MALL MANAGEMENTYOU MAKE IT OR LOSE IT!

BYDEBASIS MAHAPATRA & ABHISHEK MAHAPATRA

What is a shopping mall?

• Collection of independent retail stores, services, and parking areas constructed and maintained by a management firm as a unit

Eg: Forum mall, Oberon• Mercantile establishment consisting of a carefully

landscaped complex of shops representing leading merchandisers;

• Usually includes restaurants and a convenient parking area;

• A modern version of the traditional marketplace;

What is mall management?

• Mall management concerns itself with a combination of people, location, processes and technological systems in a particular building.

• Mall management has been identified as a critical factor for the success of malls and the retail industry across the world.

Mall management actually takes care of the issues like:

• Positioning• Zoning (tenant mix and placement within

mall)• Promotions and marketing• Facility management (infrastructure, footfalls,

ambience)• Finance management

Positioning of mallPositioning a mall refers to defining the category of services offered based on demographics, psychographics, income levels, competition in neighbouring areas and extensive market research ofthe catchment. For example, if the market research indicates that the average number of households living in a particular area belongs to the upper middle class, then a high-end retail mall would suit thelocation. An example of this practice can be seen in the upcoming malls, Select City Walk in Saket andDLF’s Emporio in Vasant Kunj. These malls have been specifically designed after an extensive market research, based on the catchment area of South Delhi. The malls provide high-end luxury products catering to the elite class (socio-economic classification A and B consumers) residing in South Delhi.Positioning also refers to the location of the shoppingmall. A good location defined in terms of factors

Cont…

Positioning also refers to the location of the shopping mall. A good location defined in terms of factors:• Ease of access via roads.• Good visibility.

STAR CITY MALL

• 3 quarters of the retail space inside is empty glass-fronted shells

• Few customers ever walk into the mall proper — and those who do, do not stay for long.

•A couple of liquor shops and a Café Coffee Day outlet draw much of the miniscule clientele that the mall can boast of. But these are transient visitors who do not linger.

Cont…•For there is really nothing that the mall offers in terms of shopping or entertainment options that will make a customer walk in and spend any time

•— no anchor departmental stores,

•no big brands,

•no multiplex theatres,

•no specialty shops,

•no electronic shopping zones,

•no playing areas for children,

•and not even a proper food court.

•There are a few eating joints and restaurants scattered on the ground floor. But these do not look as if they have ever been stretched by having to serve too many customers.

• Its location is excellent — Mayur Vihar is a middle-income colony full of successful professionals who are ideal customers of many malls in Delhi and Noida.

• More importantly, by virtue of being right on the Delhi-Noida link road, and with a metro rail station adjacent to it, the mall was ideally positioned to attract traffic from both east Delhi colonies adjoining Mayur Vihar and the suburb of Noida.

• More over the Star City mall also opened with Reliance Retail as its anchor tenant three-and-a-half years ago, and that should have helped it attract other tenants. And yet, within months of its official opening, the footfalls had started falling and the decline had started. After almost three years as a tenant, even Reliance Retail abandoned it. And that accelerated the decline.

What went wrong with Star City?

• One of the biggest issues was that the mall was not — and is still not — actively managed. i.e.. after building it, the builders had sold off shop spaces to individual investors.

Cont…• Many of these investors were not interested in improving the mall;

they were simply looking to rent out the spaces they had bought. • There was no mall management company or in-house operation

that would get the tenant mix right and figure out ways to improve footfalls. And that was why it was just a disparate collection of shops with no specific zones for entertainment or food or clothes or electronics.

• It also did not have any multiplex tie-up or tenant who could pull in people to see movies, and then stay back to do shopping.

• Even though Reliance Retail was the anchor tenant, a shopper had nothing much to do within the mall once he had finished with that store.

Analysts at Crisil, Third Eyesight, Jones Lang LaSalle (JLL) India and Ernst & Young

• 80 per cent of India’s 255 malls are ailing, half of them very seriously.

• Look at Mumbai, Delhi or any other big city and you will find plenty of malls which are half empty. In Mumbai alone, the list is long —

• the Centre One mall in Vashi, which is 30 per cent vacant,

• the Kohinoor Mall in Kurla is 70 per cent vacant, and • the Dreams Mall in Bhandup is 75 per cent vacant.

• But the issue is that the greater majority of the malls built are either pulling in indifferent business or worse, just fading away to oblivion.

• In some cases, malls are desperately turning empty shop spaces into banquet halls in order to survive.

Only 5 to 6 per cent of the malls in India are real malls

• “Unless the builders view retail as a long term business, the quality of malls will not improve. The rest, he says, will either disappear or turn into mixed-use properties with offices to support their survival.

• many malls neglected even simple research and common sense steps that would drive footfalls — and as a result, they are now in trouble.

