Amit Bagaria's Blog

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.

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.

 

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”.

 

 

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.

 

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.

 

 

GLOSSARY OF TERMS/ABBREVAIATIONS USED IN THE ARTICLE

 

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.

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

Lifts

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?

Escalators

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 3^rd or 5^th 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 29^th 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 3^rd 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.

No one will question the belief that shopping centres should but perform well for at least 20 years, if not more. The 5.3 million square feet West Edmonton Mall (the world’s third largest mall by GLA) in Canada started 29 years ago and still does relatively well – it clocked 29 million footfalls last year.  That may not be very high by Indian standards (Express Avenue Chennai will probably beat the footfall number in its very first year), but is big for the west.

Since there is no official global ranking, it is popularly believed that South China Mall in Dongguan at 7.1 million Square feet is the world’s largest mall by GLA and The Dubai Mall at 5.5 million square feet is the second largest. The GLA (gross lettable area) in this article is calculated as per Indian norms, by adding all covered circulation areas.

The 3.6 million square feet Mall of America (the largest mall in USA) has been operational for 18 years and continues to attract 40 million annual footfalls.  The GLA of MOA will more than double, to over 8.0 million square feet, with a major expansion project currently underway. Closer to India, the 1.8 million square foot Deira City Centre in Dubai clocked more than 20 million footfalls in its fifteenth year.  It is clear that no one is building shopping centres for one, two or even 10 years.

By now, most Indian real estate developers – at least in the larger cities – have also understood that development of shopping centres is a very different business model from development of residential buildings; as shopping centres have to be run like a business, much like hotels, schools or hospitals.

It takes about five years for a new shopping centre anywhere in the world to witness peak footfalls – Mantri Square in Bangalore and Express Avenue in Chennai (both opened in 2010) may have defied this generally accepted fact, although there is nothing yet to say that they will not have higher footfalls in 2015.  There may be cases where a mall hits its peak by the third year, and yet others may take longer than five years – but exceptions do prove the rule.

In India, it takes about four years to open a large shopping centre (GLA of >500,000 square feet), from the time it is on paper – literally, on a conceptual architectural plan.  So, any large shopping centre in India, where construction has not yet begun, will only open by mid 2015 and will only attract peak footfalls by 2020.

Aha!  This brings me to the topic of this article – do we know who the consumers will be in 2020, or in fact, where will they be? In other words, do we have a “Vision 2020” for Indian shopping centres?

The results of the 2011 national census will tell us that India’s urban population is somewhere between 357 million and 365 million; and is growing at between 2.6% to 3.6% per annum.  As per a 21-month long research study by McKinsey Global Institute (MGI), urban India will have 460 million people by 2020 and 590 million by 2030.  On analysing an urbanization study done by Ernst & Young (E&Y), it appears that urban India may have as many as 520 million people by 2020.

For this article, let us assume that the current urban population of India is 360 million and will reach 500 million by 2020.  This means an addition of 140 million people.  With almost negligible addition due to births, most of these 140 million will be migrants from rural India.  In fact, the E&Y study does predict that 140 million will migrate from rural to urban India by 2020. More than 60 million have already migrated in the last 10 years.

This means that, of the 500 million urban population in 2020, as many as 200 million (or 40%) will comprise of those who have migrated from rural India in the last 20 years.  Let us refer to them as MRIs, an acronym for “Migrants from Rural India”.

Do we know what these MRIs will buy?  Do we know where they will live?  Have we planned our new mega shopping centres as per their needs?  Does our Vision 2020 take these MRIs into account?  In fact, do we have Vision 2020 at all?

Before anyone assumes that the MRIs will be economically weak and will thus not be mall customers, let me remind you about two facts – first, while the prices of farm produce are consistently rising, the same is not the case with shirts or watches; and second, while Ambani, Biyani and Jagtiani still have to pay taxes on the small profits they earn from their modern retail businesses, their country cousins in rural India enjoy tax free income.  So, get ready to welcome the real Indian consumer.

