MUMBAI - As
part of its efforts to decongest its capital city
Mumbai, the western Indian state of Maharashtra
conceived a satellite town called Navin Mumbai (New
Mumbai). One of the premier attractions of New Mumbai is
Vashi, standing out for its wide roads, well-planned
residential blocks and huge, neat gardens.
Most
Vashi residents would rush to these gardens in the
evenings to catch up with some fresh air, as well as
gossip. But of late the gardens wear a deserted look as
the crowds now throng to Center One, a newly opened
seven-story steel-and-glass shopping mall near Vashi
railway station. Some of the visitors are serious
shoppers, attracted by the convenience of buying a wide
variety of goods under one roof at economical prices.
But most are partaking of new experiences - gawking at
luxury goods, cooling off in air-conditioned comfort and
enjoying an ambience seen only in Hollywood movies up
until now.
The scene is repeated every day in
about 50 new shopping malls in big towns, smaller cities
and, of course, the large metropolises across the
country. A rash of malls has suddenly appeared over the
Indian landscape, where only a handful existed five
years ago. A study by Knight Frank, a real-estate
consultancy outfit, says that no less than 25 million
square feet (more than 2.3 million square meters) of
organized retail space will come up across the country
by 2005. According to one estimate, 300 malls are
already under construction countrywide.
Take the
example of Gurgaon, a sleepy little suburb of the Indian
capital New Delhi. In a development that surprised many
town planners, Gurgaon transformed itself overnight by
first housing the headquarters of many multinational
corporations and banks, and then calling itself the
"shopping-mall capital of India".
Each mall in
Gurgaon is about 300,000 square feet in size, with every
leading retailer, or, to use a trade parlance, "anchor",
occupying anything between 60,000-80,000 square feet. A
popular destination for the trendy young crowd is the
City Center Mall on Mahatma Gandhi Road - for eating
out, shopping and watching movies. Another attraction is
the Metropolitan Mall, complete with a multiplex cinema
theater, underground parking and a food court. Leading
construction company DLF Universal has floated DLF Mega
Mall and the DLF City Center, which boast, apart from
stores selling leading international and Indian brands,
multi-cuisine restaurants occupying 20,000 square feet,
piped music, an entertainment arcade and high-speed
lifts and escalators.
It is not just the north
of the country that is seeing a furious construction of
malls. Visakhapatnam, a fast-growing city in the
southern state of Andhra Pradesh, is witnessing a huge
demand for shopping malls. The biggest of them, CMR
Shopping Mall, occupies 60,000 square feet over five
floors. The throng of buyers who visit the mall are
working class and office employees of the numerous
public and private sector outfits that are based in
Visakhapatnam.
Similarly, Ahmedabad in western
India is slowly becoming a magnet for shopping malls.
More than half a dozen malls have sprung up in
Ahmedabad, known as a fading city of dying textile mills
until a few years back. The biggest of them, aptly
called Super Mall, occupies a gargantuan 90,000 square
feet and has 200 shops in its folds.
But the
biggest mall-construction activity in India is taking
place, as expected, in Mumbai, the country's financial
and business capital. In all, 25 malls are under
construction, each measuring anything between 90,000 and
600,000 square feet. A hefty Rs4 billion (US$87 million)
is being pumped into these projects by 20 investors.
About a dozen malls are already up and running in the
upmarket south side of the city, as well as the
downmarket distant suburbs.
The anchors that first pull the
crowds here - and at other malls all over the country -
are as varied as they come. There are the US and
European chains such as McDonald's, Lacoste, Pizza Hut,
Benetton, Subway, Marks & Spencer and Mango. Their
success has spawned the emergence of successful Indian
chains such as Pantaloon, Globus, Shoppers Stop, Giant,
Lifestyle and Big Bazaar. Stores named after popular
branded merchandise also act as effective anchors. These
include the likes of Tommy Hilfiger, Swatch, Arrow,
Louis Vuitton and Nike.
Foreign mall operators cannot enter
India as foreign companies are not allowed to own real estate in
India. Companies like Nike, McDonalds and Reebok sell
at mall outlets through their Indian subsidiaries or
franchisees. McDonalds, for example, has appointed two master
franchisees in India, and these in turn
have appointed numerous sub-franchisees all over the country.
A sub-franchisee, therefore, could open a McDonalds outlet
either as a stand-alone store or as one
of the many stores in a mall.
Making the job easier for the anchors is a
gradual change in the Indian economy from a socialistic
to a capitalistic one. This has led to a rise in the
numbers of middle-class consumers, their wallets stuffed
with more disposable income. According to one estimate,
over the past three years, consumer spending has
increased at a respectable rate of 12% per annum.