• In some cases, the mall owners have realised the problem and they have pulled in expert help — professional mall managers and mall management companies — to revive the malls.

• But not all malls can be rescued. • While some can be turned around by changing

some elements of layouts, or the tenant mix or the business model, others cannot be fixed without drastic surgery..

• In at least one case in Pune, the mall has been shut down while the architecture and interiors go for a drastic surgery.

• In another case in Bangalore, the access road to the underground parking is so badly designed, says one analyst, that customers are simply not coming in. This is despite the fact that the mall has a good tenant mix and other attractions

why it is so important to realise what is going wrong with the vast majority of Indian malls, and how one can create and run a successful mall by design.

• So far, reports suggest that some Rs 22,000 crore has been sunk into building 255-odd malls, of which about 65 per cent are in Delhi/NCR and Mumbai.

• Over the next two years, another 242 malls will come up, entailing an investment of Rs 2.1 lakh crore.

• These malls will add 96 million sq. ft of retail space to the already existing 72 million sq. ft.

DLF

On the retail real estate management front, DLF is unmatched in its seamless integration of real estate business model owing its business operation spanning across land, design, construction, leasing, operation, facilities and marketing. This comprehensive bouquet of services are managed by a team of EXPERTS.

Key Success Factors

• Site Planning and Circulation• Design - External, Internal• Tenant Mix- Right Balance between Anchors, Retail

Galleries and Entertainment and F&B• Asset Management

• Relationship with retailers• Commitment to high quality marketing and branding• Proper Management systems• Multiple Locations

Iluma in Singapore

Mall Design• Retail architecture expert Chris Thomas of DLR Group

explains, "When we talk of a mall we're basically talking of something that has an interior concourse lined with small shops, what we typically call inline retail. And it's anchored by department stores. The problem with malls, and what we're trying to break out of when we look at them new, is the fact that they had no exterior.

Read more: The World's 18 Strangest Shopping Malls - Design and Architecture for Shopping Malls - Popular Mechanics

Mall Design Process

A good tenant mix is the blood line of the shopping centre industry – Jean Louis Solal

Feasibility Studies – Stage 1 Master Plan Location, Building Site Location, Catchment

Analysis, Demographics, customer demand analysis, Competition overview, Future Growth, Financial Analysis and viability, Market overview, Trade and Tenant Mix

Feasibility Studies

Stage 2 – Post Feasibility– Zoning and Tenant Allocation– Retail Planning– Schematic Design (Floor Plans, Basement including

calculation of parking space, outline, architectural specifications, outline finish schedules for both exterior and interior)

– Detail Design (coordinate with other consultants)

Tenant Mix

• Should satisfy the demand of the catchment area

• Should create a specific image for the shopping mall

• Should increase the amount of spending by addressing non-shopping activities

• Tenant variety has strong influence on shopper’s level of excitement

Leasing

• Leasing Plan –Action plan to lease the vacant space. It comprises of identification of target usages and target tenants

• Tools to identify retailers– Tenant Contact Bases– Cold Canvassing– Leasing Brochure– Direct Mail– For Lease Signage– Print and Radio Media Advertising

Leasing

• Leasing Plan –Action plan to lease the vacant space. It comprises of identification of target usages and target tenants

• Tools to identify retailers– Tenant Contact Bases– Cold Canvassing– Leasing Brochure– Direct Mail– For Lease Signage– Print and Radio Media Advertising

Best Leasing Practices

• Vacancy Report/Leasing Report• Meeting with the Tenants• Draft Lease to made available to the tenants• Database Development• Bank Guarantees• Advanced Rental Payments/ Security Deposits• Area of Premises-Measurement• Fit-out of the premises• Fit-out prior to Lease Execution

Lease Administration

• Record of Tenant and Lease details• Tenancy Schedule• Lease Preparation• Lease Renewals• Rent Reviews

– Year 1- Base Rent– Year 2 - Base Rent + CPI– Year 3 – Year 2 + CPI– Year 4- Market Review

Variable RentsCategory Revenue Share as Rent (%)

Anchor Stores

Hyper marketDepartmental Stores

3-4%7-8%

Vanilla Stores

ApparelFootwearJewelersHealth and Luxury Products

12-18%15-18%3-4%10-12%

Food Courts

Fast FoodsFine Dining

15-20%25-30%

Entertainment 8-10%

Lease Administration

• Assignment of Lease• Insurance Certificates• Lease Surrender• Aged Debtors• Rent Collection• Office Management• Misrepresentation and Conflict Resolution

mall management broadly includes

2.Zoning – Formulating the Right Tenant Mix and Its Placement in a Mall

• Tenant mix refers to the combination of retail shops occupying space in a mall

• Zoning refers to the division of mall space into

zones for the placement of various retailers.

