Is Reliance Retail’s performance matching Mukesh Ambani’s expectations?

May 31st, 2013

Growth in our organised retail business is reflective of the changing habits and increasing aspirations of millions of fellow Indians who seek modern conveniences without losing focus on value. In a short period and as a reflection of consumer preferences, Reliance now has leadership positions in food, apparel and consumer electronics retailing in the country. With over 1,300 stores operational and more being opened, Reliance is positioned to be India’s premier retailer even as organised retailing becomes a more meaningful part of the changing consumer preference in the country,” says Mukesh Ambani’s in his Letter to Shareholders published in the 2011-12 Annual Report of Reliance Industries Limited (RIL), India’s second largest company (by sales), after the public sector Indian Oil Corporation.

In the first time in six years since Reliance entered the retail business, this business has managed to get almost 10% share of Mr. Ambani’s Letter to Shareholders and more than 15% share of the Business Performance portion of the Management’s Discussion & Analysis section in the latest Annual Report. More importantly, RIL has invested Rs. 5027 crores ($967 million) in the retail business last fiscal – more than it ever did earlier.

Does this mean that the time has come for Reliance Retail to shed its diapers and start taking big boy steps? After all, a six year old cannot be considered a baby any more.

With a sales turnover of Rs. 7599 crores ($1461 million) in FY12, RIL’s retail business is a small drop in the ocean for this megacorp, representing just 2.24% of its total turnover, not even finding a separate mention in RIL’s segment wise revenue.

And if RIL itself continues to grow at a CAGR of 30.2% (like it has grown over the last five years), then a growth of only 25% per annum in the retail business will just make the share of the retail business smaller by the year.

Despite being present across several formats, Reliance Retail now ranks as only the fifth largest Indian retailer, after Future Group (Pantaloon Retail India Limited), Malabar Gold, Kalyan Jewelers and Titan Industries Limited.

It is senseless comparing Reliance with other Indian retailers, as it is bound to become No.1 in the next 2-3 years. But we all know that this will not satisfy Mukesh Ambani’s ambition. For him, the real competition is not Future Group – it is Walmart.

So how does Reliance’s retail business compare with Walmart and other global retail giants?  The table below shows Reliance’s turnover compared with the Top 4 global retailers and the Top 4 Asian retailers – with additional comparisons based on the purchasing power parity (PPP) index, as well as the Big Mac Index.







Walmart USA




Tesco UK




Carrefour France




Metro Germany




Seven & I Holdings Japan




Aeon Japan




Yamada Denki Japan




Suning Appliance China




Reliance Retail India




Asipac Research, Data based on published information available


Obviously, Reliance is currently nowhere on the radar. Even on a PPP basis, Reliance’s revenues are less than 1% of Walmart’s, just about 3.4% of Tesco’s and less than 9% of the revenues of China’s largest retailer Suning Appliance. Can Reliance therefore do a Pearl Harbour on the American behemoth Walmart? Seems highly unlikely for the next 30 years, even on a PPP basis.

However, if Reliance continues to grow at a steady 25% p.a. for the next several years, it can probably cross Asia’s largest retailer Seven & I Holdings (the operator of 7-Eleven stores, Denny’s restaurants and other retail formats) on a PPP basis in 16 years and on real revenue terms in 22 years, assuming that Seven & I will grow at only 4% p.a.  With the same growth rates, Reliance can also overtake Europe’s largest retailer Tesco in 20 years on a PPP basis, and 25 years on real revenue terms.

What will make Reliance a global retail giant and make all of us (Indians) proud? For this, we need to do an analysis of the company’s different retail formats and predict what may be a winning strategy going forward.

The Annual Report says: “Despite challenging macro-economic conditions most of the retail formats have delivered well over 20% same store sales growth. Same stores sales growth has been well above the growth declared by peer retailers in respective formats which indicates the robustness of the business model.” Let us take a close look.

Reliance Fresh, Reliance Super and Reliance Mart

The food & grocery (F&G) business contributed more than 51% to Reliance Retail’s revenues in FY12. With sales of almost Rs.4000 crores, Reliance is now clearly No.2 in F&G retailing, behind Future Group, which was estimated to have sales of more than Rs.7000 crores from its four F&G formats (Big Bazaar, Food Bazaar, KB’s Fairprice and Food Hall) during the comparative 12 months (Future Group’s listed flagship company, Pantaloon Retail India Limited, has its fiscal year from July to June, compared to the standard April to March fiscal year for Reliance).

It will probably take another three years for Reliance to overtake Future Group as India’s largest food & grocery retailer.  As it is probably quite well known to most of the readers of this publication, Reliance has had three major changes at the top layer of management in this business and this is perhaps the main cause that Reliance is still more than 40% behind Future Group in F&G retailing.

At the time of commencement of operations, the F&G business was led by former Unilever executive Gunender Kapur, who ran it for the first three years. He was reporting to the Late Raghu Pillai, who was with Reliance Retail from inception.

In December 2009, Reliance brought in four senior executives (two Thai nationals and two Britishers) from Tesco Lotus (Thailand) to spearhead this business. Tesco Lotus operates 660+ F&G stores in Thailand, including 88 hypermarkets. Both Pillai and Kapur quit Reliance Retail within a few months.

About 21 months later, the top management was rejigged again. This time, perhaps realizing that it needed people experienced in a far bigger market than Thailand, Reliance brought in Rob Cissell, former COO of Walmart China, as CEO, and Shawn Gray, vice president of store operations of the same company, as COO. Walmart China has around 333 outlets, generating $7.5 billion in revenues. Cissell was responsible for store operations, merchandising, marketing and supply chain at Walmart China. Before going to China, Cissell held senior positions in different British retailers. Gray was with Walmart for over 19 years, having spent nearly 13 years in China where he led the team that opened and integrated hypermarkets.

It perhaps makes better sense for Reliance’s F&G business to be led by senior executives from Walmart China, than by people from Thailand. However, it has (unfortunately) taken five years for Reliance to realize this. And this has hurt the company.

The change is already becoming visible to consumers – the foods sections and the FMCG section of the new (or revamped) Reliance Marts (hypermarkets) are amongst the best in the country. Now Cissell and Gray must revamp all the Reliance Fresh stores and start opening new ones at underserviced locations. They must follow Sam Walton’s strategy of servicing small towns and semi-urban areas instead of concentrating on the Top 30 cities, as Reliance has done in the past. They must identify new locations from a chopper or small aircraft rather than from a car.

As the chart shows, as per Asipac’s estimates, Reliance already has a 12.7% share of the organized food & grocery retail market, but only a 0.5% share of the total market. This is the opportunity.  China’s largest F&G retailer, Bailian Group, had revenues of RMB 141.5 billion ($22.4 billion) in 2011, giving them a 2.3% share of the $975 billion Chinese F&G market. If Reliance can replicate this in India in the next five years, its F&G business alone can have revenues of Rs.33,000 crores.

I would like to point out that RIL’s annual report states that the Indian F&G market is worth Rs.16,25,000 crores, which translates to about 68% of the total Indian retail market. A correction is needed here. We have been reading about food & grocery being 65-70% of the total retail market for the last two decades, if not more. India has moved on. The share of F&G in total retail is not as high today, as it used to be 2-3 decades ago. At that time, mobile phones and laptops did not exist, there were no branded apparel and lots more that we consume today.

As per Asipac’s research, the personal automobile retail industry alone is estimated to be worth Rs.2,33,500 crores, and the CDIT (consumer durables, IT and telecom) retail sector is estimated to be worth Rs.1,89,300 crores.

The total consumption of food & grocery (including FMCG products) in the country is estimated at Rs.11,30,000 crores, or about Rs.9200 per capita. However, the retail market comprises just about 73% of consumption (or Rs.8,26,600 crores), as the rest is accounted for by farmers or fisherman consuming their own produce. Thus, the F&G retail market accounts for only 33.4% of the total Indian retail market, and not 65-70%, which was the case 20-30 years ago. Reliance should be happy that it has a smaller market to conquer.

Before I move on to the next format, I would like to suggest that Reliance should look at the possibility of creating an Indian equivalent of 7-Eleven, the small neighbourhood convenience store which is ever so popular across the rest of Asia. There are more than 42,000 7-Eleven stores in 16 countries worldwide, with 13,300+ stores in Japan alone and more than 6500 in Thailand. The chain has global revenues of approximately $112 billion, putting it at almost the second spot amongst global retailers, if all franchisee sales were consolidated with the Japanese parent, Seven & I Holdings.

Given the size of India, there is easily a market for 20,000+ such stores in the country. Being much smaller in size compared with Reliance Fresh, finding real estate will not be such a challenge. Like in other countries, 50-70% of the stores could be franchised. The average sale of a 7-Eleven store in Thailand is 31.7 million Baht. In India, such stores can easily achieve sales of Rs.25 million apiece. Thus, 20,000 stores would translate to sales of Rs.50,000 crores. If Reliance does implement this idea, I will send them an invoice for the advisory services.

Reliance Digital

Perhaps, the most successful amongst all of Reliance’s retail businesses is its CDIT format – Reliance Digital. This business achieved a turnover of Rs.1249 crores, including its servicing business resQ, in FY12. From a total of 48 stores (31 Reliance Digital and 17 iStore) at the end of FY11, the CDIT segment almost doubled total store count to 94 (75 Reliance Digital and 19 iStore) at the end of FY12. Opening 44 Reliance Digital stores in a year – one every 8.3 days – was a feat in itself.

The credit for this stupendous growth goes to Brian Bade, an American who joined Reliance Digital as its CEO in August 2010. Bade had worked at the now defunct American CDIT retail giant Circuit City for more than 17 years, starting as a District Manager in 1991, and rising up in 2007 to the position of vice president responsible for sales development and merchandising for all of Circuit City’s 712 stores. For a year before joining Reliance, Bade also served as vice president at Big Lots Stores, a $5.2 billion discount retailer in USA.

While Reliance Digital is now the No.1 large format (average 7500+ square feet) CDIT retailer in India in terms of number of stores (compared with 72 stores of Croma, a joint venture between Tata and Woolworth of Australia), it still lags behind Croma in revenue terms – Croma had revenues of Rs.1970 crores in FY12. Further, Croma’s revenue per store is almost 70% higher than that of Reliance Digital.

The Indian CDIT retail market is estimated to be worth Rs.1,89,300 crores, as per Asipac’s research. The organised sector has just 19% market share. In a category where consumers would like to buy from a “reliable” source, there is no reason why the organized sector cannot capture 50-60% of the market.

The total market is estimated to reach Rs.3,90,000 crores in five years. So, if the organized sector can capture 60% of this market in five years, this would translate to revenues of Rs.234,000 crores. And the market leader should ideally have a 15% share, or revenues of Rs.35,000 crores. (Note: Croma already has 5.5% share of the organised market)

Japan’s Yamada Denki has 2700+ stores and revenues of more than Rs.1,40,000 crores. China’s Suning Appliance has revenues of Rs.1,28,700 crores from 1300+ stores. There is no reason why Reliance Digital cannot reach revenues of Rs.35,000 crores in five year or even lesser time. Will Reliance reach this milestone first or Croma? This will truly be a battle of the titans.

Reliance Trends

The apparel arm of Reliance Retail has also been an above average performer. In terms of number of stores, Reliance Trends (with 91 stores) is now larger than Max (68 stores), Pantaloon (65 + 21 factory outlets), Westside (62), Shoppers Stop (51), Globus (35) and Lifestyle (33). This in itself is a commendable feat, considering that all the other retailers named here have been in business much longer. As many as 48 stores were open during FY12, rivalling the pace of Reliance Digital in terms of expansion.

However, while Reliance Trends may be No.1 in terms of stores, its per store sales are much lower than most of its peers – namely Pantaloon, Westside and Max.

Japanese value fashion giant Uniqlo, whose business is similar to that of Reliance Trends, has 1700+ company operated stores worldwide, with sales of more than Rs.55,000 crores. Value fashion retailing has huge potential in our country, given that urban India alone has more than 120 million consumers who like to shop in modern retail outlets, but are also seeking value. In comparison, Japan’s urban population is just 85 million.

So, if Uniqlo can have 1213 stores serving 85 million consumers (one for every 70,000 persons), why can’t Reliance Trends have at least 857 stores (one for every 140,000 persons, or half the ratio of Uniqlo stores in Japan)? If it manages to reach that number in five years, with an average per store sales growth of 12% p.a., this value fashion retailer can achieve revenues of more than Rs.11,000 crores.

Uniqlo is not the only example. American retail group TJX has 1753 stores of TJ Maxx and Marshalls (both discount fashion retaiers) in USA, and 215 stores of Winners (also a discount fashion retailer) in Canada. Its European subsidiary TK Maxx has 307 stores. As per TJX’s 2011 Annual Report, 37% of Americans shopped at a TJ Maxx or Marshalls store in 2010.

The total apparel and fashion (A&F) retail market in India is estimated by Asipac to be worth Rs.5,95,000 crores. Of this, the organised sector is estimated to have just 5.77% share. With deeper pockets than others in the business, Reliance can take the leadership position. However, it cannot address a Rs.5,95,000 crore market with just one format which averages a store size of 16,000 square feet. Uniqlo’s largest store occupies 53,400 square feet. TJ Maxx has an average store size of 30,000 square feet; Marshalls and TK Maxx have 32,000 square feet each.

In RIL’s annual report, it is stated that the overall apparel market in India was estimated at Rs.175,000 crores in 2011. Without knowing the source of this estimate, I wish to categorically state that it is way off the mark. A total market size of Rs.1,75,000 crores would put average per capita consumption at just Rs.1423 per annum. How can this be believed? This figure is close to the bare minimum spent by the 400 million deprived people in India on must-have clothing.

If Reliance has to capture a substantial chunk of the Rs.5,95,000 crore Indian A&F market, it must come up with more formats in this segment. And there are opportunities galore.

Reliance Trends, along with Lifestyle, Shoppers Stop, Pantaloon, Marks & Spencer, Westside and Max, are all catering to the 22 million “urban upper middle class” population.  As per Asipac’s research, this section of the population is estimated to have a total consumption expenditure of about Rs.4,65,000 crores, of which apparel & fashion is estimated at about Rs.40,000 crores. The 167 million “urban middle class” either shops at discount formats (such as Big Bazaar or other hypermarkets or Brand Factory) or at unorganised retail outlets.

In comparison, the 10.5 million “urban rich” are estimated to have a total consumption expenditure of about Rs.5,03,000 crores, of which apparel & fashion is estimated at about Rs.65,500 crores. Even though this market is 64% larger than the “urban upper middle class”, no retailer is catering to this segment.

What I am suggesting is that Reliance should seriously consider opening department stores to cater to the “urban rich”. Not pseudo department stores like the ones we have in India (where more than 80% of the merchandise is apparel), but proper department stores, which sell apparel, furniture, home appliances, electronics, hardware, toiletries, cosmetics, jewellery, toys and sporting goods, merchandise that is generally sold in department stores worldwide. If we include all of this, the “urban rich” buy Rs.2,20,000 worth of such merchandise annually. If one includes some amount of food & grocery (which many department stores sell), we are talking about a market of almost Rs.2,50,000 crores.

Since there is no competition in this segment, the task is not difficult. As the rich don’t mind traveling a bit (most have chauffer driven cars), Reliance would only need to open 3-4 stores of 150,000 – 200,000 square feet each in NCR and Mumbai, 2-3 each in Bangalore, Chennai, Kolkata, Hyderbad and Pune, and 1-2 each in Ahmedabad, Jaipur, Surat, Nagpur, Lucknow, Ludhiana, Indore and Vizag. So we are talking a total of 30 stores in 15 cities, occupying a total of about 5 million square feet.

This “upscale” department store chain should contribute revenues of about Rs.12,000 crores. Together with the value fashion format Reliance Trends, Reliance can look forward to achieving sales of Rs.23,000 crores in the apparel & fashion segment.

Reliance Jewels

What could have been a jewel in Reliance Retail’s crown is perhaps its biggest failure. With sales of just Rs.475 crores, Reliance Jewels does not even figure amongst the Top 30 organised sector jewellers in India. Compared to market leader Malabar Gold & Diamonds (estimated sales Rs.8800 crores in FY12 from only Indian stores), its turnover is just 5.4%. Compared to its more comparable peer Tanishq (sales of Rs.7064 crores in FY12), from where it poached most of its senior executives, its turnover is just 6.7%. In fact, Reliance Retail’s total turnover from all formats is less than that of these two jewellery retailers.

Skeptics may argue that Malabar Gold & Diamonds and Tanishq have been in the business much longer. But then, so is the case of Future Group vs Reliance’s F&G formats, or eZone vs Reliance Digital, or Westside vs Reliance Trends, or Titan Eye+ vs Vision Express.

Apart from other factors, one of the most important factors for the success of a jewellery retail business is the ability to invest – and who better than Reliance as far as this is concerned? It is therefore inexcusable that Reliance Jewels has manged a turnover of only Rs.475 crores, in a total market size of almost Rs. 2 lakh crores, where the organised market comprises Rs.82,730 crores.

Reliance Jewels’ share of the organised jewellery retail market of just 0.6% is much lower than the market shares of other Reliance Retail formats in their respective segments, and less than a third of Reliance Retail’s market share of the total Indian organised retail sector.

China’s Chow Tai Fook, with 1450+ points of sale across 320 cities in China and 60+ stores in Hong Kong, and sales of about Rs.23,000 crores, is the world’s largest jewellery retailer.  Tiffany & Co., with global sales of about Rs.19,000 crores, is the second largest jewellery retailer in the world.

But we don’t need international comparisons in a segment where as many as 18 Indian jewellery retailers have turnovers of more than Rs.1000 crores each, and the Top 5 more than Rs.3000 crores each.

Malabar Gold & Diamonds will most likely cross a turnover of Rs.10,000 crores this fiscal within India. There is no reason why Reliance Jewels should be aiming at less than this figure in five years. In order to achieve this, it will have to get its act together.

Reliance Footprint

This is another of Reliance’s formats that has done reasonably well, by carving a niche for itself in a sub-segment not addressed by any others – of being a sort of multi-brand value superstore in the footwear segment.

With a turnover of Rs.155 crores giving it a 3.2% share of the organised footwear market, Reliance Footprint has done reasonably well. However, eight other retailers/brands (Bata, Reebok-Adidas, Metro-Mochi, Khadims, Woodland, Liberty, Nike and Sreeleathers) are ahead of Reliance Footprint in terms of turnover.  Of these, the legendary Bata, with a turnover of Rs.1659 crores (12 months ending March 2012) from 1300+ stores, is almost 11 times larger.

Like Reliance Trends and Reliance Digital, this Reliance format also added 50 stores this year, more than doubling its stores to a total count of 88. But Reliance Footprint has a long way to go, as Bata has 1300+ stores, Khadims has 630+, Liberty and Woodland about 350 each, and Metro-Mochi 215 stores.

Internationally, a similar format to Reliance Footprint is Famous Footwear in USA. Part of Brown Shoe Co., this 1089-store chain had a turnover of about Rs.7600 crores in 2011. Average store size is 6900 square feet, compared to about 4000 square feet in the case of Reliance Footprint.  Another American retailer Designer Shoe Warehouse has 335 stores averaging a size of 22,000 square feet. UK’s Shoe Zone has 570 stores. The world market leader in this segment is Payless ShoeSource (PSS), with a whopping 4300+ stores in 34 countries across the world. The average size of a Payless ShoeSource store in USA is 3200 square feet and in international markets 2800 square feet. Payless’ domestic operations had a turnover of about Rs.10,300 crores from 3642 stores in USA. Their international operations had a turnover of about Rs.2440 crores from 661 stores.

So, whether we compare it with international value footwear retailers or with Indian footwear single brand or multibrand retailers, Reliance Footprint still has a long way to go, both in terms of the number of stores and turnover. There is no reason why this retailer cannot aim for a turnover of Rs.5,000 crores in five years, by when the Indian footwear market would have crossed Rs.1,00,000 crores.

Reliance Timeout

With a 5.3% share of the organised retail market in the segment it caters to, Reliance Timeout comes second only to Reliance’s F&G business in terms of market share capture. However, a turnover of less than Rs.100 crores in a Rs.89,000 crore total market means it still has a long way to go.

This retailer grew much slower than its counterparts – perhaps due to the fact that, globally, retailers in this segment are facing challenges due to eBooks, MP3 downloads and all kinds of other impediments brought about by the internet. Only time will tell whether Timeout will survive – after all, many global giants in the books & music retail segement are floundering.

Other Formats

Reliance Living, Reliance Home Kitchen and Reliance Wellness have all been disasters and it is not clear if Reliance will continue these businesses.