If I said all this during a talk at a conference, I would get stares, or even boos, like the ones I got back in 2005, when I said that 75% of malls will fail, or the paper rockets that were thrown at me in 2006, when I said that affordable housing was the need of the hour for Indian real estate.  Was I correct on both occasions?  But of course!

Many people will scorn at what I am going to say now, but time will show them that I was right.  Most shopping centres have been planned for FAFOTOs or DPFBs.  FAFOTO stands for “Friends And Family Of The Owner”.  DPFB is not a new export scheme of the Director General of Foreign Trade – it stands for “Developer’s Personal Favourite Brands”.  This is exactly the problem. Most shopping centre owners/developers keep forgetting that they belong to a very small minority – after all, how many people in India make more than a billion rupees every year?  If Indian shopping centres were not really planned for FAFOTOs or DPFBs, why would a developer put a Rolls Royce car showroom in a shopping centre which caters to the mid-market segment?

What is even worse is that sometimes, these owners go and hire expat mall managers or leasing consultants who just don’t understand (or refuse to accept) that the average Indian prefers eating at a Shiv Sagar or a Sukh Sagar than a Subway or an Au Bon Pain.

It is really shocking to see the tenancy mix at many upcoming shopping centres across the country.  Adolfo Dominguez, Aftershock, Energie, Grassroot, No Code, Pollo Compero, Robert Graham, Rosso Brunello, Shorty Capone, Staccato, Ted Lapidus – I wonder how many of the 200 million MRIs have heard of these brands.  In fact, I wonder whether a majority of the other 300 million non-MRIs have even heard of these brands.

I have no doubt that urban India will have total shopping centre supply of more than 670 million square feet by 2020, spread across 1900+ shopping centres. This is based on the fact that, Asipac’s research studies of the demand and supply of malls in five metropolitan regions – NCR, Bangalore, Chennai, Hyderabad and Pune – which comprise just 11.3% of the total urban population – show a total supply of more than 83 million square feet by 2014 itself, spread across 191 shopping centres.

670 million square feet cannot be meant for just FAFOTOs.  If the 1900 shopping centres were to have 1400 owners (with some owning two or more shopping centres), each owner would need to have 159,524 friends, in order to sustain these shopping centres.  With so many friends, even the Facebook site would probably crash.

In order for these shopping centres to survive, more than 70% of the total urban population will have to regularly shop, dine and get entertained there.  A majority of the new projects have to thus cater to the mass population, and not just FAFOTOs or HNWIs; and I really doubt that the masses will be shopping at Energie or Pollo Compero.  In all probability, they will shop at Max, Reliance Trends, RMKV, Fashion @ Big Bazaar, Bata and Reliance Footprint. And dine at Rajdhani or Sukh Sagar.

Why do most Indian shopping centre owners not lease a shop to Bata, but opt for Pavers England or Aldo instead.  Is it just because Bata is too traditional, and not sexy enough for their shopping centre’s image? After all, Bata is also an international brand. Asipac chose Bata for Mantri Square, and that Bata store is doing business of Rs.45 lakhs per month.  I wonder how many of the “sexy” footwear brands are doing that kind of business.

So what will the MRIs really buy?  A majority of the men will buy denim jeans, as most rural folk tend to believe that the best way to fit into an urban population is to don the blue.  But they obviously won’t be buying Diesel, or for that matter, even Levi’s.  Coming to the women MRIs – that’s a tricky one.  I would bet on a majority opting for traditional (ethnic) attire, even in 2020.  Today, the trading density of ethnic fashion retailers across India is more than double of ladies western fashion retailers. And this situation is not likely to change very soon.

