall had a plethora of entertainment options at the Jammin', which covered three floors. It
offered simulation games, bumper cars, pool tables and a ninepin bowling alley. The entrance of the
mall had a spacious atrium with a video wall. One side of the atrium featured the works of the
celebrated local cartoonist, Mario Miranda, flanked by a piano bar. On the other side, were the
Jammin' and the Chinese restaurant China Garden.

The ground floor was completely devoted to food. The Food Court offered six types of cuisine
including Indian, Lebanese, Chinese, Italian and others. McDonald's also had an outlet here.
Crossroads had a rooftop car parking facility on the Teflon retractable3 roof (Asia's largest, outside
of Japan), apart from the basement parking facility with a capacity of about 150 cars.

3] Roll-on roofs. The roof can be rolled in and out depending on the requirement.
The 'Shoppertainment' Contd...

Crossroads was expected to begin a new era in Indian shopping. The mall attracted huge mobs
during the initial stages of its opening. During weekdays, the mall saw about 30,000-40,000 people
walk in, as against McKinsey's projection of 10,000. The number increased to 100,000 on weekends
and holidays. Vineet Chadha, Director, Celebrations4 remarked, "I could see double-deckers empty
out at the mall."

TABLE I
OUTLETS AND PRODUCTS AT CROSSROADS
OUTLETS PRODUCTS
Pyramids department store Household products
Fountainhead Books
Celebrations Greeting cards and gifts
JJ Valaya Designer Wear
Ritu Beri
Rohit Bal
Pantaloons Garments and Accessories
Lacoste'
Levi's Planet Kids
Lee
Nike
Reebok
Adidas
Benetton
Pallazzio Jewelry, Watches, and other Accessories
Groove Music
Harmon Kardon
JBL Consumer Electronics
Baron Point
Danabhai Diamond Jewelry
Cartier Watches
Mont Blanc Pens
Swarovski Crystals
Shyam Ahuja Carpets and Dhurries
L'oreal Cosmetics and Personal Care
Jammin' Recreational games
McDonald's Food Court Food
China Garden (Chinese)
Biscoti (Italian)
Café Ole

At The Crossroads
With such huge crowds, the mall's infrastructure came under immense pressure. Escalator queues
were long and aisles became crowded. Moreover, these huge crowds didn't comprise of the posh

4] The Indian franchisee of Hallmark Cards had a retail outlet at Crossroads.

clientele that Crossroads had targeted. Regular customers started enquiring when the crowds would
be low so that they could shop undisturbed. To tackle this problem, the management decided to
restrict entry on weekends.

At The Crossroads Contd...

The management had put a notice at the entrance stating that one had to produce a credit card,
cellphone, visiting card, or a student ID card to gain entry. Or they had to pay Rs.60 as entry fee,
refundable against purchases at any time. Said Chadha, "We argued against it, but the management
sided with more premium tenants like J.J. Valaya." Many people turned back, insulted that they had
to prove that they had a credit card or a cell phone.

Adding fuel to the fire, the media also started lambasting the mall. Within days, traffic fell drastically
by more than 70%. A couple of months later, the management hurriedly lifted the ban, but traffic
still continued to fall. It stabilized around 6000-8000 a day, which affected business at some of the
outlets. To deal with this situation, Crossroads initially relied on using anchor tenants like
McDonald's and Pantaloons to attract crowds.

The management reasoned that the shoppers at these outlets would then disperse to the other
outlets of the mall, but this plan did not workout as expected. The premium tenants seemed to be
happy to see that the crowd was manageable.

Initially, in the case of Pallazzio, the conversions were mere 10-15%5 when 3000-4000 people visited
the store a day, the conversions were. Many of these visitors were window-shoppers, and had
discouraged the regular clientele of these outlets. After the restricted entry, though the walk-ins fell
to 5000-6000 a week, conversions rapidly increased to 45-50%.

However, traffic-dependant outlets like bookshops and music stores were highly disappointed with
the new development. For instance, Fountainhead needed at least 1000 walk-ins every day, with
daily sales of about one lakh, to cover its monthly expense of Rs.8 lakh. But, there were days when
just 100 people walked-in. Monthly sales fell to 12-15 lakh. Hurriedly, Fountainhead opted out of
Crossroads. Many of the other tenants also started demanding lower rentals from the prevailing
Rs.250 per sq.ft.

Falling traffic was not the only reason for Fountainhead opting out. There were also problems with
the mall's layout. Books offered very little margins, unlike jewelry or electronic goods. Also, they
were mostly impulse-buys and hence needed more traffic. The greatest disadvantage for the store
was that it was on the fourth floor. Said an ex-store manager, "When I saw our shop was on the
fourth floor, I knew it would be hard-going."
People hardly went up till the fourth floor just to browse through. The store would have been a little
better off at the entrance or on the first floor. However, analysts felt that as there were too many
entrances and exits, the flow of traffic was difficult to regulate. People could walk-in from any
entrance and leave from any exit.

The only two tenants who were not complaining were McDonald's and Pantaloons. McDonald's sold
around 8000 meals a day, which made it one of the most successful outlets in Mumbai. The success
of these outlets could not be completely attributed to the mall. Originally, it was expected that the
onus for drawing traffic would lie with the mall management. But, soon after inception, the
relationship between mall management and the tenants soured.

5] Out of 3000-4000 people visiting the store, only 10-15% ended up purchasing something.

At The Crossroads Contd...

The tenants started regarding themselves as stand-alone entities. "No one has time to listen to our
demands," remarked Kishore Biyani, managing director, Pantaloons. These tenants also started
feeling that the Piramals were more interested in promoting the in-house store, Pyramids, than the
mall as a whole.

The recreation arcade of the mall was also facing problems. The novelty value of Jammin' seemed to
be over. Footfalls fell to a low of 2000-4000 people a day, from the initial 15,000 a day.

Piramals planned to close down the entertainment center and use the space for selling saris and
footwear. Piramals faced the dual threat of loss of tenants, and falling traffic.

Many of the tenant leases would lapse in 2002. Also, with many new malls in the pipeline in
Mumbai, the situation at Crossroads was unlikely to get any better. As the group planned to widen
its shopping basket to establish itself as a destination store.

It planned to initiate a multi-storied extension with 20,000 sq.ft. of retail space and a car park.
Crossroads entered into a strategic alliance with Larsen and Toubro to establish an entertainment
complex and shopping mall at Nariman Point.

The mall would be called Crossroads E Zone and would house a Cineplex, a health club, besides the
food courts and a shopping plaza. Crossroads was also planning to establish similar stores in the
Central suburbs, Western suburbs and New Bombay. It also planned to set up establishments in
Bangalore, Delhi, Calcutta and Chennai.

These new outlets would offer a mix of products that were not available at Crossroads, like
computers, footwear, and saris. Said Jaydev Mody, managing director, Crossroads, "While
Crossroads at Tardeo (Mumbai) caters to the middle to premium end of the market, we are looking
at a similar set-up for the mass to middle end of the market.

In such malls, within the same categories, we will look at stocking a shirt in a range of Rs. 100-150
instead of a premium brand in the shirts category. Such a mall will be set up in a place like suburban
Mumbai."

Is this the right strategy?