Reliance Brands has done reasonably well by bringing to India such iconic brands as Diesel, Timberland, Steve Madden, Brooks Brothers, London Fog, Quiksilver, Paul & Shark, Roxy, Thomas Pink and Ocean Pacific. This business could easily give Reliance revenues of Rs.3000+ crores in five years.

Hamleys has been somewhat of a disaster in the country. Three years after Reliance got this iconic British toy retailer to India, only two stores have opened – one each at Mumbai and Chennai – while the opportunity exists to open stores in at least five other cities. Dubai alone has two Hamleys stores.

Marks & Spancer has done much better in India after forging a joint venture with Reliance, compared with its earlier avataar of franchising the concept to Planet Retail. This retailer is likely to do even better by shedding its inhibitions and opening larger stores – after all, its average store size of 15,000 square feet in India does not do justice to the fact that M&S is opening stores of 70,000 – 180,000 square feet in the UK.

The Vision Express joint venture has done very well, with 155 stores now operational across India.  At its rate of growth, this retailer is on track to surpass Titan Eye+ and become the largest eyewear retailer in the country.


In summary, what has been presented here is not just an in-depth analysis of Reliance Retail’s performance, but also a potential roadmap for the company to achieve a sales turnover of Rs.1,60,000 crores in five years – 21 times its present turnover.

If the parent RIL continues to grow at 30.2% p.a., it will have a total turnover of Rs.12,71,000 crores in FY17. At Rs.1,60,000 crores, the retail business will contribute 12.6% to the parent’s topline and will thus be a part of the segment-wise financial reporting of RIL.



Jewellery Retail: Why do Indian jewellers shun malls? – Jun-Jul 2012

May 10th, 2013

The jewellery & watches retail market in India is worth Rs.180,500 crores, making it the third largest in the world. The US market was estimated at $85 billion (Rs.436,000 crores) in 2011, more than 2.4 times the size of the Indian market.  The Chinese market was estimated at 300+ billion Yuan (Rs.244,000+ crores) in 2011, 35% larger than India’s.  The Japanese market, at ¥910 billion (Rs.57,700 crores) in 2010, is less than a third of the Indian market. It has fallen almost 70% in 20 years, showing the decline of Japan as a major economy.

The overall consumption of jewellery (including gold) in India is much higher at Rs.278,000 crores and represents almost 6% of our nation’s private consumption expenditure – the difference between consumption expenditure and the retail market size being accounted for by gold or custom-made jewellery which is not sold in retail outlets.

Within the overall retail market for jewellery & watches, organized retailers (those with a minimum of 10 outlets or minimum turnover of Rs.50 crores) account for Rs.76,800 crores, or a whopping 42.5% – the second largest organized retail penetration after automobiles. There are about 80 jewellery & watches retailers in the organized sector, with 3150 retail outlets. The Top 20, with 2250+ outlets, account for Rs.56,700 crores in sales, which translates to almost three-fourths of the organized sector market and almost one-third of the total market.

The top 2 spots go to Kerala based jewellers. Kozhikode based Malabar Gold & Diamonds is the No.1 jewellery retailer in the country, followed by Thrissur based Kalyan Jewellers. The two major national players Titan-Tanishq (including Gold Plus) and Gitanjali Group follow at No.3 and No.4.

India’s top 3 J&W retailers – Malabar Gold & Diamonds, Kalyan Jewellers and Titan-Tanishq – will rank amongst the Top 10 J&W retailers in the world, based on their sales.

Malabar Gold & Diamonds is expected to have an estimated turnover of Rs.8,800 crores in the just ended fiscal year from 44 outlets in India (it also has 20+ outlets in the Middle East). Kalyan Jewellers’ sales are estimated at Rs.8500 crores from 30 outlets across South India. It was recently in the news for buying an Embraer jet worth Rs.30 crores. Both are expanding rapidly. Malabar Gold & Diamonds, currently present in South India and the Middle East, is expanding nationwide in India and also has plans to open stores in South East Asia.

Eleven of the Top 20 are based in South India. It is surprising that most of the published research reports on this sector do not even recognize the existence of the South Indian jewellery retail giants, which have a combined turnover of more than Rs.40,000 crores.

The world’s largest retailer Walmart was also the largest jewellery retailer in USA, with estimated jewellery sales of about $2.9 billion (Rs.14,880 crores) last year. Signet Jewelers is No.2, with domestic sales of $2.74 billion (global sales $3.44 billion) from 1300-odd stores. No.3 is Zale Corporation, with 1160+ retail stores, 670+ kiosks and five online stores, and annual revenues of $1.74 billion, roughly the size of Malabar Gold & Diamonds.

China’s largest jewellery retailer, Chow Tai Fook, with 1450+ points of sale across 320 cities in China and 60+ stores in Hong Kong, and sales of $4.5 billion (Rs.23,000 crores), is also the world’s largest jewellery retailer.  Chow Tai Fook has a market cap value of Rs.79,300 crores, 3.75 times that of Titan.  Second largest Chinese jewellery retailer Lao Feng Xiang has estimated sales of $1.8 billion and No.3 Chow Sang Sang about $1.65 billion, which is less than that of Malabar Gold & Diamonds.

Tiffany & Co., with global sales of $3.6 billion, is the second largest jewellery retailer in the world. Only half of its sales are in the US, where it is the fifth largest domestic retailer.

The top two Japanese retailers As-me Estelle, with sales of ¥27.07 billion (Rs.1717 crores) and Kuwayama, with sales of ¥25.06 billion (Rs.1588 crores), would not even make it to India’s Top 10 in terms of sales.

Per capita consumption of jewellery in India is Rs.1480, compared to Rs.12,500 in USA, Rs.10,700 in the EU, Rs.4850 in Hong Kong, Rs.4530 in Japan and Rs.1825 in China. In urban India, it is Rs.3735 and if we account for only the urban middle and upper classes, it goes up to Rs.8360 per person.

Retailing of jewellery & watches accounts for 7.2% of the total Indian retail market (including automobiles), whereas organized jewellery & watches retailing forms 19.8% of the total Indian organized retail market.  Yet we don’t see this phenomenon represented in Indian shopping centres – why?

Based on different trading densities in different retail categories, Asipac has estimated that about 7.8% of the total carpet area in an Indian shopping centre should be dedicated for the retailing of jewellery and watches.  Therefore, in a shopping centre with 350,000 of total carpet area (GLA of 500,000 square feet), as much as 27,300 square feet should be dedicated to jewellery & watches. Assuming that a centre of this size caters to a catchment of 200,000 people in the middle and upper classes, we are talking about annual expenditure of Rs.167.2 crores (at Rs.8360 per person) on jewellery and watches. This translates to a trading density of Rs.5100 – which is in line with the trading density in this segment.

As jewellery and watch counters in department stores would account for about 2,300 square feet out of the 27,300 square feet, the balance 25,000 square feet has to be spread across 10-15 vanilla stores in this segment. Barring maybe one or two, no shopping centre in the country has done this.

What is the reason that Indian shopping centres do not have enough jewellery & watches stores? In my mind, one of the reasons could be that jewellery retailers typically like to buy property rather than rent. Therefore, shopping centre developers who do not wish to sell shop spaces can look at an alternative. If they are expecting a rent (including CAM) of Rs.125 per square foot on carpet area, with an escalation of 15% p.a., they could take a one-time deposit of Rs.9723 per square foot in lieu of 12 years’ rent & CAM. This is the NPV (net present value) of the future rent & CAM payments for 12 years (including 15% escalation in the fourth, seventh and tenth years), taking cost of money at 15%.

For a jewellery retailer, it would be quite easy to pay this one-time deposit of Rs.9723 per square foot, as he would be already investing more than Rs.30,000 per square foot in interiors and inventory. This would make it a win-win situation for both parties – the landlord and the tenant.

The Tanishq store at Inorbit Mall in Malad (Mumbai) is the best performing Tanishq store in the country. Reliance Jewels is doing well in good malls. Malabar Gold & Diamonds has signed up at Forum Mall Chennai. With roughly 25-30 organized sector retailers present in every region, it is about time that we see 10-15 of them in every shopping centre of 500,000 square feet. Otherwise the “Indian experience” is not complete.


Amit Bagaria is Chairman of ASIPAC, India’s leading mall development and leasing consultants and MEN & BOYS, Asia’s largest chain of retail stores for men’s skincare and grooming.

The impact of Foreign Direct Investment on the Indian retail sector – December 2011

May 10th, 2013


The 24th of November 2011 was a historic day for Indian retail. The cabinet of ministers of the Government of India cleared the commerce ministry’s proposal to permit 51% foreign direct investment (FDI) in multi-brand retail (with several riders), as well as 100% FDI in single-brand retail (51% was already allowed in single-brand retail).

On a panel discussion on CNN-IBN, serial consumer activist Bejon Misra was shouting at the top of his voice that FDI in retail is not good for Indian consumers.  When being asked by R.Subramanian, founder of Subhiksha, to explain his logic, Misra retorted that his kirana, Guptaji, gave his family goods on credit, while organized sector hypermarkets and supermarkets did not.

“I don’t need credit, I need the choices that hypermarkets offer me, which kiranas don’t” said Sriram Khanna, Managing Trustee, Consumer Voice, “while no one is stopping you from continuing to shop at Guptaji’s kirana store, how can you stop me from getting the choices I want? After all, India is a free-market democracy, so let 1.2 billion consumers decide where to shop, instead of you deciding for all of India.”

This probably sums up the mood of the Indian consumer – GIVE US CHOICE. As one travels through Rishikesh in the North, Ajmer in the West or Mysore in the South, you can see more and more consumers flocking to neighbourhood supermarkets which are giving them a choice of brands and products at different price points, allowing them to participate in India’s consumer boom. How can anyone representing a small section/segment of society decide how 1.22 billion people should shop?

Raj Jain, MD & CEO of Bharti Walmart said: “We are grateful that the Government has realized and appreciated the value that Wal-Mart will bring to strengthen the Indian economy.   This will positively impact the Indian market and will also contribute toward India’s image as one of the world’s fastest growing economies and a welcoming destination for international businesses. We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation.”

Bharti Walmart Private Limited is a joint venture between Bharti Enterprises (better known for their telecom brand Airtel) and the $405 billion Walmart, the world’s leading retailer, renowned for its efficiency and expertise in logistics, supply chain management and sourcing.  Walmart employs over 2.1 million people across 9826 stores under 60 different banners in 28 countries. The joint venture has wholesale cash-and-carry and back-end supply chain management operations in India. The JV has nine Best Price Modern Wholesale stores which employ 3,372 people. Bharti Retail, wholly-owned subsidiary of Bharti Enterprises, operates neighbourhood stores called Easyday, compact hypermarkets called Easyday Market and hypermarkets called Easyday Hyper.

Kishore Biyani, MD of Future Group (Pantaloon Retail India Limited) agrees: “Its a big win for the agri-sector as investments in back-end in the agri-sector will result in better prices for the sector and reduce inefficiencies, thereby getting better prices for the farmers.”  Pantaloon Retail had sales of Rs.122.12 billion ($2.35 billion) in fiscal 2011, with operational retail space of 15.24 million square feet, with more than 50% of that space occupied by its hypermarket format called Big Bazaar.

“It will help at the farm level by improving productivity and possible better earnings for farmers, as well as investment in food processing. It will also help in generating employment at the farm level as well as in the supply chain,” commented Saloni Nangia, SVP Retail, Technopak Advisors.

Adds Goldie Dhama, Associate Director, PwC India: “Increased investment in back end (supply chain and cold storage) infrastructure will help in reducing the wastage percentages of 30-40% of food produce from farm to fork. Technology transfer to Indian companies will enable best practices in crop management and food safety and hygiene – thereby improving the quality of food products across the board.”

One needs to ask how kiranas will get affected differently by foreign food & grocery (F&G) players, compared with Indian giants in this business (Reliance, Tata, Aditya Birla, Raheja and Future Group) and by foreign retailers such as Wal-Mart and Spar, who are operating through licensing or similar arrangements. What can new foreign retailers do (to harm kiranas) that these players cannot?

“This is a very progressive step and consumers will get a far wider range of quality products at better prices,” said Viney Singh, MD of Spar’s licensee Max Hypermarkets, part of the Dubai-based Landmark Group, “it will also benefit farmers and the industry that feeds into retail. Currently, many states do not permit us to procure directly from farmers, as these state governments feel that farmers will get exploited with so few organized F&G retailers in India. With many more players (with the capital, scale and organizational capabilities) now coming in and building the scale required at the front-end, the same state governments will understand that the farmer will get the best prices, as he will have many organized buyers to choose from. So I expect a lot of change in local APMC laws going forward.” Spar currently has 10 operational stores in India and Singh expects to close the current year with a turnover of Rs.5.8 billion ($0.116 billion). In 2010, Spar worldwide had retail sales of $39 billion from 12,136 stores in 33 countries. Singh does not believe there will be any change in the Spar – Landmark Group relationship, as Spar does not invest in most foreign markets, where it follows a licensing/franchising model.

By 2015, Urban India will have a population of 423 million people. They will need 635 million square feet of total space for food retailing (includes grocery, pharma, beauty & FMCG), at 1.5 square feet of per capita food retail space, compared to about 511 million square feet today, including space occupied by modern trade as well as traditional retailers and neighbourhood kiranas. The western world has an average of 3.1 square feet and South-East Asia 1.82 square feet.   If we assume that the organized sector (including existing players) will capture only 7.5% market share in four years, we will have an estimated 47.63 million square feet of hypermarkets, supermarkets, convenience stores, pharmacies and drugstores by 2015, compared to about 15.3 millon square feet today.

The main opposition party BJP and the permanent opposition left parties say that foreign retailers will cannibalise the business of kiranas. Even if foreign retailers capture 50% of the organized sector’s total market share (which itself is a tall order) and thus have 23.82 million square feet of retail space, at an average ownership of 1200 square feet of retail space per small business (kirana) owner, this will only affect 19,850 businessmen and not crores of businessmen, as has been hyped by some politicians.

Most discussions about opening up multi-brand retail only talk about food & grocery, but there’s much more to retail than just food & grocery.  423 million urban Indians will need 3680 million square feet of space for non-food retailing, at 8.7 square feet per capita. Assuming 20% market share for the organized sector in non-food retail, the organized sector is estimated to have 736 million square feet of non-food retail space.

Let us look at how many jobs will be impacted. “My initial estimates are that it will create over 4 million jobs in the country and in logistics about 5-6 million jobs in three years,” Commerce and Industry Minister Anand Sharma told reporters.

At one direct job for every 180 square feet of retail space (across formats), an estimated 4.354 million people will be employed across the 783.63 million square feet of space occupied by organized retail.  With 1.5 indirect jobs (in supply chain and logisitcs) per direct job, it adds up to a total of 10.89 million jobs.  Therefore, Anand Sharma is bang on.

A vast majority of the employees will be those who have studied only up to primary school.  What other job opportunities (of this magnitude) are there for such people, who either cannot afford to finish high school, or just don’t have the IQ required?  They will have benefits such as PF and ESI, thus bringing them lot of stability and security.  More importantly, the organized sector is not just giving these people employment, but is augmenting their skills through training and personality development, thereby making them more marketable.  So what does the kirana do to increase India’s Human Development Index?  In other words, more FDI = better HDI.

“Today, about 90% of children do not pursue education beyond schooling. With a large number of new stores opening, modern trade will become a preferred choice of employment to them,” says Sanjiv Goenka, Chairman of RP-Sanjiv Goenka Group, which runs 220 retail stores including 30 Spencers hypermarkets.

Why would any political party would want to favour 19,850 small businessmen over 10.89 million youth who don’t have many other other job opportunities? The left parties and left-leaning regional parties should be at the forefront of supporting FDI, if they really stand for the upliftment of the economically weaker sections of society.

Let us look at the fine print in the announcement made by the Government of India. In allowing 51% FDI in multi-brand retail, the following restrictions apply:

  1. Minimum investment of $100 million.
  2. 50% of the investment (or minimum $50 million) has to be in back-end logistics, not including investment in property.
  3. At least 30% sourcing from SMEs or small-scale industry.
  4. Stores can only be in cities with a population of more than one million people. (Please see chart with list of these 39 cities)
  5. Government will have first right of procurement of farm produce.



Indian Cities with >1 million   population


City State

Population (2011)


Greater Mumbai Maharashtra



NCR Delhi



Greater Kolkata West Bengal



Bangalore Karnataka



Hyderabad Andhra Pradesh



Chennai Tamil Nadu



Ahmedabad Gujarat



Pune Maharashtra



Surat Gujarat



Jaipur Rajasthan



Lucknow Uttar Pradesh



Kanpur Uttar Pradesh



Patna Bihar



Indore Madhya Pradesh



Raipur-Bhilai-Durg Chhattisgarh



Bhopal Madhya Pradesh



Visakhapatnam Andhra Pradesh



Nagpur Maharashtra



Vadodara Gujarat



Ludhiana Punjab



Agra Uttar Pradesh



Nashik Maharashtra



Meerut Uttar Pradesh



Rajkot Gujarat



Varanasi Uttar Pradesh



Srinagar Jammu and Kashmir



Aurangabad Maharashtra



Dhanbad Jharkhand



Amritsar Punjab



Chandigarh Chandigarh



Allahabad Uttar Pradesh



Ranchi Jharkhand



Coimbatore Tamil Nadu



Jabalpur Madhya Pradesh



Gwalior Madhya Pradesh



Vijayawada Andhra Pradesh



Jodhpur Rajasthan



Madurai Tamil Nadu



Kota Rajasthan


“Although the announcement has taken away the uncertainty, the number of clauses make it quite difficult and very serious concerns remain about state-level decisions,” said Mark Ashman, MD of Hypercity Retail.

“This will definitely help the SSI sector, as they will have a wider choice of buyers,” says Kabir Lumba, MD of the Rs.28 billion Lifestyle (part of Dubai-based Landmark Group), “import duties are very high, so manufacturing will get a boost.”

Darshan Mehta of Reliance Brands had a different point of view. “To source locally, you need to buy minimum 1000 metres shirting of the same colour and design. This will produce 833 shirts, which will require at least 30 stores to sell them from – how long will it take for new entrants to get to 30 stores – so imports (even though costly) will continue for a few more years.”

So what does all this actually mean?  $50 million in front-end by the foreign 51% partner translates to Rs.5.1 billion in total investments by the entity, including the Indian partner’s 49% investment. It will be a similar amount for the back-end.

Of the Rs.7000 per square foot investment required in front-end infrastructure, about Rs.4500 per square foot will be done by the landlord and Rs.2500 per square foot by the retailer. Thus, a retailer has to create 2.04 million square feet of front-end retail space to meet the Rs.5.1 billion minimum investment requirement.

This completely rules out a specialty retailer like the $1.46 billion Sephora (the LVMH-owned world’s largest beauty retailer) from coming in, as they will need to open 680 stores of average 3000 square feet. With only 750 stores worldwide (17 countries) and 400 stores in USA (including 150 shop-in-shop counters at JC Penney), Sephora is certainly not going to open 680 stores in India anytime soon. Bijou Kurien of Reliance Retail should be happy, as Sephora will still need a capable Indian partner (read licensee) and Reliance is reportedly a front-runner.

However, the UK-based Boots ($31.3 billion health & beauty retailer with a presence in 25 countries) may come in. With an average store size of 10,000 square feet, Boots only needs to open 204 stores. With 3,280 Boots stores worldwide, opening 204 in India is certainly not a tall order.  Similarly, the $72 billion American health & beauty giant Walgreens (7,779 stores) can come in.  So can the Hong Kong based $18 billion AS Watson, which has 9,400 stores globally, and will need to open 510 stores of average 4000 square feet each, which is quite feasible in the 39 cities.

The Indian health & beauty retail market is currently at $36.5 billion and is growing at 17% per annum. Organized sector penetration is only 3.2%, compared to >23% in jewellery & watches and >15% in CDIT (consumer durables, information technology and telecom) – this should be exciting enough for any global health & beauty giant.

Let us look at another popular and fast growing multi-brand category – CDIT. With an average store size of 15,000 square feet, a new foreign entrant only needs to open 136 stores (Croma has 73 stores and Reliance Digital 51 stores).  The $32.7 billion Indian CDIT market can easily absorb 850 CDIT megastores doing annual business of $7.7 million each, which will give these types of retail formats a 20% market share.

However, there is another problem here. How will they source 30% from the SME/SSI sector? Surely, Indian consumers will prefer buying LG, Samsung and Sony products, compared to those made by Kumar & Sons or Venkatchalam Industries. Perhaps they will be able to work out the maths by sourcing accessories, components and the like from the SME/SSI sector, but this will need further and deeper study. This may lead to some global players coming in.

