INDIAN RETAILER - MALLED OUT!

By Ruma Dubey

What is your idea of “going out” on a weekend with family? Invariably, isn’t it always a shopping mall? The place is teeming with people of all sizes and shapes, a real scene of hustle and bustle. But have you actually sat down and had a look at the shops there? Most of them wear a vacant and almost desperate look. The salesperson there looks out at you from inside the shop, almost with beseeching eyes, imploring you to buy something. The feeling one gets is that most of the shops have not had a decent business for some time now.

On the other hand, look at the Food Courts and hyper markets – everyone who comes to Mall does not come to visit the shops but pick up something from these hypermarkets and maybe grad a quick bite. The programme usually is, for most of us, to roam around in the cool comfort of the mall, window shop and balk at the price tags and then quietly go to the hypermarket and buys the necessities and this could be either before or after eating something. Yes, the Food court is expensive too so many of us prefer to come back home and either eat home food or order from the restaurant close to your home. That in short is the weekend for majority of the Indians living in urban areas – mall is for the experience, a place to merely hang out.

And have you been a mall during the week? It has got an empty, despondent look. It looks almost haunted and with a few lost souls, roaming around, maybe for an escape from the sun. This is having a telling effect on the malls.

In September a report - Malls in India” was released by Images Research. And as per its findings, there were 470 shopping malls in India and there are plans to take this number up to 720 by 2016. This is despite the fact that 90% of these 470 malls are struggling to merely survive. Some 30-40 malls across India has downed their shutters of which more than 12 are in Mumbai itself.

Mumbai is the worst hit – Milan Mall and City Mall have already closed while Evershine, Center One and city mall could shut down any time. The Atria Mall at Worli has too many “too rent” sign boards and the one next to it – Sobo Central is also struggling for survival.  In Gurgaon, Haryana, there is a “Mall Mile” with some, one dozen shopping malls standing next to each other. How will this model work at all?

So what plagues these malls? Why are many of them today facing a shut down?  A quick look at some of the reasons:

• Sluggish demand – people go to the mall for just having fun, enjoy the cool AC and hang around. No one seems to be interested in the expensive shopping.
• Too many malls – there has been a rampant rise in the number of malls. There is literally a mall at almost every major junction street and this over supply of mall has killed the industry.
• High cost – mall owners are literally gasping for breath, apart from lower demand, due to asphyxiation caused by high rental charges, which in turn is due to prohibitive realty prices. Mall owners say that their costs – rent, electricity, maintenance, salaries and other fixed costs have risen almost 300% over the last 2-3 years. This means higher cost for goods sold and this killed the already fledgling demand.
• Online shopping:  Yes, Indians have taken to online shopping like fish to water. There are much better deals online with cheaper goods and home delivery. People go to the mall to ‘feel and touch’ what they want to buy in the mall and then order it online at much cheaper rates. Even the discounted sales do not match the online prices.

There has to be a churn in this “mall” sector. There are just too many fighting for the same target audience. Malls also have to look at how they can successfully compete with online sales and increase this ‘experience’ of going to a mall into sure shot sales too. There is sure to be some consolidation in the sector.

Too much of anything is not good, not even Malls.  With FDI expected to bring in more malls, one wonders whether this great Indian retailing story is still intact?