Case Study: From Mill To Mall To Sprawl

Mahadev Garg walked into XtOne Mall in Mumbai. His client had asked to meet him at “Golden Chai on the ground floor”.

But on stepping into the XtOne, Mahadev was alarmed. ‘Ground Floor’ was not good enough an address. The floor just unfurled before him like an endless carpet.

Mahadev walked around negotiating every turn while his trained eyes took in the mall ambience. People were sitting around in bunches, watching life, unagitated, happy, calm, while their kids ran around in glee. This was an ideal ‘city’ for them. Full of happiness, full of all their needs and wants and dreams.

Mahadev clicked a few pictures, of the vibrant mall and posted a few on his Facebook with a comment, “This is the life they want. They come here to live. In the process, some needs will be met, some wants will be met, some dreams will be seen and stored for later.

Presently he stumbled upon Golden Chai — tucked away far inside and away from visibility. Later he would tell StratNext’s MR Head, Theresa Kurien, “What intrigues me is how come there was no indication or pointer to this tea shop in the main portico of XtOne? Frankly I would not have known about this tea shop! Neither was there any signage or indication that this level has a tea shop.

Theresa: I have done the rounds at XtOne and understand that neither is Golden doing anything to negotiate with the mall to put up a signage, or information leaflets. So, they have also not done much. Their’s is a Gigil situation: in the lower basement, away from visibility, no signage, and tucked behind a huge super market.

Mahadev: “So what are we seeing here?” (as he made space for the coffee that was brought in.)

Theresa: That malls are a business in themselves. You, the store, are just a part of it.

Mahadev: It somehow goes against the very definition of a mall, the idea of a mall.

Theresa: And what is that?

Mahadev: Shopping malls are an evolution of the shopping experience from shopping areas, to shopping districts, to shopping high streets. See, there is a difference between buying and shopping: buying is habit related. To do with commodities and daily use brands. So, it is convenience. Shopping is exploring, discovering, fun, gratification, entertainment, socialisation and even bonding with family or friends.

There is a huge emotional quotient in shopping.

Theresa: And so?

Mahadev: Shopping malls invest in delivering that emotional and social quotient by organising spaces, aggregating outlets based on targeted end-user, value adding to that experience with food courts and movies.

So, malls target not only the share of wallet of products people ‘want’ (as opposed to need), but also share of stomach, share of entertainment. More importantly share of time. A good corollary would be: malls that get high share of time, also end up with high share of wallet. In a sense, these are large entertainment parks, taking the definition of consumption to a totally new level…

Theresa: …so that the power of selling shifts from the tenant store to the mall in subtle ways. Often it appears to me that notwithstanding the stores, the real selling happens because of the mall. I have seen people buy things at malls, which they would never stop to even look at on a high street.

Mahadev: Ha ha ha… Absurd! You think so?

Theresa: Right now, there is no homegrown intelligence on mall role. There is a vague assumption of mall being responsible for tenant success, which is not true. Like the wise old owl, the more we watch, the more we know. So, for now, we need to glean intelligence by just observing.

Mahadev: I keep wondering about the dynamics for the tenant store – how do they sell themselves? Attract attention? So, a Big Bazaar on a high street is different. Whereas at Phoenix Mall in Bengaluru, only those who park their cars themselves see the supermarket, as its entrance is from the parking lot. The front of the shop that you see in the LG level, is the clothes segment, not the groceries. I wonder about the strategy here.

Theresa: If you notice, right next to it is Reliance Trends, the fashion store. Fashion dictates the front face of a store. The rules are totally rewritten for inside malls. Even in R City Mall in Ghatkopar, fashion is the front face of Big Bazaar and only when you go inside, you notice the supermarket or groceries. This works for the brand and its loyalists.

Mahadev: But once you buy your groceries, it is quite a challenge to lug it up the escalator to the main exit. These people may not have come in a car. Trolleys are not allowed on escalators. Same thing happens at Home Fitters; you buy two-trolley loads and then you are told that the lift is at the far end of the floor, a good 6-7 minute walk. There are these inconveniences.

Theresa: Despite these inconveniences, for Home Fitters, the overriding decision is the space they can get and whether it is a catchment or not. Because they need that kind of space – vast and sprawling. Regardless of the lift location, they make their real estate decisions based on whether it can drive people in or not.

Mahadev: So, you are saying that its location need not be shopper-enabling?

Theresa: But brand does not worry about all this, as long as it gets the spread. And for the mall, it is about driving aspiration. And this is why we see brands come and go in malls.

You take Phoenix in Lower Parel in Mumbai; when it opened in 1996, there were only four anchor tenants. One was PVR, which was driving everyone from Dadar catering college to Jamnalal Bajaj MBAs to working population. The second was Big Bazaar. Then, there was Barista and Copper Chimney. Big Bazaar was the bigger spread. After almost eight years, it relocated to a different part of the mall and even scaled down.

The mall then brought in Foodhall. PVR continues to attract all sorts of people and students and kids, because the rest of the mall has managed to develop a tenancy mix that is driving aspiration value. Initially Big Bazaar coexisted with Foodhall but in two different locations in the mall. Later, that was also changed and only Foodhall remained.