“All SME and SSI vendors of the automobile industry became billion dollar market cap companies, so we will see the same benefits coming to retail industry vendors now,” said B.S. Nagesh, Vice Chairman of Shoppers Stop, who now runs a trust called TRRAIN, which is committed to upgrading the lives of people in retail both at work and home,  “Ikea is already sourcing from several Indian vendors for exports, now they will start sourcing for selling in India.”

Most retail experts agree that global bookstore or leisure store chains will probably not be able to take advantage of this policy change, as they will not be able to invest 50% in the back-end.

That brings us to the largest non-food multi-brand retail category – department stores. At an average size of 120,000 square feet, a foreign retailer only needs to open 17 department stores. Shoppers Stop has 46 stores and Lifestyle 34 stores.  Nagesh says that department stores cannot invest the minimum amount for the back-end, as they do not require huge back-end investments. He felt the policy was more oriented towards food retailers. Lifestyle’s Lumba agreed.

This can be looked at from another perspective. To open 25 department stores of 120,000 square feet each, a chain will need 10,000 retail staff and at least 1200 other staff.  At just Rs.150,000 per employee to be spent on recruitment and training, they could invest Rs.1.68 billion on training alone. With 30% sales from private labels and minimum one month’s inventory, they will need Rs.1.08 billion in inventory. That takes care of Rs.2.76 billion of the Rs.5.1 billion minimum back-end investment, leaving Rs.2.34 billion to be invested. This could be easily deployed in investing in other brands’ inventory and negotiating far higher margins than what they are getting from brands under their current business models of “sale or return” or “consignment sales”.

For the $15.5 billion Isetan or $10 billion Takashimaya (both from Japan), the $12.83 billion El Corte Ingles from Spain, $7.74 billion Galeries Lafayette from France or $5.94 billion Lotte from South Korea, $100 million is not difficult to invest. Even Central and Robinson from Thailand are strong contenders. Growth opportunities are restricted in their home markets and the Indian market growth offers a compelling story. All these chains are already present in multiple countries.





Countries present

Total sales FY 2010





$72.2 billion


South Korea



$54.2 billion





$33.4 billion





$31.2 billion





$31.3 billion

AS Watson

Hong Kong



$24.0 billion





$18.2 billion

Gap Inc




$14.7 billion

El Corte   Ingles




$12.0 billion





$10.6 billion





$10.5 billion

Galeries   Lafayette




$3.4 billion





$2.2 billion

Now let us look at where FDI in multi-brand retail will really come in from – the food retailers – actually the hypermarket/supermarket operators.  The Indian market size is $154.4 billion, with less than 3% organized sector penetration.

If 80% of the 47.63 million square feet of total organized sector food retail space is comprised of hypermarkets, at an average size of 70,000 square feet, we are talking about 544 hypermarkets.  India currently has 240 hypermarkets. Of the new 304 hypermarkets, if foreign retailers have to capture 50% market share, they need to build 150 hypermarkets – so there is space for 6-8 players. Who are these going to be?

There is no doubt in anyone’s mind that Wal-Mart, Carrefour and Tesco will be amongst the players. In all probability, the others would be out of the following 11: Rewe from Germany, Auchan from France, Aeon from Japan, Le’clerc from France, Ahold from Netherlands, Groupe Casino from France, Intermarche from France, Shinsegae from South Korea, Shoprite from South Africa, Lotte from South Korea and Giant from HK/Malaysia. Details about these chains are given in the table.





Countries Present

Total Sales FY 2010

Rewe Zentral




$70.6 billion

Groupe Auchan




$56.6 billion

Aeon Co




$54.0 billion

E Leclerc




$41.0 billion





$39.3 billion

Groupe Casino




$38.7 billion





$38.1 billion





$11.2 billion


South Africa



$8.5 billion


South Korea



$7.3 billion





$4.9 billion

“Several Japanese, Korean and South American retailers have retail business models suitable for India. I see someone like Pao De Acucar of Brazil coming in.  Even American retailers like Home Depot and Best Buy may consider coming to India. Carrefour may either buy into an existing Indian retailer or move from B2B model to a B2C model,” said Bijou Kurien, President Lifestyle Business, Reliance Retail, a company which is expected to have a retail turnover of $2.7 billion in the current fiscal, and part of the $50 billion Reliance Industries Limited, India’s largest private sector company.

“There are 25 regional hypermarket chains in the US alone, bigger than most Indian hypermarket chains,” said Mark Ashman, MD of Hypercity retail, part of the Rs.23.8 billion Shoppers Stop group. “The Tata Trent – Tesco arrangment may become a joint venture now,” says Nagesh. Singh of Spar and several others echoed the same sentiment.

Now let us look at the impact of the government allowing 100% FDI in single brand retail.  Four things will happen in this space:

(1)    Retailers who are running 51% owned operations in India with the balance 49% being held by sleeping/silent Indian partners will most likely take 100% ownership. These include the likes of Louis Vuitton, Tod’s and Christian Dior. “There are many 83 year olds in places such as Coonoor and Dharamsala who have facilitated such JVs,” says Darshan Mehta of Reliance Retail, “many global retailers will still prefer to have Indian partners, as the market here is very complex.”

(2)    Some retailers who normally operate internationally only with 100% ownership, and have thus been operating in India through licensing/franchising, will come in with some own stores, while they may parallely continue with the existing licensed/franchised stores. The first name that comes to mind is Apple. Lumba of Lifestyle feels that brands like Mango – where the franchisee has only opened 12 stores of approximately 2000 square feet each – may come in directly. Mehta disagrees: “Mango is here as a franchisor, because they didn’t want to invest; they didn’t take 51% when it was allowed.”

(3)    Retailers such as Ikea, H&M, Uniqlo and Gap/Banana Republic, who have patiently waited for 100% FDI, will now come in. “Ikea will impact Home Centre’s business – we compete very well in seven countries in the middle east region; they will help expand the market, as more people will buy readymade furniture,” says Lumba.

(4)    There are likely to be some investments in the F&B space. Entrants in this space are likely to include Wendy’s, Starbucks, Dairy Queen, Hardees, Popeyes, Quiznos, Chipotle, Panda Express and dozens of others. Many of them would be coming in through the franchising route, so would have come in any case even without this policy change. The Indian F&B market is already at $40.4 billion and is growing at >15% per annum. Organized sector penetration is less than 4.5%.

The action on single brand retail is likely to happen much faster than in multi-brand retail. In single brand, we should start seeing announcements from as early as March or April 2012. In multi-brand, we will probably have to wait till at least July-August to see any major announcements.

“The impact will be seen from the third to the fifth year,” said Nagesh. Reliance’s Kurien says that “the early bird catches the worm, as this is a property grab business”, suggesting that those who take faster decisions will benefit.

“Retailers like Ikea, H&M, Prada and Dolce & Gabbana will come in,” says Timmy Sarna, Chairman of DLF Brands, “and many developers will now start building malls all over again.” Adds Lumba “brands like Uniqlo, which are extremely relevant for India, should come in; H&M is also likely; Gap will probably come through 74% or 100% ownership – this will all lead to a lot more choice, excitement and energy for Indian retailers and consumers.”

Apart from foreign retailers entering India, FDI is also likely to come from overseas PE/VC investors who may invest in established Indian retailers. This will happen in both, multi-brand as well as single brand space, including online retail. We have already seen PE/VC investments into retailers such as Nilgiris, Nirulas, Lilliput, Kimaya, Spykar and Fabindia.  Several more old & established Indian retailers are ripe for investment.

“FII was constrained by FDI in India,” says Kurien. Ashman agrees. “Indian groups got few years to establish themselves in retail and now they will be ready to offer their platform to foreign investors to come in and also get good valuations,” adds Nimesh Shah of Equirus Capital.

There is also likely to be M&A activity. “This will certainly be met with open arms by several domestic retailers. In particular, players such as Pantaloon Retail and Vishal Retail need to ease their current debt levels. Foreigners looking to capitalise on this new policy may help support them. Vishal Retail has around Rs 70 billion of debt as of June 2011, Pantaloon Retail is also carrying a debt burden of Rs 40 billion,” says Parita Chitakasem of Euromonitor International.

At estimated sales of Rs.2000 per square foot per month in 2015, the 783.63 million square feet of organized retail space will generate annual revenues of Rs. 18.807 trillion and taxable profits of Rs.564 billion (assumed at only 3% of revenues). This translates to Rs. 2.594 trillion in GST collections (@ 16% GST) and Rs.174.28 billion in corporate income tax. The government is losing minimum 50% of this potential tax revenue because half of the business of the unorganized retail trade is probably escaping the tax net.

The organized retail sector will have at least 780,000 managers earning an average taxable salary of Rupees one million per annum. This will generate at least Rs.195 billion of additional personal income tax collections.

The total Rs.1576 billion in additional tax collections (Rs.1294 billion in GST [50% of total] + Rs.87 billion in corporate income tax [50% of total] + Rs.195 billion in personal income tax) translates to an increase of more than 11% in the tax collection of the centre and states, wiping out the revenue deficit and making India a revenue surplus economy.

Of the 783.63 million square feet of organized retail space, about 103.9 million square feet already exists – so we are talking about 680 million square feet to be added anew. This will need infrastructure investments of Rs.4.76 trillion (at an average Rs.7000 per square foot at 2012-2015 costs, for building construction, interiors and shop fit-ins) and Rs.1.904 trillion in inventories (@ Rs.2800 per square foot), or a total investment of Rs.6.664 trillion ($128 billion).

If 50% of this is foreign investment (by foreign retailers as well as financial investors), we are talking about FDI of $64 billion in four years, or $16 billion p.a., 80% increase over the actual inflows of fiscal 2010-11.

“We will get around $8 billion to $10 billion of fresh investments coming into the country over the next 5 to 10 years,” said Kishore Biyani to many TV channels and to this magazine.  “I expect at least $15-20 billion of investment over the next 10 years. Initially it will be smaller, but will pick up once international players get a hang of the market,” said Harminder Sahni of Wazir Advisors. According to the BBC, foreign retailers have said that investments will be closer to $40 billion. Certainly, these foreign retailers have done their homework.

“India has been a very exciting market and all this just adds to the excitement,” says Martin Jones, CEO of Marks & Spencer India, “we will not do anything different – we are happy with Reliance as a partner, as both parties bring different skills to the table.”

To sum up, if Dr. Manmohan Singh can make the state Chief Ministers and opposing party leaders (including some UPA allies) understand the tremendous impact that this bold move will have on the Indian economy, he will take Vijay Mallya’s recently vacated position of “the king of good times”.

Almost 11 million youth will have new (or better) jobs.  That’s almost 7.5% of the youth population of urban India. FDI will go up almost 80%, hopefully leading to the rupee bouncing back against major world currencies. The budget deficit will be wiped out, thus putting us ahead of China in this decade. Most importantly, about $180 billion will get converted from black market economy to accountable economy, and we may need a much smaller Lokpal authority.

RBI Governor Dr. D. Subbarao said on 25th November: “For India to regain its growth momentum and indeed accelerate it further, the country has to address key challenges – raise agricultural production and productivity; expand employment; bridge infrastructure deficit; promote financial inclusion; and provide a stable and predictable macro-economic enironment.” FDI in retail takes care of most of this. Can this UPA government do it?



Asipac undertakes strategic research on the retail as well as the retail real estate sectors. In retail real estate, Asipac has provided development strategy, planning and lease management on reail/shopping centre projects of more than 17 million square feet, including seven of the 15 largest shopping centres in India. The company has leased more than 8.5 million square feet of retail real estate in South India alone in just six years. Asipac has current leasing mandates for nine malls in five cities, with combined GLA of 8.2 million square feet.


What’s missing in Indian shopping centres? – Dec-Jan 2012

May 10th, 2013

At least five new shopping centres have opened across India in the last three months. Yet, apart from the noisy roller coaster at Infiniti-2, Malad West (Mumbai), I don’t see much difference between these 2011 centres and those that opened in 2003-2004. This shows that the Indian shopping centre industry has not evolved much.

You may have a new brand (for India) such as Zara, but this is only adding to the already overcrowded apparel and fashion category, and one Zara alone cannot change the way India shops.

According to early findings of an ongoing retail consumption study being done by Asipac, only 25.8% of modern retail space is required for the broad apparel and fashion category, including eyewear, footwear and accessories – yet, more than 60% of space in Indian malls continues to be dedicated to this category. At Mantri Square mall in Bangalore, Asipac only leased 44.4% space to retailers in this category – perhaps the lowest ratio in the country. At the 4,75,000 square feet Mall of Travancore in Trivandrum, we have only provided 41.9% area for apparel & fashion, thus bringing this mall even closer to the actual consumer expenditure patterns.

On the other hand, while the home & CDIT categories put together require 18.7% space, less than one-third of this is actually provided to these important categories – at Mantri Square, Asipac had provided 11.6%, and barring one, all retailers in these categories are doing very well.  At that time, the research study had not been done and we did not realize that these categories needed even more space. At the upcoming Neomall in South Bangalore, we are providing the required 18.5% space to various home and CDIT formats.

The study shows that F&B needs 14.8% space – show me one recently opened shopping centre that has provided close to this number. At Mantri Square, Asipac had provided 12.5% space for F&B outlets, which are all doing well; and are providing a similar prcentage at Neomall as well as at Sobha Global Mall in Bangalore. Even at Mall of Travancore, we are providing almost 14% space to the F&B category.

What about entertainment? Apart from the almost mandatory multiplex and a forced family entertainment centre, what are Indian shopping centres doing on this front? The research study shows that this category needs 13.4% space. At Mantri Square, we provided 12.3% and the entire category is witnessing fantastic numbers. At Neomall, we are dedicating more than 15% of the area to leisure & entertainment facilities, including some attractions that will be seen for the first time in India.  At Mall of Travancore, we are assigning 12.7% space for leisure & entertainment.

Coming back to the apparel & fashion category, the study shows that 73.5% of expenditure on this category in urban India is by people who are value conscious – in other words, they cannot afford brands/retailers such as The Collective, Zara, Debenhams, Mango, Nine West, Promod, Esprit, Ed Hardy, Diesel and Energie.

Yet, new centres such as Phoenix Market City in Whitefield (Bangalore) have dedicated a large percentage of space to such brands. Even worse is the case of Brigade Orion, a 750,000 square feet shopping centre slated to open by March 2012 in the Yeshwantpur suburb of Bangalore. The primary catchment of this mall is one of the most traditional and value conscious area of the city. Yet the promoter thinks that his mall will succeed if he brings in retailers such as Zara and Debenhams. I was at an upscale restaurant in the posh Indirangar area of Bangalore last night (Saturday night) and someone shouted loud that Zara had opened at the Phoenix Market City mall. Almost 90% of the 70-odd people present there were bewildered – they all were wondering why an old Sharukh Khan – Preity Zinta Bollywood film had to reopen at a new mall.

Another phenomenon that the study confirms is that almost 26% of total expenditure on apparel & fashion (by both genders, including footwear & accessories) in urban India is on ethnic wear. But how much space is dedicated to ethnic wear in Indian shopping centres?

At Mantri Square, Asipac had brought in several value brands to occupy 31.2% of the total space dedicated to the apparel & fashion category, yet we were criticized for “downgrading” the malls’s image. The reality is – most of these “value” retailers are doing far better than their counterparts who sell at higher prices. Same is the story with ethnic wear – 12.9% of the total space in the apparel & fashion category is occupied by ethnic wear, which is the best performing standalone category in the entire mall.

At Brookefields Plaza in Coimbatore, Lifestyle is averaging a turnover of Rs.36 crores per annum from a 38,000 square feet store, while ethnic wear department store RmKV is doing 3.5 times the sales from only 20% larger space. This has prompted Bangalore-based Prestige Constructions to get RmKV as one of the anchors at their upcoming Forum Vijaya Mall at Vadapalani, Chennai. At Mall of Travancore in Trivandrum, 28.6% of the total area dedicated for apparel & fashion is reserved for ethnic wear.

To me, it does not look like things are going to get any better soon – in fact, I believe that the scenario will get even worse, as many developers are now bringing in so-called “expert” mall planners from abroad – as if these goras and goris understand India. How can any white South African, who has spent 46 years of his life (and learned all his shopping centre planning skills) during his own country’s apartheid years, understand how our multi-ethnic, multi-religion, multi-language society co-exists and functions? When will we give up our phoren fixation and start respecting our own culture?

The problem (of not being able to understand the Indian consumer) is not just prevalent in our industry. ICICI-Prudential is using Amitabh Bachchan on a TV ad, in which the Big B is trying to tell a CISF security guard to buy an insurance policy. Do none of the people at ICICI-Prudential or their agency Lowe Lintas or Mr. Bachchan himself realize that Indian security guards are not paid enough to be able to afford insurance? Or that CISF already has several welfare funds and schemes at subsidized rates for its personnel.

Why have people stopped thinking? Why have they stopped paying attention to what’s around them? Is this what economic boom has brought to our country? Unrealistic dreams – it seems like the whole of India is functioning like a Bollywood movie, with life revolving around dream sequences of our own creation.

The 3.3 million square feet Eastwood Mall complex in Youngstown, Ohio (USA), has 230+ stores, of which 7 are anchor stores of more than 100,000 square feet each, 7 other anchor stores of more than 50,000 square feet each, and 18 mini anchors of 20,000 to 40,000 square feet each. But it also has 2 Multiplexes with total 20 screens, 35 F&B outlets, a 6300 seater Minor League Stadium, a 61,600 sft Exposition Centre, a 64-room Marriott Fairfield Inn Hotel and a Salt Water Aquarium.

Central Plaza Chaengwattana in Bangkok has as many as 26 health & beauty clinics, about 22 education/tution centres and 14 bank branches. More than 20% of the space in this shopping centre is dedicated to F&B. The 80+ health & beauty clinics, education/tution centres, bank branches and F&B outlets are mostly local brands/ retailers, even though many of the apparel/fashion brands are international ones from the west.

Almost all large shopping centress in South Africa have four or more bank branches, thus ensuring that people from neighbouring communities visit the centre regularly and generating “extra” footfalls. In the tenancy mix, Services are given a high amount of importance in South Africa. There are several salons, travel agencies, car rental agencies, dentists, optometrists, other medical service providers, florists, photo studios, mail/courier services, internet cafes, wedding planners, telecom company relationship centres, business centres, engravers, locksmiths, laundry, pram & wheelchair hire, amongst other consumer conveniences.

So it is not just about fashion and footwear. The case is not different in good shopping centres in USA, UK, Thailand or Philippines. Developers/owners of shopping centres in most of the mature markets have realized, a long time ago, that shopping centres must try and provide as many “needs” of the consumers as possible, and not just cater to their discretionary shopping needs.

When we copy from abroad, why do we only copy foreign shopping centres on a  selective  basis? Why do we only want to believe that, by just getting 10-12 foreign apparel, footwear or cosmetics brands, our shopping centres will also become “world class”?

Why are we not willing to work harder to bring the wide tenancy mix that truly world-class shopping centres provide to the communities they serve?

The 2.9 million square feet King of Prussia mall in suburban Philadelphia (USA) has 13,400 car parking spots. The 4.2 million square feet Mall of America (USA’s largest mall) has 12,500 parking spots. The 1.94 million square feet Canal Walk shopping centre in Cape Town (South Africa) has 9300 parking bays. The V&A Waterfront in the same city has 6200 bays for a retail built-up area of 856,000 square feet. It is not surprising that this centre gets 64,000 average daily footfalls and is one of the most successful shopping centres in the world. Because of its success, apartments neighbouring the shopping centre sell above Rs.25,000 per square foot.

Why are Indian shopping centre developers not willing to invest in the required number of parking spaces? A shopping centre with GLA or retail built-up area of 600,000 square feet in a metro city like Pune, Kolkata, Chennai or Hyderabad will need to do business of about Rs.54 crores per month, in order for the retailers in that centre to afford the rentals.

In order for the centre to do this much business, it needs to have a minimum of 27,313 average daily footfalls, considering an average spend of Rs.650 per person per visit.  To sustain this, the centre will need to provide a minimum of 2545 equivalent car spaces or ECS (1 ECS equals 1 car parking spot or 6 two-wheeler parking spots), in addition to 320 ECS for staff. So we are talking about 2866 car parking spots, or 4.78 ECS per 1000 square feet of retail built-up area. And this requirement will only increase in the future.

Most shopping centres in India are providing less than 2 ECS per 1000 square feet – and the developers complain about retailers paying low revenue share rents. It is like giving your cook at home 12 eggs and asking him/her to serve fluffy omelettes to 50 guests. I often ask these developers – can they construct a 600,000 square feet shopping centre (without any additioanl basement floors) with just 600 MT of steel? Then how do they expect retailers to pay them high rentals when they’ve not provided one of the basic raw materials for a shopping centre – parking spaces?