I recall a discussion with Mark Ashman (Managing Director of Hypercity) almost a year ago, when he was Managing Director of Marks & Spencer Reliance India, on the subject of ethnic versus western fashion. Mark was trying to convince me that, just like Chinese women have completely adopted western fashion, so would Indian women. My argument was simple – when western fashion entered China, the Chinese women had one (two? three??) ethnic dress design and four colours, so why would they not adopt to the various choices that were being thrown at them?  On the other hand, traditional Indian womenswear comprises hundreds of designs and scores of colours.  We’ve probably got more variety of ethnic womenswear in our country than the whole western world put together. Besides, another reality is that most Indian women (post the age of 30) are not as slim as Chinese women, and therefore cannot carry western clothing as well as their Chinese counterparts.

I’ve been consistently driving this argument forward in the media and at various industry forums in the past few months, and am beginning to notice that many shopping centre developers are now taking Asipac’s cue and allocating far more space for ladies ethnic fashion.  This is a welcome development, better late than never.

But this is not enough.  Does the shopping centre industry realize how many people in India – including thousands of HNWIs – eat Jain food or other restricted diets?  When airlines such as Kingfisher and Jet, and hotel chains such as Oberoi and The Leela, can cater to their needs, why not Indian shopping centres?  Here, even the FAFOTO rule does not apply, because I’m sure most shopping centre owners have friends who eat Jain food.

Coming back to the MRIs, another big need will be educational institutes – from English speaking classes, to finishing schools, from training on various musical instruments to training on different martial arts – and these can very easily be located in the normally difficult to lease higher floors of a shopping centre.  Experience in Thailand has proven that such institutes increase the lady visitor’s dwell time in the mall.

In fact, Thailand reminds me about another very important point.  No, it’s not about massage parlours. Indian shopping centre developers should try to learn from the experiences of their counterparts Thailand, instead of Dubai.  It’s true that Dubai has great shopping centres, but many of these are meant for tourists, which is not the case in India. Also, the spending power and income distribution pattern in Dubai is very different from India. Thailand, on the other hand, has a similar socio-economic distribution.  Our eastern neighbour also has a similar urban-rural divide.  Migration from rural to urban Thailand is also as rampant as India. A very successful concept in Thai shopping centres is the bazaar – as we love bargaining, why not bargain at a mall?  Asipac is incorporating bazaars of 8000 to 15,000 square feet in our larger shopping centre projects.

Apart from what they will buy, developers and tenants also have to be mindful of where the new 140 million MRIs are going to live.  They will obviously not fit into the populated areas that retailers usually look for, before they sign up in a new shopping centre project.  The 40 million new households – which can sustain 600 to 800 new shopping centres – will come up either next to newly developed workplaces, if vacant land parcels are available, or in under-developed suburban areas which are relatively inexpensive, have good access to the CBD and adequate ground water.

Isn’t this exactly what happened during the last 10 years at Gurgaon and Noida in NCR, Malad (West) in Mumbai, Whitefield in Bangalore and Salt Lake in Kolkata? And aren’t several shopping centres thriving in these areas? So, if we are building shopping centres for 2020 and beyond, we might as well build them where their customers will live.

Before ending, I must add that, according to the MGI study, the per capita disposable income in urban India will go up from Rs.67,000 today to Rs.136,000 by 2020.  So the total disposable income in urban India will go up from Rs.24.12 trillion to Rs.66.64 trillion, a whopping 176% growth.  Obviously, this is fantastic news for the modern organized retail industry and for shopping centres.  Atul Ruia will probably ask his team to double the rentals at HSP again, even before he puts down this magazine.

By the way, the same MGI study also predicts that Bangalore’s per capita GDP will be 14% higher than the NCR region, 43% higher than Pune, 58% higher than Mumbai, 70% higher than Kolkata, 85% higher than Hyderabad and 91% higher than Chennai.  So, it looks like Mumbai rentals are overpriced, whereas Bangalore is underpriced. Uh, oh – did I just hear that Market City Whitefield rentals were to treble?

Amit Bagaria is Chairman of Asipac Projects, India’s largest mall development and leasing consultants and Asipac Mall Services, India’s fastest growing mall management company.