Home Shopping Centre Foreign Brands Line Up For Quality Retail Malls

Foreign Brands Line Up For Quality Retail Malls

By  
SHARE

’s latest report ‘Is Indian Real Estate Heading Towards A Tectonic Shift?’ examines the transitions that India’s real estate has undergone over the past decade. Among the major trends is how the new breed of retailers is driving demand for quality retail supply and leading to frequent churn in retail malls.

Gone are the times when contract period tenures were typically in the range of 18-20 years for anchor tenants and 9-10 years for smaller vanilla retailers. More recently, contract periods have been shortened to anywhere between two and five years for vanilla retailers. Resultantly, in a few good malls with roaring business, the rate of churn has increased considerably.

On an average, when business is good, churn rates of around 15-18% have been recorded. This is abnormally high considering that it used to be in the range of 4-8% in well-managed malls in the initial period.
The good part of this churning, however, is that the market is realising its true value. Leading malls enjoy the privilege of deciding which brand to house and continuously monitor all stores that follow a revenue-sharing model, over and above a minimal fixed rental.

The revenue-sharing model has been increasingly in use to ensure both developers and retailers put in equal efforts to drive-in the much needed footfalls to the mall. Hence, non-performing brands are being weeded-out within fairly short periods of time and others being coaxed or forced to shift floors for better-performing brands to be accommodated.
Global as well as leading domestic brands either prefer to lease space in premium malls or go for high-street locations. In a way, there is pressure on malls to partner with only highly productive brands, or risk succumbing to competition from other malls in the vicinity. Good malls are currently in demand.

Foreign retailers expanding reach/ favour good malls
An increasing number of international brands want to enter India and lease space in high-performing malls. For instance, all national and international brands want to get launched from either a or in Delhi and , Oberoi, or Palladium in Mumbai.

Foreign retailers did not occupy more than 15% of the total retail space in organised malls in 2005, which increased to 18% in 2010, and close to 22% currently. Entry of big foreign brands such as Marks & and has led to a jostle for space within the good performing malls. It is the entry of these players that has resulted in a divide between successful and unsuccessful malls, as they heavily favour the former even at a higher cost.

The presence of foreign retailers is only going to rise in India, given that many brands have already expressed their intention to start operations here. This will make churn all the more necessary and rewarding. Already, mall developers have gone ahead and bought-out contracts of brands in order to accommodate a more premium brand.