Apart from a lack of variety in the tenancy mix and pathetically inadequate parking, many other elements are missing from Indian shopping centres. Most of them don’t have proper mall directories or maps that they can hand out. Hardly any have provided Muslim prayer rooms or feeding rooms for nursing mothers. The elevators (lifts) are too small. There aren’t enough parking check-out counters.

At the newest Westfield centre in London and the largest shopping centre in Europe, Westfield Stratford City (located adjacent to the main 2012 Olympics Stadium), there is a “Find Your Car” system, where you just punch in your car’s registration number and you will see a photo of your car along with a map showing you where it is parked.

This new jewel in Westfield’s huge shopping centre portfolio also boasts of 72 F&B outlets, a 17 all-digital screen multiplex, a 65,000 square feet casino, a 20,000 square feet luxury bowling centre, and an outdoor ice skating rink.

Majid Al Futtaim Properties (owners and operators of Mall of Emirates, Dubai, Deira City Centre and eight other shopping centres spread throughout the MENA region) are building a 3.2 million square feet shopping centre in Damascus, a city of 2.55 million people, roughly the size of Patna, Bihar’s capital and India’s thirteenth largest city. The district populations of Cuttack (Odisha), Ajmer (Rajasthan) or Gulbarga (Karnataka) are higher.

Such is the potential of building shopping centres in India, but only if we get it right. Otherwise, we will continue to build less than 40% of the required parking spaces and keep complaining that malls and modern retail in India are not taking off.


Amit Bagaria is Chairman of ASIPAC, India’s leading mall development and leasing consultants and MEN & BOYS, Asia’s largest chain of retail stores for men’s skincare and grooming products.

Why are shopping centre owners and retailers shy of sharing data? – Oct-Nov 2011

May 10th, 2013

When was Mahatma Gandhi born?” I was recently asked. Before I could respond, the person herself said “on his birthday”. Apparently, this was meant to be a joke. On the other hand, a majority of tenants not knowing the correct GLA of Ambi Mall (Gurgaon) or the High Street Phoenix complex (Mumbai) is definitely not a joke.

Look at this Fact Sheet of Spotsylvania Town Centre, wherein the owner (of the shopping centre) has published the exact data of the store sizes of all its anchors and very relevant data about the income of its catchment. The total retail sales achieved by the centre have also been provided, along with the breakdown of the retail sales by category. Is all of this not extremely relevant for any potential new tenant considering taking up space in this shopping centre? Wouldn’t Indian retailers like to have such data  on malls in India?

Most Indian real estate developers exaggerate something as fundamental as the GLA of their shopping centres. In the UK, the “Going Shopping” series of reports by Trevor Wood Associates even lists details like transport linkages and parking provisions for 500+ shopping centres. In South Africa, reports such as the SAPOA/IPD Property Index and The Parker Review regularly publish lots of relevant data about the market there.

If anyone in India thinks that shopping centre owners in USA, UK, South Africa and other “western” countries are being transparent because of “regulations” in their countries, I have three things to say – first, even mall owners in Dubai and Bahrain are doing it despite there being no such regulation in these countries; second, why do we always wait for regulations to govern us?; and third, these seasoned mall owners are publishing such data because it helps them to attract the most appropriate tenants at the “right” rentals.

Aha! What if we (Indian mall owners) want to charge high rentals even though our footfalls and retail spends do not justify such rentals? For this, I have only one answer – just wait for there to be a supply surplus (which is going to be a reality very soon in most of the Top 50 Indian cities) and you will see what happens.

Compared to the transparency in most countries in the world, some people in India take pride in publicizing wrong information.  When our research team calls up Indian shopping centre owners or their representatives for the size (GLA) of their mall, footfalls, the number of parking spaces, etc., most of the time they get wrong data. One developer in the NCR had claimed that his mall had a GLA of 1.6 million square feet, whereas an entry by them in Wikipedia puts it at 867,000 square feet, just about half. Another (newer) shopping centre by the same developer is publicized as 1.1 million square feet, but is supposed to have a total built-up area (excluding MLCP and basements) of 452,000 square feet as per the Environment Impact Assessment Study submitted to the Ministry of Environment, Government of India in March 2006, to seek pre-construction approvals.

What is the need to give inflated figures for something as important as the GLA of a shopping centre?  Sooner or later, are people not going to find out the truth?  Apart from GLA, the other often misquoted data is the number of parking spots. Shopping centres with 1400-1500 spots claim to have over 2500 – is it not possible for the tenant to physically verify the actual count once the centre is open?

Insufficient or improper data in India is a major stumbling block in planning/analyzing any kind of retail business, whether it is a shopping centre, a retail format or brand, an industry sector or even nationwide statistics.

It is not just the shopping centre owners who are unwilling to share data and be transparent about their set up. It is true even of retailers, large and small, corporate or mom&pop. But this is changing slowly, and the good news is that some of the “listed” retail companies are sharing the actual statistics.

This change could be because of the stringent SEBI regulations or the “need” to attract foreign institutional investors. In the last fiscal year, companies such as Shoppers Stop, Trent and Gitanjali Gems have given far more relevant and easy to understand data than ever before. For example, there are many firsts in Trent’s Annual Report for 2010-11:

  • There      is a graphical correlation between number of stores and overall revenues      for the past five years, for both Westside as well as Star Bazaar.
  • The      locations (names of malls) of 14 new Westside stores have been published.      In fact, addresses of all 113 stores of the company (including Sisley)      have been listed.
  • A graph      shows the “like-for-like” sales growth of Westside stores for nine years.
  • There      is a transparent management discussion on the relatively poor performance      of Landmark, with detailed explanations put forth with great humility.
  • There      is a graph showing the break-up of Landmark’s (the books & music      superstore format of Trent) sales by five categories.

I must congratulate the Board and management of Trent Limited on this transparency and humility – it takes a Tata company to show the path to others.

It would be unfair if I leave out Shoppers Stop and Gitanjali Gems here. Both these companies have also been quite transparent.  Hats off to Shoppers Stop for disclosing their average selling price per unit and average transaction size (same as ABV). I hope other retailers take the cue and start publishing such data.

We can collaborate and try to improve as an industry on the whole if people are willing to share performance data openly.  Look at two of India’s most transparent sectors in recent times – the IT industry and the telecom industry (3G spectrum apart). It is not a surprise that these two have been the most successful sectors of the Indian economy in the past decade.

Having showered deserved praise on Shoppers Stop and Gitanjali Gems, I must add that there is still a lot of important data missing, and the availability of this would help industry analysts as well as start-ups in the industry. For example, in the Shoppers Stop fiscal 2011 annual report, in a graph showing sales mix percentage, I would have liked to see much more details than just a break-up between apparel and non-apparel catgories. How about a break-up by men’s apparel, women’s apparel, kids’ apparel, western/ethnic, beauty, handbags & leather accessories, home furnishings, etc.? The revenues of Hypercity and Crossword could have been given much earlier in the report rather than a statutory schedule on Page 107. There is absolutely no data on Home Stop – does it still exist?

In the case of Gitanjali Gems (in its fiscal 2011 annual report), the company has gone into great depths in describing the size of the Indian gems and jewellery market and its constituents. It has also made the effort to give its store count break-up, details of occupied retail space, etc.

On the other hand, it is not clear what the consolidated domestic turnover of the group from just the retail business is, since the group is also into manufacturing, exports and international retail. Not just a retail analyst, but even equity analysts would definitely like to know their domestic turnover, especially considering that Gitanjali itself puts domestic consumption of gems and jewellery in India at a staggering $57 billion.

While there is a fair degree of transparency in the annual reports of Trent, Shoppers Stop and Gitanjali Gems, the same cannot be said of India’s largest listed retail company – Pantaloon Retail India Limited (PRIL).

In the case of PRIL, I am referring to their 2009-10 report, as I have not been able to lay my hands on the fiscal 2011 one yet and it was not uploaded on the company’s website atleast until the sixth of September, 2011, when I wrote the story. Although the MD’s letter to shareholders states that the company’s retail business has four principal categories – food, fashion, general merchandise and home – there is no breakdown of the company’s performance in the reported fiscal year across those four categories.

There is also no break-up of the “consolidated turnover” by different retail formats. I am sure thousands of people in the retail industry in India and abroad, as well as hundreds of analysts and observers, would like to know how much of PRIL’s Rs.97.87 billion turnover came from Big Bazaar, how much from Food Bazaar, how much from Central, how much from Home Town and so on. How is KB’s FairPrice performing? What about eZone?

If Trent Limited, Titan and Shoppers Stop can all be transparent about this kind of data, I don’t understand what Future Group has to hide  It is not enough to say that “the group regards the business segment retail as a single reportable segment”. If the public can come to know that the turnover of Planet Sports was Rs.1,585 million because it was a statutory compulsion (as the Planet Sports business is part of a separate legal entity [company] called Winner Sports Limited), why shouldn’t we (the people) know the turnover of Big Bazaar, which is several times larger than Planet Sports?

Is it not more important for us to know how much business KB’s FairPrice did than the fact that PRIL owns air conditioners worth Rs.513.1 million?

What do leading retailers in the rest of the world do? Take the example of these extracts from the 2011 annual report of one of UK’s leading retailers M&S (Marks &Spencer), a company 4.5 times PRIL’s size.

On the first page itself, you get a good summary. As you flip the pages, there are extremely important pieces of information put into eye-pleasing graphs, some of which are reproduced here.

Where is all of this (or similar) information in Future Group’s (PRIL) annual report? Being an Indian I am much more familiar with the operations of Future Group than that of M&S, but after going through their annual report I now have more insights about the market position and performance of the M&S rather than Future Group. For example, I not only know the UK market share of M&S (by value as well as by volume) in clothing and footwear, I even know the breakdown of their market share in categories such as food and home, and sub-categories such as womenswear, menswear, kidswear, and even lingerie. In comparison, in the case of Future Group, I don’t even know what their food sales are. Isn’t that a real shame?

M&S even goes on to tell us that 46% of their 78,000 employees have been with the company for five years and 27% have been with them for 10 years. They tell us that their employee turnover is 14%; that 11,000 people applied for 180 job openings; that 26,000 employees participate in their employee share plan; and they even give us various other statistics relating just to people at M&S.

In comparison, Future Group tells us that they have 33,500 employees, of which 56 store managers have been identified from within the organization for a happiness building initiative. Huh?

Let’s look at the Rs.1145 billion Macy’s, one of USA’s largest department store chains. The data presented in their financial reports is excellent and an example of this is produced here.


Take a look at these graphs from Japan’s Isetan Mitsukoshi. The story pretty much remains the same – much greater transparency than Indian retailers. The data reproduced here is just a small part of what is available on the company’s annual report.

Lotte of South Korea surpasses most of the retailers referred to above. Going through their annual report was a real pleasure.

So if we are not emulating the West, the Middle East or the Far East, are we once again going to hide behind the common (and very clichéd) excuse that “India is different”. This sounds no different from the “foreign hand” excuse (used by one national political party) that we so easily criticize.  How are we in the corporate class any different than the political class?

The need for data (or the lack of it) becomes even more relevant when it represents a sector as a whole. Wrong data for an entire industry or sub-sector can either keep people away from entering (or investing in) a sector, or give leaders a false sense of pride about their market share.

For example, last December, Ajit Joshi, Managing Director and CEO of Infiniti Retail (the JV between Tata Group of India and Woolworths Limited of Australia that runs the Rs.17 billion Croma chain of CDIT retail stores) told me that the size of the CDIT industry in India was Rupees one trillion (Rupees one lakh crore). In a story I wrote for Images Retail magazine in January 2011, I said that our in-house research team has estimated the market to be much larger at Rs.1.33 trillion.

Since then, we at Asipac have done a lot more research on the subject and now firmly believe that the market is even larger at about Rs.2.02 trillion. Retail consultancy Technopak’s report put the market at just half (Rs. 865 billion) and the India Retail Report 2011 by Images Group (this magazine’s publisher) puts the market at just Rs. 961 billion, or less than one-third of what our research suggests.  Another report by CCI puts the market at Rs.1.43 trillion. With the mobile handset market alone being about Rs. 350 billion and the TV set market at about Rs. 240 billion, the total CDIT market (obviously) cannot be just Rs.865 billion or even Rs.961 billion.

Look at it another way – LG and Samsung together are expected to clock annual revenues (at the retail level) of about Rs.450 billion. Is it more likely that these two Korean giants have a 52% share of the entire CDIT market, or does a 22.3% share sound more reasonable? They are most likely to have a combined market share of nearly 45% in the colour TV market, but definitely not the entire CDIT market, as they are virtually non-existent in segments like PCs and cameras, which constitute a Rs. 275 billion market.  Obviously, a whole lot of data is either missing or wrong.

Let us examine another industry – jewellery. Technopak estimates the total Indian (domestic) gems and jewellery market size to be about Rs.1.1 trillion. The India Retail Report 2011 puts it at Rs.806 billion. Gitanjali Gems’ annual report for fiscal 2011 (referred to earlier) puts the market at Rs.2.59 trillion. There is a huge difference of in these three estimates.

The top five Kerala based jewellery retailers alone have domestic retail sales of more than Rs.130 billion. According to one of the top 3 jewellery retailers in Kerala who did not wish to be named, the total Kerala market alone is about Rs. 450 billion. The number crosses Rs.680 billion in Tamil Nadu. So, just these two southern states have a market of Rs.1.13 trillion. Do the math yourself to see whether Technopak’s and IRR’s estimates are more correct than Gitanjali’s, or whether all three are way off the “real” mark.

I will now move to another small but trendy sector of the retail industry – beauty. When I started a skincare and grooming products retail business in mid-2010, I was obviously interested to know all details about the market. The best case (RNCOS) puts the domestic beauty, cosmetics, skincare and haircare industry size at Rs.473 billion. Technopak estimates it at less than Rs.438 billion. A July 2011 Business Standard article on The Body Shop puts the total market at only Rs.43.7 billion. The Economic Times publishes a story once every 2-3 months putting the market at a paltry Rs.40 billion. The Asia Pacific Business & Technology Report puts the market at Rs.182 billion. MSN News puts it at Rs.122 billion. According to Franchise India publications, the industry size is only Rs.30 billion. Euromonitor puts the market at Rs.275 billion. Whom am I going to believe? Actually, none of the above.

We did our own research. We discovered that the men’s shaving products market alone was more than Rs.50 billion. We also discovered that the men’s fragrance and deo market was another Rs.64 billion. Our research showed the men’s personal care market alone to be Rs.211 billion. Based on an assumption that men’s products comprise about a third of the total market, we concluded that the total Indian personal care (beauty, cosmetics, skincare and haircare) market was at least Rs.630 billion – more than double Euromonitor estimates and 33% higher than Technopak’s estimates.

So there is confusion, confusion and more confusion.  One does not know which data to believe. Everyone is happy to live with smaller numbers than reality, because it gives their own business notionally higher market share.

There is an equal amount of confusion about the size of India’s overall retail market and the share of organized or modern retail in this. Most published reports have estimated the total retail market (including automobiles) to be between Rs.18 trillion and Rs.21 trillion.

India’s nominal GDP in the last 12 months (September 2010 to August 2011) was Rs.83.8 trillion. Therefore, India’s household final consumption expenditure (or private consumption expenditure) at 55.7% of GDP should be Rs.46.67 trillion. Obviously, the retail market cannot be less than 45% of the household consumption expenditure.

According to Asipac’s extensive research and analysis (which we update on a regular basis), the total retail market is Rs.24.676 trillion ($542 billion), or about 53% of India’s household consumption expenditure.

The various published studies have estimated the organized retail sector (or modern retail) to be somewhere between Rs.990 billion to Rs.1.267 trillion. My contention is that two sectors – automobiles and jewellery – alone have an organized trade of more than Rs.2.07 trillion, and there is sufficient data in public domain to prove this. As per Asipac’s research, the organized or modern retail industry is Rs.3.31 trillion ($72.7 billion), which is 13.41% of the overall retail market.

It may be possible that Asipac’s data also has some gaps, and this is because we too (like everyone else) are constrained by the gross inefficiency in the data assimilation and dissemination practices prevalent in India.  Here, it’s not a case of “it happens only in India”, but more of “it does not happen in India”.



Indian Department Store Chains Missing the Mark – September 2011

May 10th, 2013

The Oxford dictionary (remember that thick book we used to refer to in our school/college days, when there was no Wikipedia) defines a Department Store as “a large shop stocking many varieties of goods in different departments”.

Wikipedia, which is what most youngsters refer to today, defines a department store as “a retail establishment which satisfies a wide range of the consumer’s personal and residential durables product needs; and at the same time offering the consumer a choice of multiple merchandise lines, at variable price points, in all product categories”. Wikipedia further continues: “Department stores usually sell products including apparel, furniture, home appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photography equipment, jewellery, toys and sporting goods. Certain department stores are further classified as discount stores. Discount department stores commonly have central customer checkout areas, generally in the front part of the store”.

Whoever wrote this definition in Wikipedia needs to visit Indian department stores and think about how to rewrite their definition. What does Wikipedia mean by “satisfies……consumer’s……needs”?  I am also a consumer, but (alas) no department store in India has ever been able to satisfy even 50% of my needs. I will explain this in more detail later in this article.

What are we Indians supposed to make of Wikipedia’s statement “certain department stores are further classified as discount stores and these commonly have central customer checkout areas”? Don’t all Indian department stores have this phenomenon? Someone just told me that we don’t even have “department” stores in India – we have “departmental” stores. Huh?

I first visited the Central department store in Bangkok’s Chidlom area (the original Central, not Future Group’s Indian version) way back in 1987.  I shall refer to these two Centrals as Thai Central and FG Central in the rest of this article to avoid any confusion.

From what I can recall (it’s been 24 years), the staff at Thai Central displayed a higher standard of hospitality and customer service than the Macy’s or Dillard’s stores that I used to shop at in Cleveland, USA, where I was studying. On the other hand, the store itself was screaming offers and discounts, and looked more like a discount store (not different from FG Central). It lacked a level of sophistication, perhaps not different from other department stores in Asia at that time.

Fast forward 13 years, when Landmark Group’s second “Lifestyle” department store opened on Bangalore’s Richmond Road (I hadn’t seen the first one in Chennai), it seemed that retail in India had finally arrived. The store had a much better look and feel, at least if one compared it with the Shoppers Stop stores of that time.  Not yet associated with the retail sector at that time, as an ordinary consumer, I told my family and friends that the day is not far when we would see department stores like Harrods, Selfridges, Nordstrom or Bloomingdales in India.  I could not have been more wrong.

Fast forward once again to 2010, now Thai Central’s Chidlom store in Bangkok looked (and felt) as close to the Harrods store at Knightsbridge in Central London (see picture of this Harrods store in all its glory at night), as any Asian retail store has ever been.  Not much different from the best in Singapore.  In my mind, their Central Food Hall was one of the best on this planet – I am not surprised it has won so many awards.

Comparing the Central Food Hall inside Thai Central stores with the Food Bazaar inside FG Central stores would be probably similar to comparing a Louis Vuitton store and a Holii store. Yes, it is actually that stark.  I remember visiting a Food Bazaar store in a Tier-II city shopping centre some time back (on a reconnaissance mission and not a shopping trip) and counting the number of flies (both live as well as dead) as at least three times more than the number of human beings s at that store.

Even the brand new Gourmet West food section of Westside’s Kala Ghoda store at Mumbai is pale in comparison with the Central Food Hall at Thai Central – what a shame, considering that the catchment served by the Kala Ghoda store is not much “poorer” that the catchment served by Thai Central’s Chidlom or other stores.

The “bridge to luxury” Shoppers Stop store at GVK One mall in Hyderabad reminds me of a Robinson store in Bangkok (for those who are not so familiar with the “non-spa” retail scene in Thailand, Robinson is to Thai Central in Thailand what Max is to Lifestyle in India). I am pretty sure that the new Robinson flagship store slated to open in November this year at Bangkok will be far more “evolved” than any Lifestyle or Shoppers Stop or FG Central store in India.  Alas, Lifestyle’s stores are slowly beginning to look more and more like (their value subsidiary) Max’s stores, and FG Central more and more like a Megamart.

What do I mean? Well, you get t-shirts for Rs.249 at Lifestyle today, don’t you?  Isn’t that the price segment that Max is supposed to cater to? All the major department store chains in India seems to be catering to the “bottom of the pyramid”.  There is nothing wrong with doing this, except that at such low price points, you cannot be running chains with just 30-40 stores. If you are playing the volume game (and not the margin game), you need to have at least 200 operational stores, or a turnover of at least Rs.80 billion (Rs.8000 crores).