So, coming to tenancy and convenience: if you are a Big Bazaar or a Home Centre or a Westside, the choice is always about maximising per sq. ft. revenues.

Mahadev: Then, what happens to the shopper? People go to malls to go to the mall and not necessarily for the tenant brands inside the mall?

Theresa: That could probably be how malls are intended to evolve. Malls owners are reconsidering their strategy completely, wanting to create happiness centres, maybe. In the process, they have been rehashing their mix every now and then. A Garuda Mall in Bangalore where a Westside footprint was almost 20,000 sq. ft, reduced close to 13,000-14,000 of that to accommodate a Forever 21. The whole objective for Garuda was to increase trading density (revenue generated for a given area of sales space), which went up from Rs 1,500 to Rs 2,300 after this – a growth of 53 per cent. And mind you, Westside was one of its anchor brands! For Garuda, this also meant a change in its positioning from a neighbourhood retail centre to a lifestyle-oriented one with the coming in of Forever 21, a global brand.

Mahadev: Trading density?

Theresa: Exactly as you understand it, just a new term to measure sales achieved per rentable sq. foot.

Mahadev: Who would have thought of that!

Theresa: This means tough competition has arrived. The gap between successful malls and the underperforming malls is increasing and success lies in innovation, recrafting tenant mix and sales strategy. Your Quartz was likely working on transaction value per square foot, which is why Gigil needs to be nimble footed. That will explain why convenience cannot be Quartz’s driver.

Truth is, mall business has become cut-throat and strategy driven. So, I think Volyoom may have been at fault, but yes, there are some points Mallika made that we need to factor in.

As competitive as malls are, stores need to be aggressive too. The gains from being in a mall are far reaching. A customer walking into a Clinique couldn’t be bothered about a flea market 10 feet outside his salon or on his level. But if you are a small salon brand trying to differentiate yourself, you will need to be concerned about the crowd outside.

Mahadev: All these behaviours are for the time being. In the sense that malls are continuing to evolve. All this rearranging, relocating, etc., changes traffic, changes the profile of the footfall, changes spend habits! This even changes my perception of a mall! If a mall has a Muji or a Foodhall, it starts meaning different things to me. These are the dynamics we need to watch and observe.

Theresa: So, this is the behaviour of the browser for now. Now, the way cities are developing: Thane in Mumbai, Gurgaon in Delhi-Haryana... or Faridabad. These are self-contained hamlets and people rarely go out of their region to look for brands in the neighbouring city. All their needs are being met in their little township. This same pattern you compress into a mall. See my point? A mall is now becoming a little happy city where needs, wants, luxuries, desires dreams, entertainment, recreation... are all being met. It is becoming a fun spot. So, if I see it from the mall owner’s perspective, how long can he keep the mix unchanged? If he does not keep doing new things regularly, if he does not invest in intrigue value...

Mahadev: He cannot hold his audience’s interest!

Theresa: And there is a reason why this is so. One, because there is a lot of online shopping. Hence, stores that earlier drew people to a mall, may need to get up and be replaced today, or even renew themselves, for, that mug that you buy at a Westside or Home Centre could be bought online from Pepperfry.

Mahadev: You are making a case for why stores need to streamline their categories and SKUs?

Theresa: Also, but importantly, this is why malls like Garuda are reducing footprint of bigger anchor stores to accommodate a) More service oriented brands that cannot replicate online – such as salons, b) More entertainment. In Noida, UP, there is a mall that opened seven months ago, called Mall of India; typically in a mall, your food and beverage, and entertainment constitute about 15 per cent of the tenancy mix. And Mall of India? Nearly 36 per cent!

Mahadev: Yes, like Cyberhub, which is a flattened out or horizontal mall with 100 per cent food.

Theresa: Right! So, they are bringing in service brands that cannot be replicated online. Even if they expand, they want to find every opportunity to maximise the per square feet rupee earning.

The other thing mall owners are doing is, because it is a mixed audience that comes there, even if they have an upscale destination and attract the hoi polloi, they will deliver to the local catchment as well, if that demand is sensed. No matter how many Zaras he brings in, or Forever 21s, at the end of the day, that particular mall will also attract a certain kind of buyer segment. PVR is becoming the bigger draw and so is Reliance, as too Max. Because that kind of catchment will always come in. So, a Phoenix Market City Kurla, has a flea market like the one at Quartz! So, bling is in.

Mahadev: That means, the driver is throughput!

Theresa: Absolutely! Of course, there are a handful premium, lifestyle, urban-y malls, who are rethinking their strategy, to defining even restating the mall experience and are emerging as not just a service and entertainment hub, but a community hub. A significant per cent of malls in the country are the Garudas of this world. They will go where the throughput is available.

Now, I will tell you why I was not sure that Volyoom had a sad story to tell. At R City, there is this Thai massage place at the back of the first floor.

