Home Retail Downtown mall — concept in Nagpur

    Downtown mall — concept in Nagpur

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    The Nagpur retail market consists of two intersecting streets – MG Road and Abhyankar Road. The market is popularly known as the Sitabuldi area and has approximately 200 retailers that form the bulk of the market. Estimates of footfals on both the streets combined are 70,000 customers on weekdays and 2,00,000 customers on weekends. Most retailers in the area have been operational in the same location for 40 years or more. The market has seen steady growth of 15-17 per cent per anum in sales. Shop interiors have upgraded over the years as retailers have kept up with the times.

    The intersection of the MG Road and Abhyankar Road has a prime property that is owned by the Buty family. Due to a road widening project, the property owners and its tenants went to court against the Nagpur Improvement Trust’s decision to compensate the businesses affected by the road widening. After prolonged litigation, the Supreme Court finally issued a judgment and empowered a builder to be appointed by NIT to redevelop the prime property into a mall which would house the tenants of the property and the Buty family and developer would have areas apportioned for the sale or lease of the developed mall. As per the judgment, 119 tenants would have to pay construction cost to the builder and would get 75 per cent of their existing frontage and carpet area in the mall.

    Consumer profile
    Modern retailers have expressed concern over the quality of footfalls in the market area. They also had concerns over buying power of the consumers and whether the market size was large enough to support a large development of the size planned.

    Extended catchment
    In the market, customers travel from surrounding areas of Yavatmal, Wardha, Amravati, Bhilai, Betul, Gondia, Chandrapur, Betul,with approximately 30 per cent of customers on any given day coming from outside Nagpur.

    GDP, liquidity and
    The Nagpur urban area may be approximated to a GDP of Rs.2,800 crores. It has a population of approximately 20 lakh projecting sales of Rs.250 crore; the projected market share of the Sitabuldi mall would be 8.9 per cent of the urban sales.

    Data from the leading bank, Bank of India, reveals a steady growth in deposits in the rural areas. A fair amount of liquidity is available in the market as can be seen from the ratio of deposits to advances. The economy could therefore be considered as being healthy for retail growth. Based on an assumed savings rate of 25 per cent the GDP for rural areas is approximated as Rs.11,040 crores.

    Since the Sitabuldi market is the main shopping destination for the extended catchment, the share of business for the mall will be only 2.2 per cent if the mall achieves Rs.250 crore in retail sales. The banking sector has experienced very low NPA (non performing assets) in the Nagpur area and no major bankruptcies have been reported in the region. A major reason is the accumulation of agricultural land by .

    Opinion of retailers
    The tenants at the Buldi Mall speak on the differences in consumer behaviour in malls and Buldi market and the likely consumer response to a downtown mall. Shyam Agarwal, owner of Gaysons and a tenant says, “Costs are higher in malls and so they become unfeasible for most retailers in cities other than Bangalore and Mumbai. Malls have become more of impulse buying destinations rather than requirement based shopping. For regular and festival requirements, the consumers stick to traditional retailers.”

    “This location offers an initial advantage but the top five retailers will be able to take advantage easier than the others since they have paid extra attention to the consumers and work hard as entrepreneurs.” Categories not sold in malls available in his shop — school uniforms, silver ware, infant needs, kids ethnic wear, ladies fashion slippers, high-end ethnic ladies party wear.

    , garments retailer and a tenant, says, “Malls are not successful in Nagpur because the merchandise is ‘HiFi’ and variety maintenance is low. They clothes sold have a different look from what customers want.”

    Kishen Agarwal, retailer in Buldi market since past 40 years, says, “This is the main market, and even though in their own way malls are successful, our counters have not been affected. Customers come from Yavatmal, Wardha, and other neighbouring small towns.”

    “The response will be terrific to a mall in Buldi, because most malls are located in odd locations where there is no shopping. The consumer in Buldi is middle to higher end.”

    Modern retailers have expressed concern over the quality of footfalls in the market area and over the buying power of the consumers and whether the market size was large enough to support a large development of the size planned.