Let’s step back and examine why Thai Central’s store in Bangkok’s Chidlom (see picture) has evolved so much in these 24 years (since I first visited it in 1987). Are people in Thailand earning much more than us Indians?  On the face of it, yes!. Please refer to Table 1 to see the comparisons.


All figures in US Dollars



Urban India

Only SEC-A,B,C in Urban India

Per Capita GDP on   PPP basis





Urban Per Capita   Consumption Expenditure







Thailand’s Per Capita GDP on a PPP basis is US$8700, compared with India’s $3500 (source: CIA World Factbook). However, Urban India’s Per Capita GDP on a PPP basis is $8550, almost the same as Thailand.  Since modern (organized) retail is only in Urban India, it would be more appropriate for us to consider Urban India alone and leave “Bharat” out of the equation.

Also, when we discuss retail, GDP (in any form) may not be the right comparison. It is always better to take consumption expenditure. India’s PPP-factored per capita private consumption expenditure (or “PCCE”) is $1940, our Urban PCCE is $3720 and if we stick to only the SEC A, B and C categories of brand consumers (as modern retail really caters to “them”), the PCCE goes up to $5560.  The comparative number in Bangkok (more than a third of Thailand’s urban population lives in the country’s capital city) is $7600.  In simple words, the brand consuming population in Urban India (not just the metros) is spending 73% of what their counterpart in Bangkok (just one metro) is spending.

Let’s have a look at an interesting comparison between the largest retail groups of four Asian countries in Table 2 below.  (Source: Company Annual Reports)

Table 2

Retailer Country

Annual Revenue (US$ Billions)

Contribution to GDP

Average Trading Density (INR)

Lotte Shopping   Group South Korea



Central Retail   Corporation Thailand



Rs.640 psfpm

Suning Appliance China



Rs.15,400 psfpm

Future Group India



Rs.383 psfpm


As Thailand’s largest retailer, Central Retail Corporation (CRC), the owner of Thai Central and Robinson, as well as several other retail formats, has annual revenues of more than $3.6 billion, which translates to 1.13% of that nation’s GDP. South Korea’s Lotte Shopping Group has revenues of $12.97 billion, 1.3% of South Korea’s GDP. It is to be noted that 10% of Lotte’s revenues come from overseas. China’s Suning Appliance has revenues of $24.43 billion, almost 0.5% of China’s GDP. In comparison India’s largest retailer Future Group (FG) has revenues of only about $2.5 billion, or only 0.16% of our GDP.

Shouldn’t Indian retail leaders be worried about these figures. Suning Appliance only runs CDIT (consumer durables, information technology & telecommunications) stores and has almost 10 times the revenues of Future Group which is almost into every facet of retail (see picture). Compared to Future Group’s CDIT format eZone, Suning’s turnover is almost 100 times. While Suning has more than 1200 stores, eZone has less than 60.

PIC-4 WITH CAPTION: “Suning Appliance, China’s largest retailer”

Coming back to the comparisons in Table 2, CRC’s average trading density (ATD) across the entire chain is about Rs.640 psfpm, whereas FG’s was Rs.383 psfpm as per their 2009-10 annual report.  So that’s 60% for Future Group vs. CRC, compared to the 73% spending by Indians vs. Thais.

How “poor” are we compared to our brethren in Thailand? Doesn’t look like the difference is too much. I purposely chose Thailand for most of the comparisons in this article, because every time one mentions any country in the west, or even Dubai or Singapore, our retailer friends remind us that we live in a “poor” country.  We may be living in a poor country, but are we poor?

I would like to know how the senior management at our national large department store (NLDS) chains Lifestyle, Shoppers Stop and FG Central have mapped the consumption patterns in India. The 2.77% “rich” households of Urban India contribute 20.2% of the urban private consumption expenditure.  Since thir average bill values (ABV) range from only Rs.1600 to Rs.2200, none of the NLDS chains seem to be targeting this segment of the population.  The key question is, why not?

The Indian “rich” annually buy Rs.1.27 trillion worth of stuff that is (usually) sold by a department store anywhere in the (more evolved) world. That is more than 30 times the combined turnover of the three NLDS chains. So this is not just a huge missed opportunity in terms of the sheer market size, it is an even bigger missed opportunity in terms of bottomline, as it would also be much easier for retailers to make higher margins from “stuff” sold to this population. The consumption of this “stuff” per household is more than Rs.5.00 lakhs per year.  If the NLDS chains could even capture even a fifth of this consumption, they would have ABV’s of Rs.4800-5600.

It seems to me that these NLDS chains are all targeting the next economic class or segment of Indian society – the “upper middle class” consumer. Have a look at Chart 1 below.

The “upper middle class” segment comprises almost 7% of the urban population but contributes just 16% of the urban private consumption expenditure. As these people usually shop within a (tight) budget, they are perpetual value seekers.  Many other national retail chains (we can call them fashion megastores, as they are not yet fully qualified to be termed as department stores) like Marks & Spencer (in the UK, M&S runs large department stores that also sell food & grocery, which contributes more than 50% of their revenues; see picture), Pantaloon, Reliance Trends, Westside, Max, as well as several regional chains, are also targeting this segment. There must be something about the “upper middle class” consumer segment that I don’t understand – although their combined consumption expenditure is just 79% of the size of the “rich” segment, most Indian retailers seem to be making a play here, gloriously ignoring the “rich” segment. In the case of the NLDS chains, could it be because most of the senior management at these chains belong to this economic segment, and therefore understand it best?

As the chart above shows, the next consumer segment, or the “middle middle class”, comprises 47.5% of the urban population and contributes 49% of urban private consumption expenditure. This segment is quite well catered to by big box discount retailers such as Big Bazaar, Star Bazaar, More Megastore, Brand Factory, Megamart, etc. This population also shops at formats such as Reliance Trends, Fashion @ Big Bazaar, Max, Pantaloon, Westside, Globus, regional department stores and sometimes even at the NLDS chains.

I would like to ask a question to the senior management of Landmark Group, both in India as well as Dubai. Shouldn’t Lifestyle be catering to the “rich” segment, while Max caters to the “upper middle class”?  It appears that Lifestyle is catering to the “upper middle class” and Max to the “middle middle class”.  If this is deliberate, it is fine, as the “middle middle class” is the largest consumer group. But I would still like to know why Landmark Group is ignoring a segment which buys 26.5% more than the “upper middle class”?.

Obviously, I have an almost similar question for Future Group. If several of their retail formats, such as Big Bazaar, Brand Factory and Fashion @ Big Bazaar, are already catering to the “middle middle class”, shouldn’t Pantaloon be catering to the “upper middle class” and FG Central to the “rich”?  In the case of Thailand’s Central Retail Corporation, the Thai Central department stores cater to the rich of that country, while Robinson caters to the upper middle class.

Indian retailers should look at Tata Group’s recently restructured hotel business. They have created four distinct brands – Taj (the flagship brand), Vivanta by Taj, The Gateway Hotel and Ginger – catering to four different economic classes of travelers. Over time, I am sure the Tata management will realize that there is a gap between The Gateway Hotel and Ginger, and create another mid-market brand to fill this.

Most of the large multinational hotel groups and automobile companies have different brands catering to different economic classes of customers. The key question is – when Indian retail groups have multiple formats, why are these formats not DISTINCTLY different from each other in terms of their TG’s, instead of cannabilizing from one another?

In Thailand, Central’s ATD is equal to about Rs.2250 psfpm in Indian rupee terms, while Robinson’s is about Rs.1350 psfpm.  Compared to this, Lifestyle’s ATD is at about Rs.810 psfpm, Shoppers Stop at Rs.710 psfpm, FG Central at about Rs.600 psfpm and Westside at Rs.585 psfpm. If we convert the two Thai retailers’ ATD’s to Indian PPP (refer Chars 2 below), Thai Central’s ATD would change to Rs.3228 psfpm and Robinson’s to Rs.1937 psfpm.  Based on The Economist’s Big Mac Index, Thai Central’s ATD would go down to Rs.1568 psfpm and Robinson’s to Rs.941 psfpm. The comparison is clear for all to see – our NLDS chains have a lmuch ower sales performance than these Thai retailers – what is the reason for this?

Let us look at these comparisons from another perspective. The world’s most famous department store – the Harrods store at Knightsbridge in Central London – has an ATD of about Rs.6400 psfpm. Applying UK’s PPP to Thai Central would give Thai Central an ATD of Rs.4275 psfpm – not bad for Thai Central compared with Harrods.  Our ATD leader Lifestyle would be pared at Rs.2216 psfpm … need I say more?

What is the size of the NLDS chains in India? The largest by turnover, Shoppers Stop, has annual revenues of Rs.19.3 billion last year, which translates to 0.028% of India’s GDP. In comparison, the world’s largest department store company, Isetan of Japan, had annual revenues of Rs.677.1 billion, 35 times more than Shoppers Stop, only from its domestic department stores business in Japan. Europe’s largest department store chain by sales, Spain’s el Corte Inglés, had sales of Rs.564.5 billion, again only from its domestic department store business. USA’s largest, Nordstrom, had sales of Rs.423.6 billion. South Korea’s Lotte Department Stores (only domestic sales, excluding international business) had sales of Rs.290.6 billion in 2010.

Table 3

Department Store Country

Annual Revenue

(in INR Billion)

Contribution to GDP

el Corte Inglés Spain



Lotte Department Store South Korea



Isetan Japan



Nordstrom USA



Shoppers Stop India



See Table 3 above for a comparsion of these department store companies in terms of a percentage of each country’s GDP. So we see that el Corte Inglés is 29 times larger than Shoppers Stop in terms of real sales, but 31.4 times larger in terms of share of national GDP.  Alas, our retailers have a very long distance to cover.  Can they do it?

So, what (really) ails the national large department store chains in India?  This question has been bothering me (and making me think, as well as analyze) for a very long time, and I have come to the conclusion that it is “lack of confidence”.

Firstly, I believe that they don’t have the confidence to open stores of a global size – they still prefer stores of 45,000 square feet to 65,000 square feet, compared with the global average of 150,000 to 200,000 square feet.  The exception here is FG Central, which is now setting up stores of this size, excluding a multiplex cinema.  Alas, their trading density is the poorest amongst the three NLDS chains.

The world’s largest department store – Macy’s at Herald Square, New York City (see picture), has more than one million square feet of retail space. The Harrod’s store at Knightsbridge (London) is almost one million square feet. While there is no reason to blindly copy international retailers (especially the failing American ones), 45,000-65,000 square feet is too small for the size of the population in most of our cities.

Secondly, the Indian NLDS chains seem to lack the confidence (or is it something else?) to widen their merchandise mix – the bread & butter apparel category still constitutes 58%-65% of their revenues, compared with 31%-54% for most global chains.

The furniture and home accessories that one sees at Thai Central’s Chidlom store in Bangkok is stuff that I would actually buy. In comparison, the collection that I see at Home Centre by Lifestyle is something that I would not even consider – remember what I said at the beginning of this article that no department store in India has even satisfied 50% of my needs.

Even the Robinson stores in Thailand have a much wider merchandise mix than any of our department stores, and Robinson is definitely not more “upscale” compared to a Lifestyle or Shoppers Stop.

Thirdly, and perhaps most importantly, the Indian NLDS chains just do not seem have the confidence to sell higher priced merchandise. Just have a look at Table 4 below.


Table 4


Men’s Shirts

Men’s Denim Jeans

Lowest Price

Highest Price

Lowest Price

Highest Price

FG Central

Rs. 325

Rs. 2,999

Rs. 999

Rs. 3,999

Shoppers Stop

Rs. 399

Rs. 3,999

Rs. 1,199

Rs. 8,999


Rs. 499

Rs. 3,999

Rs. 1,299

Rs. 6,999




Rs. 1,990

Rs. 11,500


Rs. 6,000

Rs. 14,000

Rs. 8,000

Rs. 21,245

The Collective

Rs. 3,500

Rs. 13,200




The price range of men’s shirts at Shoppers Stop is Rs.399 to Rs.3999 and denim jeans are Rs.1199 to Rs.8999. At Lifestyle, shirts are Rs.499 to Rs.3999 and jeans Rs.1299 to Rs.6999. In FG Central, shirts are Rs.325 to Rs.2999 and jeans Rs.999 to Rs.3999.

On the other hand, Diesel (in India) sells men’s shirts priced at Rs.6000 to Rs.14,000 and jeans priced between Rs.8000 and Rs.21,245. Even Levi’s has jeans priced up to Rs.11,500, but these are not available at any of the NLDS stores. The Collective (Aditya Birla Group) sells men’s shirts priced between Rs.3500 to Rs.13,200.

Senior management at the NLDS chains may argue that Diesel is catering to a very small market or that The Collective is a failure. And this is the very reason I have chosen to bring these brands/retailers into the picture.

Even if I agree that Diesel is catering to a very small population, at a mean price of Rs.14,623 (I don’t know their average) for a pair of jeans, they would need to sell just 31.6% of the quantity as Shoppers Stop and Lifestyle to achieve the same revenues from this merchandise category.  Need I argue that their margins would be higher.  Obviously, Diesel cannot sell these many pairs of jeans as a standalone EBO format. But if Diesel jeans were available at Shoppers Stop or Lifestyle, the sales volumes would definitely go up.

Look at it another way – if Shopper’s Stop and Lifestyle moved up their mean pricing for men’s denim jeans from Rs.4624 at present to Rs.6499, they would achieve the same revenues by selling 28.8% lesser quantities. But that is not the purpose here – the real purpose (of upping the average or mean selling prices) is to take up the overall revenues, the margins and the trading density – in order to achieve better bottomlines.

There are buyers for brands such as Diesel, BCBGeneration, Quiksilver, Timberland and Steve Madden in India. That is the reason why Reliance Brands has got them into India.  But why is it that these brands, or the brands brought in by Apparel Group Dubai (better known as Major Brands in India), have to come in through standalone stores? Globally, whenever any brand wants to launch in a new market (country), the brand’s first choice is always to launch within that country’s major department store chain. Why is this not applicable in India?

Let me also talk about The Collective. Even though this retail chain is not (yet) a department store format, it is important to bring it in here, as it is probably the only born-in-India MBO which has proven that the “rich” do shop in India. I would strongly argue that The Collective cannot be termed as a failure.

The 10,000 square feet Mumbai store at The Palladium is averaging sales of Rs.20 million a month, with an ABV of Rs.12,000 and ATD of Rs.2000 psfpm.  The newer Delhi store (8000 square feet at Ambience Mall Vasant Kunj) is already averaging Rs.14 million a month, with an ABV of Rs.13,000 and ATD of Rs.1750 psfpm. Yes, the Bangalore store did not do as well as expected, but that’s due to several factors: firstly, it is on a high street, compared with the Mumbai and Delhi stores being inside malls; secondly, the Bangalore store is much bigger, while the Bangalore market is smaller than Mumbai or Delhi.

The Collective has not yet been able to do justice to most of its non-apparel offerings – for example, in its Bangalore store, it was averaging less than Rs.2 lakhs per month in sales of men’s skincare products, whereas sales of these products in the neighbouring UB City are more than Rs.10 lakhs per month. I am quite confident that The Collective will fix these problems over time and be able to reach ATD’s of Rs.2500-3000 psfpm. The shopping experience is awesome and one feels like going back to this store. As more and more people experience this, The Collective will “collect” loyal high spending customers.

My friends in the NLDS chains will still argue that this kind of ATD is possible only in the top 4-5 metros and that too in “such” smaller stores – my counter argument is that the Lifestyle store at High Street Phoenix (within the same complex as The Collective’s Mumbai store) could have captured this Rs.20 million of sales, thus increasing both – it’s ABV and ATD – at this store. That’s a missed opportunity!

Every time I go to the USA, I spend $350 to $500 in buying clothes (mostly formalwear) at a Nordstrom or Brooks Brothers store.  I also spend an average of $700 in buying jeans – at my secret store in New York City. If the same choices were available in India, I would most definitely buy only in India. And the ABV would be Rs.15,000 to Rs.32,000, wouldn’t it? Alas, the choices are not available.  How I wish that stores like Nordstrom or Brooks Brothers come to India.

Believe it or not, I don’t get 42” waist sized denim jeans in India.  Not even at Diesel. And even The Collective rarely has shirts that fit me. Why don’t the Indian retailers realize that those who can spend more are probably a little older (say 35+) and are more likely to have waist sizes of 32” to 42” rather than 22” to 32”?  And why don’t they want customers who spend an average of Rs.23,500 – 12 times their current ABV? Huh?

Last, but not the least, the Indian NLDS chains are not able to deliver the quality of in-store service that the growing (in spending, taste and expectations) Indian consumer is looking for. Why can’t the retailers learn from the Indian domestic airlines, which are amongst the best in the world in terms of in-flight service? Service does not necessarily have to come at a very high cost – Indigo has proven this.

Look at the experience one faces at Indian retail stores. The picture of the broken fixture given here is that of a Biba store at Bangalore. The sales associates at this store actually put the broken flap back with cellotape each time they take out the merchandise they want from this storage place located just below the visual merchandising displays and therefore imminently visible to customers. It is life as usual. Even though the picture is not from a NLDS, the point is that Biba is a company astutely mentored by Future Ventures, as their advertisements have been screaming out for the past few days. Is customer experience not part of this mentoring? Perhaps not, going by the experience one has even at a Food Bazaar located within FG’s Central stores. One should visit the beauty sections of some Pantaloon stores to understand the “meaning of beauty”. The customer service is no different at Tata Group’s Westside or Star Bazaar stores.

I may be wrong, but it seems to me that Indian retailers just don’t seem to care. They seem to ignore the phrase “if you pay peanuts, you will get monkeys”, because they can’t afford to pay more than peanuts – because they don’t make money – but that’s because they are only catering to value conscious customers. But that’s exactly the problem, isn’t it?

In my mind, there are only two ways that the NLDS chains will fix all of these problems. The first will be by hiring top managers who have been brought up in “rich” households, and can thus relate better to the needs of the 2.33 million “rich” households in urban India. After all, let us not forget that these people – no matter how small they are in numbers – collectively spend 26.5% more money collectively than the 5.85 million “upper middle class” households.

The second – which is perhaps (sadly) more likely to happen – is that foreign department store chains will come in once FDI opens and these foreign retailers will raise the bar, in size, in merchandise mix, in average bill value, and in trading densities. They will (obviously) start hurting the Indian chains – and they will then (hopefully) wake up. (see picture of Saks Fifth Avenue, an American department store chain that is likely to enter India soon, according to media reports)

As an Indian who is as concerned about this country’s future as Anna Hazare or Kiran Bedi, and as a well wisher of the very people that I have criticized in this article, I sincerely hope (and pray) that it will be the first – and soon … very soon!

Before signing off, I would like to say something. I hope that the constructive criticism in this article (and my other frequent articles in this publication) are taken in the right spirit. I neither claim, nor pretend, to know more than the leaders of the Indian retail industry, who have far more experience and insights than me.  I just want to try and play the small role of a catalyst for change, reminding my fiends in the industry from time to time that we can do much more.



Amit Bagaria is Founder Chairman of shopping centre development consultants and managers Asipac Group and retail chain MEN & BOYS.

The “common wealth” Scam in India’s Shopping Centre Industry – Aug-Sep 2011

May 10th, 2013

In any revenue share arrangement or transaction between a shopping centre Owner and its Tenant, the Net Revenue (or turnover) accruing to the Tenant (retailer) is supposed to be shared as their “common wealth”. So, is everything really hunky-dory in this space or are mall developers / owners being taken for a ride?  In other words, is this form of transaction our industry’s very own commonwealth scam?

To find out, we first need to understand how “Net Revenue” is defined.  Net Revenue should be the total consideration accruing (whether received or not) to the Tenant and also all the sub-lessees, concessionaires, franchisees and sub-Tenants of the Tenant (including shop-in-shop counters) and any third party operating from the Leased Premises from all business of whatsoever nature (in cash or on credit) conducted on or from the Leased Premises and whether by way of sale or exchange, or commission or otherwise, of goods, wares, merchandise and services (including financial services) performed, together with the amount of all orders (including but not limited to mail, internet and telephone orders) fulfilled or delivered from the Leased Premises, irrespective of where delivery is effected, and all sales completed by delivery at the Leased Premises or elsewhere, and all sales made by means of vending devices in the Premises.