Earlier, a large majority of Indians believed in
the Spartan asceticism of the Father of the Nation,
Mahatma Gandhi. But the new generation of shoppers -
like their contemporaries worldwide - believe in living
for today and splurging at the mushrooming malls over
the weekends. These consumers, many of whom have been
exposed to shopping trends in the West, are also more
aware and discerning.
Another reason for the
ongoing boom in mall activity is the opportunity to
retailers for a greater accessibility to real estate at
affordable prices. Part of this is due to easier
availability of bank and institutional finance. And in
places such as Mumbai, the freeing up of much-needed
real estate. This has happened with the many closed
textile mills in the central part of the city now being
allowed to exploit their real estate for other
commercial purposes. Investors are attracted by the 14%
returns in the malls business, compared to 11% in the
office segment and 6% in the residential segment.
For the young crowd, malls have become areas in
which to "hang out", to catch up with friends in stores
like Cafe Coffee Days and Barista, each vying to be the
Starbucks of India. There's also an entertainment
factor, with more and more of the youngsters beginning
to see shopping as an enjoyable pastime. Many of these
are working women; the goods in the malls are now not
only enticing but attainable as well.
The mall
phenomenon is vividly captured by Paco Underhill in his
book Call of the Mall (Simon & Schuster), and
when he writes "the mall is the venue where the young
have their first taste of social freedom and the rest of
us compare notes", he could be talking about a location
anywhere in the world, including India. "Malls are very
much like television. Another totally fake environment
that attempts to pass itself off as a true reflection of
who we are and what we want. We disdain it, and yet we
can't stop watching. Or shopping," elaborates Underhill.
The mushrooming of the Indian malls is being
followed by a process of segmentation, each trying to
project a particular environment, a specific image. In
Mumbai, for instance, is Crossroads, the country's first
mall (opened in 1999), a chic, ultra-modern collective
of international brands including Swarowski, Lacoste,
Tag Heur and Marks & Spencer and eat-outs such as
Pizza Hut, Subway and McDonald's. At the other extreme
is R-Mall in suburban Mulund, proudly displaying
homegrown retail labels such as Big Bazaar (household
items), Hakoba (ladies' wear), Planet M (music), Food
Bazaar (groceries), Weekender Kids (children's wear) and
Pantaloon (men's readymades).
The phenomenal
success of Pantaloon if proof enough that the successful
mall of the future will store goods that are more
accessible to a broader segment of Indian society.
Launched in 1987 as the country's first ready-made
trouser brand by Kishore Bayani, Pantaloon has now grown
into the Rs4.5 billion (sales) Pantaloon Retail (India)
Ltd. Two months ago, Bayani launched his own mall, the
six-storied Bangalore Central, stocking more than 300
brands across a 120,000-square-foot area. Bangalore
Central also houses Central Square - a dedicated space
for product launches, impromptu events, exciting shows
and art exhibitions. Biyani will soon open new malls -
Hyderabad Central and Pune Central - in other Indian
cities.
Another group in expansion mood is
Shoppers' Stop. The Mumbai-headquartered chain employs
2,000 people at 16 stores and has ambitious plans to
expand to 25 locations by 2005. Lifestyle India is all
set to open seven shopping malls - each at a cost of
Rs100 million - over the next three years. By then, its
turnover expected to jump to Rs7 billion from the Rs4
billion at present (from seven malls). Lifestyle India
is looking at smaller Indian cities like Kochi, Indore,
Ludhiana, Chandigarh, Lucknow and Jaipur for its plan to
fan out all across India. Similarly, Piramal Holdings
Ltd, which pioneered the concept in India with
Crossroads, is planning to set up malls in four other
cities besides Mumbai.
But Bayani has a word of
caution for would-be entrepreneurs trying to cash in on
the booming mall business. "The taxation and legislation
system is complex and difficult to navigate," he has
said. Some analysts also warn that too many malls are
being built, creating a bubble that is likely to burst.
"The developers have to watch out that they don't
oversupply," cautions Megha Shenoy, a Mumbai-based
real-estate analyst. "As it is, only a handful of them
[developers] understand the retail property business
property. The majority are jumping onto the bandwagon
without even realizing the pitfalls."
According
to a survey conducted by global property consultancy
firm Cushman & Wakefield, not all mall operators are
likely to benefit equally. "Only the ones in favorable
locations and having the right format and suitable
strategies are likely to remain long-term players,"
informs the report.
But Indian businessmen are
known for their sheep mentality. A single success in any
new field spawns many me-too imitators. However, as is
evident from Indian business history, many private
airlines, courier companies and granite exporters have
bitten the dust.
The survivors in the mall
sector will emerge only once the dust has been cleared
from the frenetic mall-construction sites.
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