Typically, like a Volyoom, you would not have noticed it. But they did a smart thing of negotiating a small display counter barely two-feet-by-two-feet right outside where the buzz is, with the promoter sitting there, a portrait of the Buddha and so on, which serves as a pointer to what’s behind that wall – this great massage place!

Mahadev: I see your point. It is up to the tenant store to check the feel for his brand in the bustle of the mall, walk around and examine what is taking away attention from his brand or what he needs to do to get attention for his brand, and then, negotiate with the mall to create that little buzz for his brand. I see...

Theresa: This is the ground reality, Mahadev. At least for next to 8-10 years, I don’t see mall owners doing much to take care of tenant interest. They are occupied with creating a buzz for themselves, especially if you see how many malls are coming up, often right next to each other!

So, tenants like Gigil have to negotiate to find their marketability quotient and create their own magic.

Mahadev: What is the strategic activity that malls are immersed in, in trying to define themselves? Where are they driving the industry today?

Theresa: I have gleaned a bit, Mahadev. Been watching the malls so closely yet I cannot be sure if my conclusion is perfect. So world over, malls are rocking. Take a Southdale shopping centre in Minnesota.

So, in the story of Southdale, you will see how malls are nothing but a re-clustering of shops in various stages of survival and marketing strategies, a lot like Volyoom and Gigil. Southdale (established in 1956) began as a shopping centre – a few department stores punctuated with coffee shops and car parks, but because Minnesota is warm, Victor Gruen, the creator, threw a roof over these shops and set up an air conditioning system. Thus was born the indoor shopping mall, and, of course, it has kept on evolving since. You see? It was meant to be a cluster of shops, a lot like Delhi’s GK markets, I would imagine.

Now, step aside to view our cities and how we too moved our shops around as estate prices went through the roof. If you recall the old Lokhandwala 4-bungalows area, where a bunch of buildings ended up having the best shops between them and thus a market was born. Ditto for GK I market and South Extension markets in Delhi.

Look at New Market in Kolkata. It is probably the oldest enclosed market in India, dating back to 1874 when the British wanted a shopping complex entirely for themselves without the brown Indian around. Thus was born the enclosed New Market on Lindsay street. Of course, it had quaint services like dressmakers Ranken & Co., shoe merchants Cuthbertson & Harper! But it was enclosed.

Then, markets led to departmental stores that we recall: like Akbarally’s in Mumbai, a single large store with everything in departments; and then Ebony in Delhi, which was many stores owned by different people in one building! Also enclosed.

To where we are today, malls! It is now about size, Mahadev. Huge sprawling structures! Dubai, for instance, is planning a sprawling mall of the world that is expected to be 48 million sq. feet and fully air conditioned! So, see where the definition is going – climate control, service apartments… they expect you to take a holiday, stay there and shop till your bankers send the cops after you.

Mahadev (smiling deeply): And here we are worrying about a little Gigil!

Theresa: Well scales operate, so a Gigil also makes a difference.

Mahadev: Yet look where it all began. When the Phoenix property opened 18 years ago, it was novelty value then, people went there to enjoy the vision of growth. And so much to see! You went there more to experience the spread, the space, the freedom to keep shopping. To be ‘fed’ with wares all the time without a break.

Theresa: That same Phoenix Mills already began to think evolution and has metamorphed in 15 years! It was not The Palladium then. They had just a handful of brands: Copper Chimney, Big Bazaar, PVR and Barista. When the mall fever set in, Phoenix broke everything and developed Palladium, then, the big guys came in.

Now, the mall makes your eyes pop.

Mahadev: I agree. Once upon a long time ago, when we said Phoenix we meant the Mill, not the Mall, ha- ha- -ha. So, malls are looking at tenants who are passionate about growth and revenue. I can see Volyoom’s folly. In fact, it is likely that Volyoom pulled the plugs itself as, as a salon it was likely to do better business on a high-street. So, Volyoom’s decision is to my mind pure salon dynamics and may have little to do with Quartz’s bling-market, although it is likely that Volyoom, like so many other smaller stores, are slowly learning to survive in a mall, how to sell in a mall, how to remain head and shoulders above mall cacophony. That is a huge issue.

I am now seeing this whole thing better. I am alarmed that we have such a loose definition for our relationship with Gigil. In fact, we need to work very closely with Gigil and participate in its strategy for every mall it plans to operate in. I can see that Gigil in Phoenix LP Mumbai will be faced with completely different dynamics than a Gigil in Garuda than a Gigil in VR Chennai... because not just the catchment, but the rolling throb of the specific mall’s dynamics will beg a different approach ! Should not then Gigil differentiate its presence in each environment? Location is critical, I am clear. I daresay a brand’s personality will vary from mall to mall. Until now, brands have had a knee jerk response to store availability in malls and have moved in rather in a hurry.

But now we see that is not how it is. Malls are downscaling, renovating, redeveloping... adding, taking away... If a salon is not creating footfalls or new business then a mall will rethink their lease.

Theresa: That’s it. That was Mallika’s argument. That if we are going to deal with brand stores in malls, then we StratNext, should be involved in their location within the mall!

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