What this means is that: (a) If one or more departments/divisions of the business carried out at/from the Leased Premises is sub-leased by the Tenant or is conducted by any person or entity other than the Tenant (including an entity in which the Tenant has an interest), then the gross revenue of such departments or divisions are to be included in the Net Revenue and shall have the same effect as if the business of such departments had been conducted by the Tenant itself; (b) The Net Revenue should not include any amounts collected and paid out by the Tenant to any statutory authority in respect of any taxes, levies or cess, including VAT, sales tax, service tax, entertainment tax or any other similar levy of a like nature; (c) The Net Revenue should include any and all consideration received by the Tenant from any advertisement or publicity or space on hire (vide hoardings, billboards, promotional displays, events, glow signs, banners, standees or in any other manner whatsoever) of any brand or merchandise in the Leased Premises from any third party including manufacturers/wholesalers/distributors of any merchandise sold/traded by the Tenant; (d) The Net Revenue should not include discounts/rebates given to customers and sales of merchandise for which payment is received but subsequently refunded by the Tenant to the customer; (e) Sales of gift vouchers from the Leased Premises should be excluded but gift vouchers redeemed at the Leased Premises shall be included in the Net Revenue. There are a few other considerations that need to be captured in the legal document executed between the parties and I will not get into such minor details in this article.

Let me now rephrase the above paragraph in simpler language which will be easily understood by those who may not understand such legalese. Let us assume that department store chain Northstop has taken up 100,000 square feet of space in an upcoming shopping centre (we’ll call it Centramall or just refer to it as the mall) in Mumbai, being developed by Maxima Developers.

All names in this case example/study are assumed/fictitious names and I apologize in advance if someone real actually operates the same business under the same name.

The transaction between Maxima Developers and Northstop is based on 6% revenue share or a minimum guaranteed rent (MG) of Rs.55.00 lakhs per month, whichever is higher; and the deal has been done by leading brokerage house Medhraj & Sons.

Within this 100,000 square feet space, Northstop gives (on a sub-lease or concession) 2000 square feet to Coffeebits to put up a café, another 2000 square feet to Smartcuts for a salon, 3000 square feet to Kanishka Diamonds to set up a jewellery shop on a SIS (shop-in-shop) basis, 1000 square feet to Eye Express for an eyewear department, 1000 square feet to Deepika’s Secret for a lingerie SIS and 15,000 square feet to Home City to run the home department.

So, in all, we have assumed that Northstop has sub-leased 24,000 square feet of space to the various specialist retailers / service providers named above. Northstop also keeps an additional 1000 square feet vacant to use as “space on hire” for promotions/displays, etc.

In the first year of operations of this 100,000 square feet Northstop department store in Centramall, we assume that Kanishka Diamonds does sales (net of VAT) of Rs.160.00 lakhs per month and pays Northstop Rs.4.00 lakhs per month by way of revenue share (RevShare) @ 2.5%. Home City does net sales of Rs.150.00 lakhs per month and pays Northstop Rs.15.00 lakhs per month RevShare @ 10%. Deepika’s Secret does net sales of Rs.25 lakhs per month and pays Northstop Rs.5.00 lakhs per month RevShare @ 20%. Eye Express does net sales of Rs.20 lakhs per month and pays Northstop Rs.3.00 lakhs per month RevShare @ 15%. Smartcuts does net sales (net of Service tax) of Rs.8.00 lakhs per month and pays Northstop Rs.2.00 lakhs per month RevShare @ 25%. Coffeebits also does net sales of Rs.8.00 lakhs per month and pays Northstop Rs.2.00 lakhs per month RevShare @ 25%.

From the 75,000 square feet space managed directly by the anchor itself, Northstop does net sales of Rs.11.00 crores per month.  Out of this, Rs.50.00 lakhs comprises redemption of merchandise against Gift Vouchers sold at another Northstop store in Delhi; and another Rs.50.00 lakhs comprises telephone orders received at Northstop’s store at Centramall, but delivered to the customers’ homes. In addition to the Rs.11.00 crores of sales, Northstop earns another Rs.1.00 crore per month from the 1000 square feet of floor space on hire and other income from hire of hoardings, billboards, etc. within the store.

At the end of the financial year, after reconciling its accounts, Northstop sends a statement to Maxima Developers that the RevShare based rent has been computed as Rs.61.86 lakhs per month (6% of Rs.1031.00 lakhs average monthly Net Revenue) and since Northstop has already paid Rs.55.00 lakhs as MG during each month of the year, Northstop has to pay a balance of Rs.6.86 lakhs per month to Maxima.  Within a week of sending the statement, Northstop delivers a cheque of Rs.82.32 lakhs (6.86 x 12) at Centramall’s centre management office.

When Mr.Gupta, the owner of Maxima, hears about this, he is thrilled. He has received a bonus of Rs.82.32 lakhs, which is 1½ month’s MG rent. It is almost like receiving rent for 13½ months in a year comprising only 12 months. There is a small celebration and Mr.Gupta takes out the entire centre management for drinks and dinner to a 4-star hotel. Mr.Gupta also takes Anil Medhraj along and thanks him for getting such a wonderful anchor tenant into Centramall.

So, if this story has such a happy ending for all the parties, why does it have “scam” in the title? Beause Maxima and Mr.Gupta have been shortchanged to the tune of Rs.388.80 lakhs (Rs.32.40 lakhs per month).  Now, how did I figure that out?

As per the definition of Net Revenue given at the beginning of this article, the actual average monthly Net Revenue from the Leased Premises is Rs.1571.00 lakhs and not Rs.1031.00 lakhs as claimed by Northstop in their statement.  Therefore, the RevShare rent should be Rs.94.26 lakhs (6% of Rs.1571.00 lakhs) and not Rs.61.86 lakhs (6% of Rs.1031 lakhs) as claimed by Northstop.

How did I arrive at Rs.1571.00 lakhs – it’s actually quite simple – Rs.1100.00 lakhs net sales of Northstop, PLUS Rs.160.00 lakhs of Kanishka, PLUS Rs.150.00 lakhs of Home City, PLUS Rs.25.00 lakhs of Deepika’s Secret, PLUS Rs.20.00 lakhs of Eye Express, PLUS Rs.8.00 lakhs of Smartcuts, PLUS Rs.8.00 lakhs of Coffeebits, PLUS Rs.100.00 lakhs of other income earned by Northstop from the space on hire.

But how did Northstop calculate Rs.1031.00 lakhs? That’s actually also quite simple – from the Rs.1100.00 lakhs, they first deducted Rs.50.00 lakhs of redemptions because “they didn’t receive money against this”.  Then they deducted another Rs.50.00 lakhs worth of home deliveries made against telephone orders, because “the customer did not come to the store, so why should the landlord get any benefit from this?”  So, Northstop’s own sales as reported in their statement was just Rs.1000.00 lakhs. To this, they added the Rs.31.00 lakhs that they received as RevShare from their sub-lessees and concessionaires (Rs.4.00 lakhs from Kanishka, PLUS Rs.15.00 lakhs from Home City, PLUS Rs.5.00 lakhs from Deepika’s Secret, PLUS Rs.3.00 lakhs from Eye Express, PLUS Rs.2.00 lakhs from Smartcuts, PLUS Rs.2.00 lakhs from Coffeebits) as Northstop felt that this is the revenue that Northstop is “supposed to” share with Maxima.  In addition, Northstop did not add the Rs.100.00 lakhs it earned from space on hire as this was “a tactical part of their negotiation with brands” who they deal with.

Due to this innovative accounting, Northstop paid Maxima only Rs.1.86 lakhs out of Rs.231.00 lakhs income that they earned (Rs.100.00 lakhs from space on hire, Rs.100.00 lakhs from redemptions and home deliveries and Rs.31.00 lakhs revenue share from sub-licensees). Hmmm.

And if Maxima only received Rs.61.86 lakhs per month from premises that had a net revenue of Rs.1571.00 lakhs, then in actual effect, Maxima only got 3.94% revenue share and not 6% that it had signed for.

The table below depicts what Maxima actually received as compared to what it should have received.

So, who is wrong and who is right? That’s for Mr.Gupta to decide, isn’t it? As far as Anil Medhraj is concerned, he gets his brokerage on the MG amount, so he could be least bothered about how much reveue share the landlord is really getting. Best case, if Northstop was honest and had paid Maxima Rs.471.12 lakhs (Rs.39.26 lakhs x 12, in which Rs.39.26 lakhs is the difference between the actual revenue share amount of Rs.94.26 lakhs that Northstop should have paid and the MG amount of Rs.55.00 lakhs), Mr.Gupta might have taken him to the Four Seasons Hotel for dinner instead of some “cheap” 4-star hotel. Not worth Anil Medhraj spending so much time on – after all, in all this time, Medhraj can do another deal.

I have started discovering that this is the way many anchor tenants have been operating in India – like the case example in this article. This may actually include a couple of listed companies – but in the world of Satyam and 2G, does being listed on a stock exchange make anyone less crooked?

Most Indian landlords (or shopping centre developers / owners) don’t have a clue that this is going on. They don’t even suspect anything, as they don’t understand all these complex calcuations.  Like Mr. Gupta in this story, they are happy to receive anything more than the minimum guaranteed rent.

That is the value that consultants like us can bring to the table – the value of knowledge. The extra Rs.50 per square foot that developers spend on flooring does not get them any returns. But the same Rs.50 per square foot spent on hiring talent with the right knowledge can help them earn an extra Rs.32.40 per square foot per month (or Rs.388.80 per square foot per year), as this story has demonstrated.

Like the Kalmadi CWG scam, the RevShare scam is multi-faceted. It is not just restricted to innovative summation of net revenue like the Northstop case example. There are many other “methods” being used by retailers to report lesser revenues to landlords.

Well managed shopping centres collect daily sales figures (mostly verbally) from store managers. Many of them have discovered that the sales/revenue number in the Monthly Sales Report (which mostly comes from the HO) sent by retailers has a monthly is 25-40% lesser than the sum of 30 or 31 days’ daily sales numbers. Granted that the daily number usually is VAT inclusive and the monthly number VAT exclusive, but surely the difference cannot be 25-40%, as VAT has not reached such high proportions in any Indian state (yet)!

In conference after conference, forum after forum, we are debating the retailers’ point of view that rents in India are too high. For a change, why don’t we debate this issue of how revenue share should be calculated and whether income from “space on hire” – within premises built and leased by the developer – should be part of the revenue they share with developers? Or, for that matter, why don’t we debate why these revenue share paying “modern” retailers are doing less than half or one-third business per square foot when compared with traditional retailers like The Chennai Silks or RmKV?

I am off to the Four Seaons Hotel with Mr. Gupta. After all, I better fill my stomach just in case I have to go on a fast at Ramlila Ground or Jantar Mantar. Adieu till next time.


Amit Bagaria is Chairman of Asipac, India’s leading mall development consultants & managers and MEN & BOYS, the world’s largest chain of retail stores for men’s cosmetics, skincare, hair care and grooming products.

Retail Giants of Tamil Nadu – August 2011

May 9th, 2013

Everyone talks about them, but most don’t have a clue about the real size of their business. I am referring to the traditional Dravidian retail giants who have dominated Tamil Nadu’s retail landscape for decades, and don’t seem to be affected a bit with the onslaught of modern department stores or malls in their home turf.

Saravana Stores does annual business of Rs.510+ crores from a 7-floor store (that’s more than what any single Lifestyle, Central or Shoppers Stop store does).  From four stores, Saravana does Rs.1200+ crores. That’s two-thirds more than the Rs.717 crores turnover reported by Tata’s Trent, which includes Westside (54 stores), Landmark (18 stores) and Star Bazaar (12 stores). The Chennai Silks is estimated to be doing business of Rs.1150+ crores (excluding jewellery) from nine stores, Nalli Rs.700+ crores from 22 stores, Pothys Rs.650+ crores from four stores and RMKV Rs.510+ crores from four stores. These five Tamil Nadu retailers do sales of Rs.4200+ crores, more than the turnover of Shoppers Stop, Lifestyle, Westside and Reliance Trends put together.

This is the power of regional retail. Modern retailers are still trying to figure out how to make it happen. After months of efforts, Asipac’s research team finally got hold of two of these giants – let’s read what they have to say.



Back in 1924, with India under British rule and organised retail non-existent, Rm.K.Vishvanatha Pillai set up a 1000 square feet women’s wear shop in Tirunelveli named RmKV after his initials. With silk sarees as its core product, the shop operated from this location until it shifted to a much larger 35,000 square feet megastore elsewhere in Tirunelveli in the 1950s. As it turned out, that market was to grow by leaps and bounds, positioning RmKV at the centre of a thriving retail hub.

According to Rm.K.Sivakumar (Siva), a third generation family member now running the business, “It was no coincidence that RmKV became the brand it is today. From day one, my grandfather worked with a mission of being honest and transparent, while focusing on efficiency at the back-end. In the 1920s he had a system to identify each product through a Unique Numbering System. With the advent of computers in the 1980s it became much easier, but the transition was smoother for us because of the system he had put in place, and we follow the basics of that system till date”.

For 80 years, RmKV operated a single store. Eventually, the market became so big and so crowded that, as per Siva, “the customer experience started deteriorating”. Access had become a problem, and there was hardly any parking for the increasing number of shoppers with private vehicles. With organised retail emerging at the turn of the century, RmKV decided to expand and take the brand outside Tirunelveli. A 35,000 square feet store was opened in Chennai in 2004. Four years later, RmKV opened its biggest store, a 100,000 square feet outlet in Tirunelveli. The original shop in the old market area continues to operate.

As a sign of RmKV’s desire to move with the times, the fourth store (58,000 square feet) was opened in 2010 inside a mall – Brookefields Plaza, Coimbatore. “We did a survey before we took the decision. Normally, silk sarees are sold in traditional markets, and we were unsure of the turnover we could achieve in a mall. We were pleasantly surprised with the results of the survey, with a majority of people saying if the price and quality of product stayed true to the RmKV brand, they would shop with RmKV in a mall”, says Siva. Asipac estimates RmKV’s sales at Brookefields Plaza at Rs. 14–16 crores per month, three times that of the similar sized Lifestyle in the same mall.

Another example of RmKV adapting to change was the online sales platform. A catalogue of almost 1500 sarees is currently online. Says Siva, “Weddings is our main business, and with weddings now planned, it helps a customer to visit the website and identify the products that fit their taste and budget. Even if they do not buy online because they want to touch and feel the product, by the time they visit our store, they pretty much know what they want, making the process that much easier”.

With a turnover that crossed Rs.510 crores in the last fiscal, RmKV’s ATD is an impressive Rs.1865. This is almost three times that of Shoppers Stop. This is noteworthy because their ABV is just Rs.1250, not exceptionally high by industry standards. With an average (four stores) 7500 daily footfalls and 11,000 on weekends and holidays, I estimate RmKV will cross Rs.700 crores this year.

“Competitive pricing and quality have been our strength. From the beginning, our business model has been one of ‘low margin and high turnover’, with margins usually in line with prevailing interest rates”, says Siva. During World War II, a quota system put a ceiling on the amount of merchandise a retailer could sell to each customer. “Retailers used to make a killing, selling at 2-3 times the normal price. Even then, my grandfather used to sell at 6-7% margin, equal to the prevailing interest rate”.

When asked about entering market segments other than silk sarees, Siva said, “Silk sarees define our brand. It is who we are. We are open to other segments as long as the parent brand is not diluted. We have diversified into RTW, dress material, artificial jewellery, women’s accessories, innerwear, synthetic sarees, but silk sarees is where we focus most of our energies on”. Maybe it was due to this unyielding focus that RmKV was not heavily impacted by the recent slowdown. Infact, they expanded in that phase, and ended up benefitting from lower sourcing costs during the slowdown.

I wondered why RmKV opened three stores in six years when it had taken them 80 years to open the second. RmKV has also signed a store of 60,000 square feett at the upcoming Forum Mall in Chennai. “We believe that growth is important, but so is sustainability and turnover. Planning and controlling the back-end process is critical. We did not want growth for the sake of growth, and it was only after a thorough study of new locations, competitors as well as customer behaviour that we decided that the time was right to expand”. As for future expansion, Sivakumar felt that the biggest challenge lay in managing multiple stores spread across a wider geography, and getting their formats right. He said that Nalli’s is a great example of a regional competitor that had successfully expanded across the country. When queried about how he plans to fund future expansion plans, Siva said that he would be open to external funding, although “it might be too early to think of an IPO”. I couldn‘t agree more, considering that RmKV has not yet stepped outside Tamil Nadu. PE investors will give RmKV a valuation of Rs.900-1000 crores. That’s more than listed companies such as Brandhouse (S.Kumar’s Group) and Provogue. If FDI was allowed in multi-brand retail, the valuation would be above Rs.1250 crores.


While on the topic of Nalli’s, Sivakumar gave them credit for spreading awareness about Indian ethnic wear amongst India’s youth, especially at a time when the general trend is towards western wear. “It is one of the challenges we face – getting younger women to wear sarees more often”, he says.

Like most businesses, identifying, recruiting, training and retaining high quality manpower remains a challenge for RmKV too. “Our frontline staff are from modest academic backgrounds and we conduct weeklong training sessions three times a year, outsourced to a professional agency, thereby ensuring that the staff’s product knowledge and customer service is top notch. Our senior management, on the other hand, comprises of educated professionals from reputed institutions. Overall, we strive to instil in our employees a sense of ownership and belonging towards the brand – it makes a positive impact on customers and it helps us counter attrition issues to some extent”, says Sivakumar.

So what makes RmKV achieve three times the trading density of Shoppers Stop and four times that of Westside? Is it because they are 87 years old? Or because they work on lower margins? Or is it because a majority of Indian women still wear ethnic? I believe it is a combination of all three. I see RmKV crossing a turnover of Rs. 1000 crores by FY 2013. Surely, a retailer of this size cannot be ignored by the industry.



Born into a family of weavers at Tirupur, in 1962, A.Kulandaivel Mudaliar set up a 100 square feet shop in Madurai, selling khadi products. Over the next 30 years, he set up 12 more “khadi vastralays” across small towns in Tamil Nadu, gradually increasing the range of products and carrying on wholesale as well retail operations.

In 1991, Mudaliar set up a 25,000 square feet store named The Chennai Silks (TCS) at Tirupur selling textiles, silks sarees and RTW garments. “At that time, it was one of the biggest stores in the area”, says P.A. Ravindhiran, General Manager – Sourcing & Operations. A store of that size in Tirupur 20 years ago (with economic reforms in India yet to be introduced) had to be a rarity.

In 1996, Mudaliar opened a 45,000 square feet store in Coimbatore. Another store of the same size opened in Erode in 1999, followed by a 125,000 square feet store in Chennai in 2001 and a 100,000 square feet store in Trichy in 2004. Two stores opened on the same day in 2007 – 100,000 square feet in Karur and a second 80,000 square feet store in Coimbatore. This spate of aggressive expansion continued, with a 75,000 square feet store opening in Coimbatore in 2008 (the third in the city), and TCS also started selling jewellery.

Another 125,000 square feet store was opened in Ernakulam in 2009, spread across nine floors. This was also TCS’ first foray outside Tamil Nadu, and an indicator of their confidence in the brand, business model and market conditions. A 150,000 square feet store is under-construction in Tirunelveli and is expected to open by end-2011.  This will take up TCS’ total retail space to over 870,000 square feet.

All TCS stores are located on high streets – not one in a mall. What’s more, TCS owns all stores, including the land under them, and has an in-house project division to identify suitable land parcels and carry out construction. Surely, they must be using third-party agencies in some form? What about market/location analysis? “Although we do have an in-house research division, they usually work in conjunction with third-party agencies, especially for customer preference surveys”, says Ravindhiran.


The development of all stores has been self-funded, and Ravindhiran maintains that TCS might not look at external funding for their short-term expansion plans.

This reminded me of my father’s generation, where debt was often considered ‘bad’. Leveraging, or using one’s own capital to generate higher returns while borrowing at relatively lower rates to fund income-generating assets, cannot really be considered bad, can it? But who’s to question convention wisdom, especially if it’s successful?

Ravindhiran claimed that he was not aware of the latest turnover of TCS, and was unable to provide the same by the time this article went to press, but Asipac’s research arm estimates that TCS currently does an annual business of Rs.1150+ crores (excluding jewellery). Since the TCS stores covered in this article also sell jewellery, an ATD calculated using these figures would be inaccurate; nonetheless, doing a business of Rs.1150+ crores from nine stores is impressive. This figure will increase if we consider jewellery as well.

According to Ravindhiran, TCS has managed to diversify considerably within the apparel segment. Although silk sarees is the core segment, supported by sub-categories like designer sarees and wedding silks, they also sell cotton sarees, kidswear and western wear for men and women. Ravindhiran stated that in the near future, TCS is planning to target “all segments, age groups and income levels”. That’s a mighty ambition, considering that even national players like Lifestyle and Fashion@Big Bazaar operate at opposite ends of target income segments. TCS caters to a wide variety of income levels but within a restricted range of merchandise, and how it manages to expand along both axes needs to be seen.