    Karim Malik, home furnishing retailer since past 16 years in the market. He says, “This is a market unaffected by malls, in fact it is the malls that have not been successful. Consumers do not spend enough time in malls, they do not have the patience in that environment, whereas in our business, consumers need time and have to be patient. We go to the consumers homes twice – once to take measurements and once to deliver. We think our business will definitely increase when we go inside the mall. Most of our customers are middle and upper class people. Malls tend to give the impression that they are expensive and mostly it is restaurants that work well in malls.”

    “Customers in malls go in for one thing but roam the entire mall without purchasing anything else. People have the impression that two shops together compete, but the truth is that wherever two shops are together, both businesses increase. All the tenants are eager to have the mall built as soon as possible.” Categories not sold in malls in his shop – curtains, sofa cover cloth, mattresses, venetian blinds, bathroom accessories, flooring materials.

    Husain, owner, Montina shoes, says, “Customers expect to get a wide range of choices as well as value for money. Malls carry branded stock whereas we carry generic products. We have already got the footfalls. We have a very large database of customers already available with each retailer. The mall will have the highest number of entrepreneurs who know their business. The local shopkeepers know the local taste and what sells in volume. Local entrepreneurs would want first preference in the malls. It will go fast and should be offered first to existing entrepreneurs. It is not the brand or the ambience but the product its price and entrepreneur that get the response.”

    Developer’s take
    To understand the complexities of the project, we decided to talk to the developer, , from Goel Ganga Developers. He says, “There are four parties NIT, the landlords, the tenants and the investors. We have paid the charges for the NIT lease. Tenants have been taken care of and assigned their spaces in the new mall. We have made substantial payments to the landlords. Now, we need the finance. Keen interest in the mall has been expressed by several modern retailers.

    What we need are partners who have the expertise, or are willing to work with us in a . We need someone with retail domain knowledge, and we want this idea to become the best project in Vidarbha if not all of India.”

    “This is an integrated development approach where traditional and modern players will be integrated into the same mall.” “We are very flexible in the design of the mall, and are currently considering three different designs based on the availability of capital for the mall. We need to work out the feasibility along with the financial partners so that both partners may get our expected returns.

    The three designs we are considering are unrestricted model, restricted model and limited model. We need the partner to bring in capital, leasing and operational excellence and marketing expertise to the end consumers. We are projecting a 20 to 25 per cent return on capital based on the data we have gathered so far.”

    “Investors need to understand that this is an integrated development and traditional retailers will be the strength of the mall.” So why is capital not rushing in to the project? One answer seems to be that PE funds and modern retailers seem to think that traditional retailers pose too stiff a competition for them to be able to compete. So far, an integrated approach where modern and traditional retailers coexist has not been attempted on this scale and in such a great location.

    This project would set the trend for many more efforts that could prove to be the solution to many problems that retailers and developers are looking to solve. When we asked Atul about the challenges that he says, “We have overcome most of the challenges in the project, now we need to tie up the financial partner and we will create a landmark in Vidarbha.

    We have 40 years of goodwill from customers in this location, we are simply redeveloping the destination to create a more comfortable shopping experience.”

    Key Learnings
    • The design of a downtown mall, which is a redevelopment project has to take into account the key tenants – traditional retailers.
    • Operations of a downtown mall will be significantly different from traditional malls.
    • Design of facades and circulations for downtown malls need to be uncomplicated and easy to understand.
    • Street hawkers and vendors will have to be accommodated in the margins of the property thereby automatically incorporating a flea market in the mall area.
    • Entrances and exits and fire safety norms will have to be take into account because of very high numbers of footfalls and special arrangements may have to be made to ensure circulations are smooth on weekends.
    • Overheads, especially electricity and water, will have to be controlled by design and may have to include non air-conditioned atriums.
    • Traditional retailers expect mall management to control loitering and frivolous shoppers.

    By Rituraj Verma is director – retail agency,