A well-formulated concept in developed countries such as UK and US, mall management as a practice in India is still in its nascent stage since it has started picking up only over the last decade or so. With the growing organised retail in the country, it has become critical for mall developers to manage their shopping centres more effectively in order to emerge as a winner in the fierce competition.
Shopping malls have become an essential part in an average Indian’s life. This is especially true in case of urban Indians. Nowadays, a weekend is considered complete only if a family has had an outing at a neighbourhood mall. We are already in midst of a retail explosion of a kind with malls and shopping centres mushrooming in large numbers across cities in India.
The mall revolution has not spared the tier II and III cities of the country as well. With the government allowing FDI in multi-brand retail, more and more foreign companies such as Wal-Mart are willing to set up shops in India. Finding that the leading metros are facing severe shortage of land, these shopping paradises are not averse to moving to tier II and III cities of the country. An average Indian now is truly spoilt for choices than ever before!
In matured markets such as the US and UK, the retail sector has developed into a full-fledged organised industry where over 75 percent of the total trade is done by the organised sector. India’s march towards retail as a modern industry started with the opening up of the economy with the adoption of the policy of economic liberalisation in the wake of globalisation during the early 1990s. This paved the way for more active participation of the vibrant private sector in economic activities, including the making of huge capital in retail business.
The congenial environment created by globalisation and economic liberalisation provided a tremendous fillip to trade and commerce and encouraged multinational companies to outsource as well as invest in India. The flow of FDI in India started showing an upward trend and still continues to do so. Big retail chains such as Wal-Mart and McDonald’s are now replacing the individual small stores across the country.
Concept of Mall Management
In India, mall management began with management functions of simple facilities, which basically entailed the operation and maintenance of malls. However, the scope of mall management services has by now been elevated to shopping centre management, which very few companies have upgraded their capabilities to in the current scenario. The expectations of clients are now on complete shopping centre management, which is a drastic shift from the earlier model.
Intense competition and an increasing number of footfalls have compelled mall developers to focus on core competencies and accurately researched offerings to target customers. This is where the concept of “mall management” comes in. At a time, when FDI in retail could be a possibility, mall management becomes even more imperative.
Availability of variety of services, exposure to brands, promotional offers and discounts under one roof are the factors that attract people to malls. The comfort of shopping in an air-conditioned and feel-good environment as well as access to a variety of food options act as added incentives to patrons.
In a scenario where the numbers of malls are multiplying, mall management has emerged as one of the most differentiating factors. Differentiating themselves from the competition is a sure way of emerging a winner, and this positioning is ensured through effective mall management. Managing a shopping centre is all about differentiating a mall from the rest, getting maximum footfalls, converting the footfalls to purchase and keeping the footfalls and tenants happy and satisfied. It strives to provide an entire consumer spend basket to make the mall a happening destination besides also creating and maintaining the adequate infrastructure. Right from the tenant mix, ensuring the creation of right ambience, and cleanliness that creates customer satisfaction to managing various income streams for the developer, the role of mall management is complex and dynamic.
Mall management is an important factor that defines the success of malls. It includes mall positioning, zoning, tenant mix, revenue sharing models, promotions/marketing, facility/finance management and a centralised help desk for customer service excellence. As the modern retail industry of the country is growing, developers must not only look to house the best mix of retailers but also set up new standards and procedures in mall management for differentiating their product and services. As complex as the task appears, an integrated solution that combines diverse functionalities can simplify the process tremendously.
A customer primarily comes to a mall expecting an enhanced overall experience and a large variety of goods under one roof. Therefore, managing a tenant portfolio that offers customers a unique set of options is imperative. There has to be a symbiotic relationship between the two where one thrives on the other’s success. A solution that imbibes this essential concept with the fundamental needs of mall management such as parking solution, promotion and event management, facility management, asset management, resource management, brokerage management and others is ideal.
Mall management covers management of functions, operations, marketing, accounts and customer service.