With more than half of their merchandise designed and manufactured in-house and separate directors for production and retail, Ravindhiran sees TCS as a trendsetter. One of the things that struck me was that they have had an online sales platform since as early as 2000. “Although it was slow to take off, it has been doing very well in the last few years and now we have a large team to handle our online operations”, says Ravindhiran. Online sales in India have become commonplace only in the last 5-6 years, and I see this as one sphere where they have indeed proved to be early adapters.

On manpower, TCS, RmKV and a lot of other regional players seem to have a similar model – fresh graduates are recruited as store staff and then trained, professionals with corporate experience are recruited for middle management positions and then groomed for more responsibilities, and people who are either from ‘the family’ or who have been with the business for a long time normally occupy the top management positions. Ravindhiran himself is related to the Mudaliar family and joined the business in 1996. Syed Mushtaq, GM – Operations, has been with the business for 30 years.

The third generation has now entered the business, handling segments like men’s western wear and designer sarees, and young blood has led to fresh ideas and strategies to take the TCS footprint further. “We will be pan-India very soon”, claims Ravindhiran. Funding (especially for expansion) is where most regional retailers seem to stumble while on their expansion plans, and TCS does not appear to have that problem.

And then there’s the precedent of Nalli’s. It’s a bit like the four-minute mile. Athletes globally tried to run a mile under four minutes for decades, and it was considered ‘almost impossible’. Finally, Roger Bannister ran it under four minutes in 1954. Once proven possible, Bannister’s record was bettered in the same year and another four times in the next 10 years. Nalli’s has already set an example by metamorphosing from a regional to a national player in a very short while. So, while a pan-India presence for TCS might take a while, I am not willing to bet against it.

Mudaliar passed away a few years back, but when he sat in his 100 square feet Khadi Vastralaya in 1962, could he imagine TCS will be one day where it is today – a $250 million turnover company with a valuation of not less than Shoppers Stop’s market cap of Rs.1710 crores? Unlikely, but he was fortunate to have lived long enough to see this success. Only time will tell whether his successors will make a national giant out of The Chennai Silks, but they sure are sitting on a solid launch pad.

Westside’s website boldly claims that “Westside is one of India’s largest and fastest growing chain of retail stores.” I wonder whether equity analysts and investors who give Trent a market cap of 4.3 times its annual revenues or 71.5 times its net profit are even aware of the existence of The Chennai Silks and RmKV, and the threat regional retailers could pose to the highly overvalued national chains.



Amit Bagaria is Founder Chairman of shopping centre development consultants and managers Asipac Group and retail chain MEN & BOYS.


Plan & Design Truly World-Class Centres in India – Shopping Centre News, May – Jun 2011

November 5th, 2012

How to Plan & Design Truly World-Class Shopping Centres in the Indian Context


Planning and designing even ordinary shopping centres (malls), leave alone “world-class” shopping centres or retail-led mixed-use developments, is not everyone’s cup of tea.  Much like airports, hospitals, stadia and to a lesser degree, educational institutions & hotels, shopping centres are also specialized buildings, and need specialized planners and architects. This article gives you some broad guidelines on what (or not) to do, but cannot replace customized work required for individual projects.  Amit Bagaria, Chairman of Asipac Group, has been a consultant in this field for 15 years and has led the planning and design of projects of over 18 million square feet.  In 2004, he conceived and planned Mall@Koramangala at Bangalore – what was then the country’s first “supermall”. Most retailers in India (and several overseas) considered the mall to be unarguably the best India would have seen.  Unfortunately, this project got stuck for years in zoning regulations. Bagaria’s first large mall project to get completed is Mantri Square (Bangalore), one of the largest operational shopping centres in India. Amongst other projects totaling over 6.0 million square feet, Bagaria has recently completed the planning & design phases for two supermalls – the 1.7 million square feet City Capital Mall at Hyderabad (the largest shopping centre under construction in India) and the 1.47 million square feet Neomall at Bangalore (the second largest). This rich experience has made him one of the most respected experts on this subject.





M/m: meters or metres

SQM/sqm: square meters

FT/ft: feet

SFT/sft: square feet

Super Mall: Shopping Centre with a GLA of 108,000 sqm

Regional Mall:       Shopping Centre with a GLA of >54,000 sqm but <108,000 sqm

Community Mall Shopping Centre with a GLA of >20,000 sqm but <50,000 sqm; Shopping Centres smaller than 20,000 sqm are referred to as Neighbourhood Malls

F&B Unit: Food & Beverage Unit, including Cafes, Coffee Shops, Restaurants, Express Food Counters in a Food Court

EFC: Express Food Counter; usually a Food Court has a number of independently branded/operated EFCs, with common seating, hand-wash, dish-wash/service areas

FEC: Family Entertainment Centre; there may be more than one FEC in a Super Mall

Lettable: Any space that can be leased/licensed to a third party

Shop: A lettable unit, including F&B outlets, Cinema/Multiplex, FEC, etc.

Anchor: A shop with UCA of >20,000 sft in case of Regional/Super Malls and >10,000 sft in case of Community Malls

Mini Anchor: A shop with UCA of 6000 to 19,999 sft in case of Regional/Super Malls and 4000 sft to 9999 sft in the case of Community Malls

Vanila: A shop with UCA of <7000 sft in case of Regional/Super Malls and <4000 sft in case of Community Malls

Supermarket: A shop that sells food/grocery & FMCG products, and (in the Indian context) has a UCA of 6000 to 35,000 sft.

Hypermarket: A large discount store that sells food/grocery, FMCG & general merchandise, and (in the Indian context) has a UCA of >40,000 sft.

UCA: Unit Carpet Area, being the perimeter area of each shop or lettable unit (whether enclosed by four walls or semi open on one/two sides), including columns within the unit but excluding shafts; measured up to 50% of the wall thickness on the back and the sides and up to the front (outside) of the glazing line in the front of the unit

GCA: Gross Carpet Area, or the sum of the UCAs of all lettable units in the mall

GLA: Gross Lettable Area, an area equivalent to the GCA plus a pre-determined loading factor (which differs on a case to case basis) to account for common areas such as circulation corridors, usually equal to the GBA (or super built area) of the building, excluding MLCP/Basement floors

GBA: Gross Built-up Area of the building, including MLCP/Basement Floors

MLCP: Multi Level Car Park

CPS: Car Parking Spots

ATD: Average Trading Density (sales per sft per month)



How many Indian shopping centres were actually properly planned before they were designed and built? I can very safely say that, of the 230+ operational shopping centres in the country, not more than 15 were planned properly. If this were not true, why would High Street Phoenix (Lower Parel, Mumbai) need so much renovation/retrofitting every so often, why would The Forum (Koramangala, Bangalore) not have a supermarket occupying at least 10% of its GCA, why would DLF Promenade have been built without any anchor store except a multiplex, why would the first Inorbit mall (Malad, Mumbai) need to have a hypermarket and a supermarket, why would Spencer Plaza die so soon despite being located in the best location a shopping centre could possibly have, why would Triton (Jaipur) be struggling even two years after opening, why would the Esprit store have to be replaced with Nalli at Oberoi Mall (Goregaon, Mumbai) and why would Pepe Jeans be located between six ethnic wear stores at the recently opened Royal Meenakshi Mall (Banerghata, Bangalore)?

The list of badly planned malls is endless and if I were to go on, this article would be more about what not to do than what needs to be done. Some people could argue that some of the malls named above are doing very well – yes, while that is true to some extent, it is equally true that al of them are doing well because of the lack of competition.

Before doing anything else, the promoters of any shopping centre project must first do a Needs Analysis Study (“NAS”) to answer the basic question – is a new shopping centre really needed at that particular location and is there a large enough catchment to service the project? I am very proud of the fact that all four operational retail projects handled by Asipac are amongst the best performers in their respective categories or locations and we are yet to see a failure. This is because we are extremely diligent about accepting projects – more than 90% of the projects that come to Asipac are actually rejected after we do an internal NAS. Most new recruits at Asipac come to the conclusion within the first 4-5 months that they are working for the craziest boss that one could dream of – someone who rejects a vast majority of the projects that come through our door (or email) every week.  If we accepted even half of the projects, we would be earning 4-5 times more than what we make today – but the cost of that would have to be borne by the promoters.

An average SEC-A/B Indian household can sustain about 12 sft of GCA – so, a shopping centre with a GCA of 300,000 sft needs a primary catchment of 25,000 SEC-A/B households. Please note that 12 sft is a nationwide average, so it can go down to as little as 6 sft in an conservative low-spending neighbourhood (like most of Ahmedabad or Kanpur) and could also go up to 20 sft in a high-spending, yuppie catchment like Gurgaon in NCR, Andheri West in Mumbai or Electronics City in Bangalore.

If the NAS proves that there is a need for a shopping centre, the next step is to do a proper Trade & Tenancy Mix Analysis (“TATMA”). This has to be based on the shopping habits of the consumers in the primary catchment. A proper TATMA will ensure that one does not open a Chicking or Great Kabab Factory in a predominantly vegetarian area or have 90% of the apparel space dedicated to western wear in a catchment where 84% of women wear sarees. Asipac was criticized by many modern retailers for putting several local ethnic retailers in Mantri Square at Bangalore.  In fact, many snobbish retailers refused to come into this fantastic shopping centre for this very reason. Ethnic wear is the best performing category at Mantri Square. We wanted to put in at least 10,000 sft more of ethnic wear, but were not allowed by the gora manager, who was unfortunately allowed to take the final decision about a catchment he just did not understand. If you don’t open India’s largest Apple store in Electronics City, where will you put it – in Pune’s NIBM area?

The TATMA has to lead to a well-thought Space Program as well as an A&E Brief. The Space Program has to define what types and sizes of shops the shopping centre should have and how they are to be spread/located on different floors. The A&E Brief has to guide the architects and engineers as to how they need to go about designing the project.

Many promoters/developers still think that all this is not necessary if they get experienced foreign architects or even top Indian architects. Nothing could be further from the truth and let me tell you why.  Indian retailers and consumers are both very different from their “foreign” counterparts.  For example, all retailers in UK accept a width (frontage) to length (depth) ratio of 1:3.5 or 1:4.  In India, retailers actually want a reverse ratio – most would be very happy if their 1000 sft shops were to have a frontage of 50 feet and a depth of only 20 feet. By that logic, success of a retail store in an Indian shopping centre should be directly proportional to the frontage of the shop.  Jokes apart, most Indian retailers DO NOT accept a length (depth) of more than 2.5 times the width (frontage).  Another huge difference – the average size of a vanilla store in USA or UK is 2150 sft, whereas in India the ATD of many vanilla retailers start falling beyond 700-800 sft.  Customer washroom density needs in India are 2-3 times that of North American or European shopping centres – seems like our western brothers & sisters are pissed “off”. We have another unique need – separate washrooms for staff, especially the security and housekeeping staff.  Another difference is that Indian shopping centres (if they are successful) have much larger crowds than their foreign counterparts.

As far as Indian architects are concerned, the less I say about them the better. They still don’t realize that a turning/curving ramp driveway needs a minimum width of 4.0m, or that most Indian cars are not Maruti 800’s, or that hypermarkets/supermarkets need unloading docks for full-sized trucks, or that a food court will need water supply and drainage.  Their complete disinterest in understanding the special needs of a shopping centre building leads to huge time and cost over-runs, but many penny-wide pound-foolish developers just fail to accept this fact.

The Space Program must actually define the actual washroom needs by type, based on a throughput & utilization study. It must also define the number of parking spots needed.  The urban human population of India is growing @10 million p.a. – or 2.5 million households p.a.  The urban car population is increasing by 1.7 million p.a. So, there are almost seven new cars for every 10 new households. What does this tell you?

It tells me that it is high time we started getting serious about parking spaces in shopping centres. When I presented a case study at the India Fashion Forum 2005 on how shortage of parking spaces can kill a mall, many people in the audience laughed it off. Of the 125 Saturdays, Sundays and public holidays that Mantri Square has seen in its 13 months, parking has been choked on 107 days.  Is this a joke?  Who is suffering? Yes, definitely the retailers – but also the owner, as most rentals nowadays are based on revenue share.

If a shopping centre has to achieve an average rent of Rs.120/sft on carpet area, it needs an ATD of 11 times that amount – or Rs.1320 p.m., or Rs.43.39 per square foot per day.  Since an average family spend is just Rs.1400 per mall visit, there need to be one family visit per day for every 32.27 sft of carpet area.  So, the shopping centre needs 31 families per 1000 sft of carpet area per day.  Since the average turnover per parking spot is 4.4 per day, a shopping centre would need 7.05 parking spot per 1000 sft of carpet area if all days would have equal footfalls.  Since Sunday (peak) footfalls are 1.75 times the daily average, the shopping centre would need 12.34 parking spots per 1000 sft of carpet area, if all visitors were to use their own transport.  If we assume that 25% of the visitors to an Indian shopping centre come by bus/taxi/auto, we still need to provide 9.26 parking spots per 1000 sft of carpet area.

Most developers don’t even providing one-third of this number – yet they want higher rents. Retailers are equally to blame – they should not sign on projects that have less than at least 6 parking spots per 1000 sft of carpet area.

The A&E Brief has to lay down the guidelines for the structural, services and infrastructure design of the project.  For any shopping centre to succeed, the functional design should be done “inside out”, rather than “outside in”, i.e. create blocks/bubbles (to scale) of the individual anchor shops and groups/clusters of vanilla shops. Then these bubbles should be assembled (like a jigsaw puzzle) based on vertical and horizontal zoning requirements.

A good shopping centre needs to have a floor-to-floor (height of minimum 5.5m on the ground floor and 4.5m on other floors.  The multiplex needs a clear height (top of slab to bottom of beam) of minimum 11.0m, and a FEC 6.5m.  The parking floors should have a minimum floor-to-floor height of 3.4m.

There should be enough break-out areas to cut the monotony and also to allow the visitors (especially senior citizens) to take rest.  Each of these break-out areas could be themed differently and should have minimum seating for 20 people in case of Super Malls, 12 people in case of Regional Malls and 8 people in case of Community Malls.  There should also be seating for 4-8 people at different locations (within the circulation spines) throughout the shopping centre.

The most functional and time tested design of the main circulation spine in the case of Super Malls is a double-doughnut (or “8”) shape (such as theexample of the plan given here on the right), so that there are no “dead ends” and visitors can always come back to where they started from, instead of losing their way around, or being forced to turn around and come back the same path they have already taken – people don’t like to do this and all shops don’t get even footfalls if this happens.

In Regional Malls, spines or circulation systems shaped like a doughnut, oval or rectangle (such as the one in the plan shown here below) are the most ideal.

In the case of Neighbourhood Malls and Community Malls, these design parameters have to be decided based on the permissible ground coverage and the resultant building footprint, as not much more than one central atrium or corridor system may be realistically feasible.

In any case, regardless of the exact shape of the main spine or circulation system, there should be no negative spaces leading off dead end corridors, such as the ones at the bottom or the centre left on the plan shown here below.

As far as possible, there should be no dead-end corridors and all corridors should loop back. In case of passages leading to public washrooms or lifts, there should not be any shop openings from such passages.

The minimum widths of the main public circulation corridors leading to shops should be as follows:

  • Double-loaded corridor serving anchors: 7.6m
  • Double-loaded corridor not serving anchors: 7.0m
  • Single-loaded corridors, including corridors on either
    side of cut-outs: 4.0m
  • Atrium Corridors with cut-outs above: 10.0m
  • Corridors in front of Hypermarkets: 8.4m
  • Passages leading to washrooms, etc.: 2.5m

In the case of Super Malls, the architects should design much wider spines and corridors.

Part of the planning process for Super Malls and regional Malls involves category-wise zoning and clustering. This is especially important for certain categories like maternity & newborn, children, footwear and jewellery.  Consumer surveys have shown that most consumers by and large prefer zoned malls, as Indians hate to walk around too much.

Atriums should give a feeling of openness and grandeur. There should be minimum 3 pairs of Escalators connecting each floor (with the floor below and the floor above) for a shopping centre with a floor plate of up to 50,000 sft, and one additional pair of escalators for every additional 40,000 sft, including escalators installed within multi-level Department Stores.

The back of escalators can be converted into usable spaces, like the one shown in the picture here on the right side. The location of escalators should be convenient to go up three floors at a time – i.e., when she goes up from one level to the second and wants to move on to the third level, she should not have to walk a long distance to get the next escalator.  It is absolutely wrong to believe that she will shop more if she is forced to walk more (in front of shops) between two sets of escalators. On the contrary, visitors to malls with such customer unfriendly layouts usually get frustrated with this kind of inconvenient design and stop visiting such malls when they get better choices.

All Basement (parking) floors should be connected with the Hypermarket Floor with a pair of travelators (flat escalators without steps), to facilitate the visitor in carrying a trolley up or down a floor. In case of Super Malls, there could be two pairs of travelators.

The depth:frontage ratio of the vast majority of individual shops (in India) should be between 2.5:1 and 3.5:1. Footwear stores can have a ratio of 4:1, but this restricts their use only as a footwear store, thus removing any adaptive reuse in the future. Anchor spaces can be designed differently, where small vanilla stores are carved out of the frontage of the anchor stores, like shown in the case of Woolworths (one of the largest anchor store chains in South Africa) in the picture on the left here. Restaurants also do not need big frontage.

Every floor of a shopping centre (except the floor on which the Food Court is located) should have at least one “open” café (or other F&B outlet) – if possible, open (no walls) on two and even three sides, otherwise at least on one side, for a floor plate of up to 60,000 sft, and minimum two cafes for larger floor plates.  These open cafes allow for people-to-people visual interaction thus adding energy to a mall, become meet & greet places and also serve as break-out areas.

Architects should also try to incorporate “open” shops without walls (like the one shown in the picture on the left) near cut-outs or openings for escalators / staircases, etc.  This adds much needed relief from the monotonous line/s of “walled” shops in any typical enclosed shopping centre.

One must also pay attention to the very important fact that the world of retail is moving towards open format shops, with no front glazing or doors, so that the customer (prospective buyer) always thinks that she is welcome inside. This factor should be considered very strongly in the structural as well as services design, as open shops can only be secured by means of rolling shutters, which need to be camouflaged when the mall/shop is open.

Globally, well-planned shopping centres earn between 9-15% of their revenue from temporary hiring/letting of walls, surfaces and other non-floor (non-tenanted) spaces for the purpose of branding, commercial advertising, etc. The architect must keep this in mind when designing the building and try to provide ample advertising opportunities throughout the public spaces in the shopping centre.  An excellent example is shown in the picture here.

Just as one enters through the main pedestrian entry into a shopping centre, it is always good to have an Information Desk (like a Reception in an Office or a Hotel) and it is good to provide some waiting areas (with seating) next to the Information Desk (see example in picture on the right).  Such waiting areas can come in very handy in case someone is not well, a senior citizen needs assistance, or if a child is lost.

Any good mall has to ensure that all new or infrequent visitors can find their way around the mall easily, and find the shops they are looking for. Gone are the days of printing thick mall directories and distributing them to one and all, as not only does this cost a bomb, it is a colossal waste of natural resources. As we are moving towards “green” malls, visitors in modern malls are guided by electronic (often interactive) display Info Screens or Kiosks, which contain a mall map, a directory of tenants and other information. Places should be provided on each floor of the mall (near each elevator bank) for such kiosks or screens on stands, like shown in the picture here.

Any good shopping centre should have several ATMs, with a minimum of one on each floor, one near the Hypermarket/Supermarket, one near each Cinema Box Office and one on each parking floor. ATMs within the retail areas can be very interestingly designed like the example shown here. In the next few years, Cinema operators will start insisting on installing Automated Ticketing machines at different points throughout the mall, so provision must be made for this as well.

Dedicated trolley parking zones (such as the one shown in the picture here) should be accommodated (just outside the hypermarket/supermarket) in the design if the shopping centre has a hypermarket or a large supermarket.

All entry points into the main (air-conditioned) customer areas should be through a vestibule (like the one shown in pink in the plan of the White House on the right) and such vestibule should have positive air pressure compared with the space it leads into (see plan on right).  In Indian climate, the hot and humid air infiltrating from outside condenses as it comes into contact with surfaces that have been cooled by the indoor air-conditioning of the centre, promoting condensation and other problems, including unhealthy air quality. Uncontrolled infiltration can exceed the capability of an HVAC system to manage indoor temperature and humidity. This can create discomfort (too hot, too cold) and indoor air quality problems caused by excessive moisture and mold. Maintaining control of HVAC pressures is key to controlling indoor pollutants and odours. Indian Malls have huge HVAC bills because of this problem, which is easily resolved with a small, one-time cost. Vestibules of the type shown here on the left can also be considered.