Functions in Mall ManagementFacilities management: Managing a mall requires developers to take complete responsibility for maintaining facilities in the mall such as plant and equipment management, housekeeping, and security. In India, most malls outsource these services to specialists. However, with acute competition and increase in the number of malls, developers and retailers are required to take control of this aspect of mall management.
The shift from sale model to leased model for financing of the malls has started. Retailers themselves have become savvier. With just one or two malls initially, they were ready to pay the rentals demanded just to get space. However, they have now realised that to sustain business, rentals should be reasonable and the mall should have a USP. Over the last few years, several techniques have emerged in marketing of malls. There are various types of SOPs offered by mall developers today and developers are tweaking rentals, coming up with innovative deals and offering value added services, in an effort to attract the right retailers.
Retail mix planning and selecting tenants: India is yet to come to terms with this concept. Earlier, mall managers did not have any control on the retail mix due to the initial financing model where mall developers sold the space outright. The space was sold to retailers willing to shell out a huge amount. You could find a high-end fashion retailer located right next to a mass market food retailer in the same section of the shopping centre. This often resulted in customers avoiding this section of the mall. With the evolution of more pragmatic business models, the mall manager’s key role has changed into planning the retail mix in tune with the overall ethos of the mall and selection of tenants accordingly.
Utilities management: Effectively monitoring the provision of basic utilities such as power, water, sewage disposal, and pollution control is an important function in mall management. Systematic utility management ensures that property owners are not subsiding tenants’ utility consumptions.
A well-managed parking with adequate space and ease of flow of vehicles goes a long way in ensuring repeat footfalls. In addition to that, parking generates valuable data, which helps the mall manager in customer behaviour analysis. The profile of the customer, her lifestyle, the average amount of time she spends per visit in the mall, and frequency of repeat visits give valuable pointers to the mall manager. Many of the malls outsource this function to specialist agencies.
Apart from these, there are many factors that contribute to the success of a shopping mall. These could be location, accessibility, or catchment size. However, one of the most important among these is an ideal tenant mix. This particular factor is critical for various reasons and is equally important to mall developers, retailers as well as end consumers.
Ideal Tenant Mix
The term “tenant mix” indicates the kinds of different retailers or service providers present in the mall as well as the amount of space and the location they operate in. Selection of the right retailers or service providers is extremely critical in terms of marketing as this defines the kind of consumers that will come to the mall. Shopping centres generally witness a generous mix of catchment crowd as well as people who are from outside the catchment area. If there is a mismatch between the needs of the catchment and the kind of tenants present in the mall, success is difficult to achieve.
Mismatch could occur in terms of buying capacity as well. If consumers feel that a mall does not offer products or services at prices they can afford, automatically they will not come to the mall and even if they do, the number of sales will not be commensurate with the investments made by the mall as well as the retailers. First impression can be the last impression, and this adage applies in the case of a mall too.
From a financial perspective too, a list of strong tenants and early leasing of spaces is important to a mall. This is because the mall developer benefits through the early rentals to pay off mortgages and for him it is an early ROI. Apart from this, from a long-term perspective too, this offers security in terms of income from rentals as well as assured prospects of good turnover growth leading to rental growth. Most malls, therefore, prefer hooking up with anchor clients in the first round of leasing, to attract both customers and smaller niche stores.
Once the shopping mall opens up and the number of vacant shops is huge, the consumer perceives that the mall as lacking because in an enclosed space the unlet premises are extremely conspicuous. This leads to a bad first impression in the consumer’s mind. The same applies to a tenant too; if prospective tenants see more of unlet areas, they perceive the mall as having failed to attract tenants and may even change their mind to set up shop in the mall. Arriving at the right tenant mix is crucial from the point of view of a developer. Those who can achieve the correct formula are clearly the winners.
A shopping mall witnesses a high number of footfalls at most times. Therefore, it is imperative that it is handled, secured and managed by the right people and in the right manner. At present, there are very few mall management companies operating in India. Most large real estate developers and retail chains either have their own mall management divisions or have contracts with international consultants.
The concept of mall management, which is still in its infancy in India, has the potential to change the fortunes of the retail sector. Properly practiced mall management will provide existing and future players a definite edge in the sector.