All public entry points from the street level into the building should have disabled access ramps with a minimum width of 1.0m. There should be 2-3 access points from the Basement car parks, so that customers do not have to walk for long distances within the Basement and also do not choke up only one entry into the Ground (or Lower Ground) Floor.

Depending on the city and its common mode of paid (non-shared) public transportation, the architect needs to accommodate a taxi/auto parking area on the master plan.  The ideal number of taxi/auto parking spaces is 20 (twenty) per 50,000 sft of GLA.

Considering all the security measures that one needs to adopt in any public building in today’s violent world, it is ideal to design for a number of vehicles backing up one behind the other at the entry for the purpose of security checks.

As merchandise (stocks) need to be replenished frequently, especially in stores such as the Hypermarket, Department Stores, Furniture, Electronics (CDIT), etc., adequate service circulation should be provided, including back entries into such shops. If possible, back entries should be provided for all shops with UCA of >300 sqm. Please keep in mind that some shops will be receiving goods as large/heavy as Double Beds, Dining Tables, 72” TV sets, 400-litre Refrigerators, etc., so the service corridors and freight elevators (lifts), doorways etc, need to be adequately designed.

A Hypermarket needs dedicated docking/unloading bays of a size no less than 14.0m (width) x 4.0m (depth) x 1.0m (height), ensuring that the top of the dock is level with the finished floor of the unit and that the level of the driveway at docking point is 1.0m below such top of the unloading dock level, for two 16-ton HCVs, four MCVs and four small freight vehicles such as autos. Each department store, furniture store and CDIT store will need (shared) unloading bays for one HCV, two MCVs and two small freight vehicles. For all shops not connected directly with an unloading bay, common bays are needed for one HCV, 3-4 MCVs and 6-12 small freight vehicles.

Service/freight lifts have to be different from passenger lifts and should be of 1500/2000 kgs capacity, with big car sizes to accommodate furniture, double-door refrigerators and similar merchandise.  Passenger lifts should be of minimum 20-pax capacity (regardless of size of the centre) and should ideally be in a Lift Bank with no less than 3 in each bank. For large centres, one should consider passenger lifts with 32-pax (or higher) capacity.

Washroom sizes (for visitors/staff) have to be computed for each individual centre based on its size and floor plate. Lady Washrooms should have provisions for microwave ovens (to heat milk) and changing mats like shown in the picture below, with a small booth (with curtain) for breastfeeding of newborns.

The Multiplex (Cinema) will need larger washrooms, as several people go at a time (during intervals, or when the movie ends).  There should ideally be a set of washrooms just outside the cinema’s exit corridors, so that people wanting to visit the washroom and exiting the mall after a movie don’t have to go back into another area in the mall just to use a washroom.

Structural columns in parking areas should be designed in such a way that they help a person locate a parking zone by colour and letter coding, like the example shown in the picture here. In addition, directional arrows painted on the road surface should clearly guide the driver along one-ways.  The second picture here is a fantastic example of how parking areas can be designed. Most Indian developers and architects ignore this space – remember, this is the first impression that a new customer gets of the mall, and also the last impression for every vehicle owning customer.

Staff lockers and a staff cafeteria are required and these are often forgotten/ignored by most architects/developers.  Happy staff result in happy shoppers – which means greater revenue for the tenants and therefore for the developer. The Space Program should have the exact sizes for these facilities, based on a computation of the number of staff (of the tenants and mall management/vendors) that will be employed at each centre. There should also be a drivers’ lounge and washrooms in the basement floor/s.

Most retail stores will generate plenty of waste (such as packing materials) regularly.  There should be a large Dry Garbage Room (100 sft for every 2000 sft of trading area). A trash compactor (like the one shown here) needs to be installed in all Regional Malls and Super Malls.

The facade should give an appearance of largeness.The architect should leave maximum wall surfaces as plain plaster, for external tenant signage, as per the two examples shown below. There is no need to put any glazing or windows on external walls which have a shop directly behind – glazing only needs to be provided if the immediate area behind that part of the façade is open (a café or food court seating area or an atrium).

Angular building views from different approaches to the shopping centre (for vehicles approaching from both directions) to be clearly defined. If possible, it is a great idea for signage towers on both ends (corners) of the front of the site, abutting the main road.

The architects and services consultants must understand that most F&B outlets will have live cooking.  Therefore, these will need fresh air & exhaust (hoods), water supply, drainage and provision for wet & dry garbage disposal.  Also provide for several electrical outlets (15/30 Amps) in each outlet and a common Gas Bank, with piped gas, including each EFC in the Food Court.

The Food Court should have a common dish-wash/drying cum storage area of 750-1000 sft, depending on the size of the centre. The number of seats required in the Food Court will differ from centre to centre, based on the GCA and the projected footfalls.  A Food Court should also have a hand-wash area, separate from the washrooms.  The service passage/s behind the EFCs should be minimum 2.75m wide, and even 2.50m is a compromise.

All the auditoriums/theatres in the cinema (multiplex) should have separate entry and exit points, and the exits should lead everyone back into the shopping centre. If possible, one should try to provide for a “Drive-through Box Office”, so that people can drive into the site and purchase cinema tickets in advance without having to go into the shopping centre. In any case, all types of centres must have a Box Office on the Ground Floor, facing and opening onto the main road.

In Regional Malls and Super Malls, there should be minimum parking space for 60 hypermarket carts (trolleys) on each of the basement / MLCP floors, broken into 3 clusters of 20 trolleys each on each floor. In Community Malls, parking space is needed for 12-16 supermarket carts on each basement/MLCP floor. All common areas including pedestrian movement areas in the parking floors should have smooth flooring to facilitate easy movement of these carts without damaging their wheels.

Multi-level anchor stores will need vertical circulation to connect each of the floors vide a pair of up & down Escalators, one 8-pax Passenger Elevator and a Customer Staircase.

When designing a new centre, one has to be very careful about the structural grid system. Many Indian centres have erred on this front. The column grids need to be designed keeping in mind the most efficient grid for parking spots in the basement floor/s. It is our experience that a grid of 8.4m X 10.8m works best, as it allows for different sized storefronts on the upper floors, while three cars fit easily into a 8.4m grid and four fit well in a 10.8m grid.

It must be kept in mind that different types of users in a shopping centre have different electrical load requirements. While most vanilla stores can do with about 6.5 watts per sft, a multiplex typically requires 45 to 55 Kw per auditorium, a CDIT store 12-14 watts, a hypermarket or supermarket 10-11 watts, while department stores and jewellery stores need 8-9 watts per sft. A good shopping centre must have 100% backup power with an automated changeover system, which comes on within 15 seconds, so that lifts and escalators with people on them do not stop suddenly. Developers of shopping centres should provide cabling up to every unit for CCTV, PA System, Mall Radio, DTH TV and High Speed voice and data communications through multiple service providers.

As we now live in the “go green” era and need to be environmenally conscious, paramount importance should be given to energy saving features. While there are any number of technologies that can be used for different systems in a shopping centre, some of the simpler initiatives would be to use T-8 lamps with electronic ballasts as much as possible. Compact spots should be used instead of incandescent accent lights (spots).

For retail store lighting, medium to high general lighting, 270 to 750 lux, is appropriate, combined with accent lighting. The accent light level should be five times higher than the general lighting. Visual merchandising scenes may be highlighted.  A neutral colour temperature, 3500k to 4100k and high color rendering, at least 75 CRI, encourages the customer to browse leisurely through a department. Maximum attention is directed onto the merchandise.  Triphosphor fluorescent, incandescent, and color-improved high pressure sodium and metal halide may all be appropriate. Perimeter lighting of wall displays is important to add a spacious feel and to accent the merchandise. Fluorescent lamps behind a valence are most popular. The ends must overlap at least by an inch to eliminate dark spots.

HVAC consultants also need to understand the specific requirements of a shopping centre.  The special needs of the Food Court areas, such as odour control, outdoor air requirements, kitchen exhaust, heat removal, and refrigeration equipment require special attention. Depending on the type of shop, a tenant may maintain either a negative or positive pressure relative to the common areas of the shopping centre for odour control. The centre’s air distribution system typically maintains a slight positive pressure relative to outdoors. Exterior entrances need vestibules with independent HVAC systems. Most tenants are happy with 1.0 TR per 200 sft of UCA.  Some insist on higher tonnage.  Obviously, units consuming higher power (such as electronics/CDIT store) will generate higher heat and may thus need higher tonnage. Chilled water should be delivered at the units/shops at 6.5°± 1°C so that the temperature in the shop is maintained at 22.5°± 1°C. The HVAC consultant should work towards better energy efficiency.  Cooling tower heat exchanger economizers, heat pumps and thermal storage systems should be thoroughly investigated.

Shopping centres also have unique water services requirements when compared with other types of commercial buildings.  Water supply and drainage is required by all F&B outlets, multiplex, most types of FECs, hypermarket/supermarket, salons, spas, gyms, jewellery stores and eyewear stores.  Since so many different types of retailers require water and it is very difficult to predict what store may come where as the shopping centre develops, it is safe to provide for water and drainage in all stores.

The Food Court, restaurants, cafés, etc., have many other unique requirements. For example, they need piped gas (you can’t really have cylinders constantly moving up and down a shopping centre!). They also need grease traps and exhaust ducts.

If the design team (ideally comprising the retail consultant, project managers, architects, letting managers, services consultants, signage consultants, parking operators, housekeeping agency and owner’s representative) works in cohesion and follows these basic guidelines, they can together create a world-class shopping centre.  However, apart from the technical requirements, the design team – and especially the architect – needs to always remember that customers make a shopping centre successful and not developers, architects or retailers. And customers will only come back frequently if the experience in the shopping centre – either while they are shopping or visiting the washroom or parking their car or even just walking around – is a happy experience   If they often get lost trying to find their way around, or have to stand in long queues for lifts/washrooms, or have difficulty in getting in or out, they will stop coming back the moment a better mall opens nearby.

Ultimately, it is very important for any shopping centre (especially Super Malls and Regional Malls) to try and be everything for everyone. If the kids are happy playing a wide variety of games or taking different types of rides, grandparents are happy with colourful break-out zones and can kill time simply by visually connecting with the youth, if women can get a facial and hair job while the man plays a game of virtual cricket, all this will increase family visits and average dwell time, and people will generally shop more.

If shopping centres of the future can provide everything that a family needs after office/school hours – shopping, leisure, entertainment, dining, banqueting, socializing, banking, sports & recreation, hobby/educational services, healthcare/wellness, etc, this will automatically lead to higher footfalls and more balanced usage seven days a week.


Amit Bagaria is Founder Chairman of Asipac Projects, India’s leading mall development consultant, Asipac Mall Services, India’s fastest growing mall management company and MEN & BOYS, the world’s largest chain of retail stores for men’s cosmetics, skincare, hair care and grooming products.

Safety First – Shopping Centre News, Sep-Oct 2010

December 13th, 2011

Are 6.6 million daily shoppers safe in India’s shopping centres?

Almost 200 shopping centres (or malls) are already up and running across India and another 600 are in different stages of development.  Indian shopping centres get about 700 million annual visitors today and this is slated to go up to 2.2 billion annual visitors by 2015. That’s a whopping 6 million daily visitors, 15% more than the entire population of Singapore and more than three times that of Dubai.

Are we really prepared for this?  What I am really worried about is that more than 80% of the current and planned shopping centres in India fall woefully short of international standards in terms of safety and security. With lack of proper safety standards and measures, Indian shopping centres have already started witnessing a number of accidents, some even resulting in deaths or severe injuries to children and adults alike.

In 2008, a series of accidents affected the operations at a popular Bangalore mall and had forced the state government and the city authorities to rethink safety standards to be implemented by all existing and upcoming shopping centres / malls in the city. Even the mall in question has adopted some measures, but the question remains, “Why do we always take corrective actions and not preventive ones?”

On 26th January 2009, Republic Day, a major fire accident was prevented at one of the most popular malls in Bangalore. The fire started at the food court on the fourth floor. Thousands of people were evacuated in minutes, and the fire was controlled. But will luck be on our side forever?

In May 2010, an early morning fire at the Shangri-La Heera Panna shopping mall at Oshiwara, Mumbai, highlighted the fact that it is not enough for shopping centres just to have fire-fighting equipment. It is absolutely crucial that the equipment is well-maintained and ready for use, and that staff are adequately trained on the use of the installed equipment and other fire safety measures. A non-functional water-riser system, coupled with the badly maintained fire-fighting equipment at the Oshiwara shopping mall, made it very difficult for firemen.  It took them nine hours to douse the fire.  They had to bulldoze a basement wall, and 15 fire engines had to be deployed to control the fire.  As per the media, about 15,000 TV sets were stored in the basement, which was actually meant for car parking. No water was stored in the static fire water storage tank.

When Indian mall developers are too keen to make a lot of mall from this business, why do they just copy paste glitzy finishes from developed markets, instead of also copying public safety and hygiene standards?

Is it because there are no strict guidelines or proper safety norms?  Or because there isn’t anyone to monitor any standards?  Or simply because we just don’t care.   After all, with a population of 1100 million, how does it matter if 1100 were to lose their life?

Copying international safety standards will not serve the purpose, because most developed markets with successful shopping centres have little experience of handling the large numbers of visitors that many popular Indian malls get, especially on weekends.  Managing such large crowds needs an altogether different approach, especially when it comes to safety and security.

In India, parents lovingly let their children move up and down in an escalator, for the sheer fun of it and even enjoy the sight with ultimate parental satisfaction; pedestrians simply walk aimlessly in parking areas, being blissfully oblivious of where the pedestrian walkways are (if there are any), or where the driveways are.

The need of the hour is to put in place very strict safety guidelines.  It is high time that we start working towards creating our own safety norms for shopping centres, taking the necessary inputs from international standards and experience.

The nine most potentially dangerous areas in the Indian context are:

  1. Pedestrian vs. Vehicular movement, inside and outside mall buildings.
  2. Lifts
  3. Escalators
  4. Parking Areas
  5. Fire Safety
  6. Health & Hygiene – specially in Food Preparation & Service Areas
  7. Railings & similar fixtures around atriums and cut-outs
  8. Public Restrooms and other common facilities
  9. Children Play Areas and other Entertainment Zones


In the 2008 case at the popular Bangalore mall, where an elevator crash landed three floors down after moving up to the first floor from the lower basement, officials from the Karnataka Fire & Emergency Services Department, who inspected the elevator, found that there were 13 people with an estimated total weight of 925 kgs, while the elevator had the capacity to carry only 8 persons with only 544 kg weight.

Under such circumstances, why can’t we have automated safety measures which ensure that the lift will not operate if it is overloaded?  Also, realizing that the average weight of the human on this planet has gone up in the past few decades, the western world is making and installing lifts with a weight carrying capacity of 75 kgs per person, while our malnourished nation continues with the age old norm of 68 kgs per person. Are we in Ethiopia?

We need a law that elevators in shopping centres and other public buildings should have a minimum weight carrying capacity of 750 kgs, and each elevator should have latest safety approvals in USA, Japan and the EU.  If we can follow this principle for vehicle emission standards, why not for elevators?  If five-star hotels can install the latest generation elevators, why not shopping centre developers?


At Varanasi in May 2008, eight-year old Annu fell to his death while stepping off the escalator on the second floor of a shopping centre.  Indians are not used to using escalators. So, shopping centre owners and managers need to have volunteers to train people on their use, at least for six months after a new centre opens.

A number of factors affect escalator design, including physical requirements, location, traffic patterns, safety considerations, and aesthetic preferences. The ability of the building infrastructure to support the heavy components is also a critical physical concern.  Furthermore, up and down escalator traffic should be physically separated and should not lead into confined spaces.

The carrying capacity of escalators in a shopping centre must match the expected peak traffic demand, presuming that passengers ride single-file.  Staircases should be located adjacent to escalators, if escalators are the primary means of transport between floors.  It may also be necessary to provide an elevator adjacent to an escalator for disabled persons, senior citizens and babies in prams.

Parking Lots

In India, there is usually only 1.5 to 2.0 parking spots per 1000 square feet of retail space, which is 30-40% of what is required by international standards.  Also, while parking lots in many shopping centres abroad have a well-defined pedestrian pathway, this is absent in India.  Even ramp widths in Indian malls are sometimes inadequate.  Lighting, either too little or the wrong kind, is often a problem in parking lots.

Pedestrians should not be allowed in to  parking lots. Only shoppers with parking ticket or pass should be able to enter the parking lot from the main retail area of a shopping centre.  There should be proper signage to lead visitors to the right cluster of bays within parking lots.

How many times have you found yourself in a multi-level parking lot (or MLCP), hopelessly looking for your car, “was it on the 3rd or 5th level, was it F or D row??

The speed limit for cars and bi-wheelers within parking lots (and even other external places within the compound of a shopping centre, where pedestrians could be walking about) should be restricted to 10 kmph.

Fire Safety

A fire hazard can be caused due to multiple sources of origin – electrical wiring, cooking at food courts or restaurants, carpeting at multiplexes, smoking, etc.  Even though we have fire safety rules as per the National Building Code, and have seen fire extinguishers hanging on walls or lying in some corner in malls, we are not sure whether:

  1. The fire safety systems are in working order.
  2. The fire extinguishers are refilled as necessary.
  3. The sprinkler system works.
  4. There is regular maintenance.
  5. There is a Fire Safety Officer in the mall.
  6. Security personnel and other staff members are adequately trained on how to act in a fire emergency situation.
  7. Anyone really cares?

Brihanmumbai Municipal Corporation (BMC) issued notices to 22 malls in Mumbai on 29th March 2010, for violation of fire safety norms. The civic body reviewed fire safety norms in 55 malls in the city and has asked 22 malls to comply.

Regular unannounced mock fire drills need to be part of any fire safety system in a public building, so that public is aware of what to do and the staff are always on their guard, apart from being adequately and practically trained.  Let us also put clear signage on each floor showing where Fire Exits are.

Unless we want another tragedy like Upahar cinema in Delhi or the school in Tamil Nadu.  After all, like I said before, what’s 1100 fatalities in a country of 1100 million.

Railings & Similar Fixtures

The Telegraph, reporting on the death of a 6-year old boy in a Bangalore mall, who slipped four floors down through the gap where the handrail ends, observed that this incident “may have shed light on a possible lethal flaw in shoppers’ havens, though it isn’t clear if every mall has a gap between the escalator handrail and the floor railings. … Even the balcony railings of the mall have huge gaps, more than a foot high and about a foot and a half wide. Some of these gaps, big enough for very young children to slip through, are covered by glass sheets but many are open.”

The Hindu, on 3rd July 2007, quoted a retired town planner, who said that “such safety lacunae in buildings were mainly because of absence of appropriate knowledge about the delicate issues of engineering and architecture, among the town planners, who approve the building plan. Also to blame is the failure of constant inspections during construction of such buildings and before issuing NOC. Even post-construction inspections were not adequate”.

Such accidents are also an eye-opener for parents who let their children run about the malls while they shop till they drop.

Public Restrooms

In a study by Kimberly-Clark, 39% of survey respondents in USA feared picking up germs in a public restroom more than any other place. Nothing can be truer than this in the Indian context.  Foul odors, lack of supplies and puddles on the floors can all be signs of improper maintenance. A modern washroom should have the following features:

  • Chemical-lined dispenser bin in each of the ladies’ WCs.
  • Door-less entry (labyrinth entrance)
  • Sensor operated fixtures
  • In the Indian context, a health faucet (bum washer spray)
  • A countertop changing area

Hidden restrooms are perfect spots for robbers, because they are away from the view of other customers. Further, they may become areas for people to gather, and in some cases even use drugs.

Other potential accident areas

Children Play Areas:  Kids’ play areas should always be enclosed properly.  The interiors of these areas should not have any things with sharp edges.

Food Court: Have proper fire safety systems and garbage disposal systems.  Ensure regular food-grade disinfectant use to prevent bacteria. Regular pest / rodent control is a must.  Operators who do not dispose off garbage properly need to be severely penalized by centre management.

Last, but not the least, it is high time for us Indians to realize and understand that, although providing safety and security is an integral responsibility of shopping centre developers, owners and managers, as well as the retailers who operate in the malls, it is also our individual responsibility to take ownership of our own actions.


Amit Bagaria is founder Chairman of three companies. Award winning Asipac Projects is India’s leading mall planning, development and leasing consultant, which has conceptualized and marketed six of India’s 15 largest malls.  Asipac Mall Services is a new mall management company.  Arus Retail has promoted Men&Boys, India’s first retail chain exclusively dedicated to men’s cosmetics.  Amit has been a speaker or anchor at many Indian and global events, co-authored a college textbook on planning and published several articles on malls and real estate.