Forum mall

• designed in a ‘dog bone’ fashion

• an anchor tenant (Landmark & Westside) at each end and vanilla retailers in the middle.

• food court is positioned on the top floor.

• 7 PVR multiplexes

3. Promotions and marketing

• Activities like food festivals, handicraft exhibitions and celebrity visits increase foot traffic and in turn sales volumes

• Eg:-Ansal plaza, New delhi

4.Facility management

• integration of people, place, process and technology in a building.

infrastructure mgt ambiance mgtTraffic mgt• Eg:-inorbit mubai

5. Financial management• cash receipts and collection of income• developing accounting systems• annual property budget• annual external audit

Business ModelsBusiness Model Key aspects Benefits for mall

developersBenefits for mall Management

Contract Model. Fixed fee Fixed cash outflows. Higher inflows if mall is a

success

Risk minimization

Revenue sharing model

Percentage of sales

Risk minimization Share of revenues if mall is a success which leads to higher income

Partial revenue sharing model

Fixed fee + percentage of sales

Risk minimization (fixed fee less than that in the case of contract)

Minimum payment guaranteed and also portion of revenues in case of success

Issues Related to Mall Management in the Indian Retail Market

• Planning the mall around anchor tenants • Lack of Feasibility/market research by developers• Tendency to lease out on a FCFS basis• Perceive outsourcing as additional cost• Lack of accountability for in-house promotional activities• Improper planning for space (lack of parking space, single entry/ exit

points)• Zoning• Design Issues• Few Promotional Activities• Facility Management

How It All Started

• The mall story — and the basic mistakes — started in India in 1999, when Delhi’s 200,000-sq. ft Ansal Plaza and Mumbai’s 150,000-sq. ft Crossroads Mall were thrown open to shoppers.

• • Both attracted enormous footfalls in the initial days. But within months, the basic

problem with both the malls had become apparent. • • Crossroads Mall had a great location — it was at Tardeo in south Mumbai. It was

built by the Piramals and the anchor tenant was their own departmental store Pyramid. The novelty factor of being the first shopping mall in Mumbai also made it an instant hit. But, according to Sushil Dungarwal — who bears the title of Chief Mall Mechanic in the Mumbai-based mall management firm Beyond Square Feet — Crossroads was badly designed and not particularly retail-friendly. It also had a parking problem which become apparent once crowds thronged to the mall, he adds. The Piramals did not want to talk about Crossroads when they were contacted.

Crossroads Mall

• had a great location — it was at Tardeo in south Mumbai.

• It was built by the Piramals and the anchor tenant was their own departmental store Pyramid.

• The novelty factor of being the first shopping mall in Mumbai also made it an instant hit.

• Crossroads was badly designed and not particularly retail-friendly. It also had a parking problem which become apparent once crowds thronged to the mall, he adds.

• For one, because the Piramals were focused on Pyramid, they did not pay much attention to the other shops and tenants of the mall.

• Pyramid was situated right at the front of the mall, and the design of the mall made the tenants and shops further down fairly inconspicuous. As a result, people often came in, shopped at Pyramid, and walked out without really exploring the rest of the mall. And this hit the custom of the other residents of the mall. This, in turn, led to a steady churn of tenants. The net result was that even people who ventured in could never figure out whether the shop they went into once would be still there the next time they came around.

• • As more malls started cropping up in other parts of Mumbai, shoppers slowly

started drifting away. In 2004 , a better-designed mall by the Ruias called High Street Phoenix came up at Lower Parel and in 2006, the Rahejas opened Inorbit at Malad. It was then that Crossroads downed shutters.

•

Ansal Plaza• One was its architecture. It had twin semi circular buildings, and the only way a shopper could move from

one to the other was to either exit the original building on the ground floor, or locate a walkway on the second floor which connected the two buildings. Not a very convenient experience, to say the least.

• • Ansal was not be blamed for the design problem. It was building its mall based on the design suggestion of

the Delhi Development Authority (DDA), and that hampered it somewhat. • Again, when it was the only mall in town, it did not have to worry about lack of shoppers. The novelty alone

pulled in enough crowds. But as newer malls opened — especially within a short driving distance of Ansal Plaza — the crowds began thinning.

• • However, though Ansal Plaza today is a pale shadow of its original glory, it still has some advantages that

keep it going. It has Shoppers Stop and McDonald’s as its anchor tenants, and also a big music shop. Being close to two big girl’s colleges have made it a sort of hangout for college students.

• Also, it has developed a party zone for children which is apparently quite popular for holding birthday parties. According to one source, the Shoppers Stop outlet in Ansal Plaza alone does business worth Rs 45 crore a year.

• • But still, much of its erstwhile visitors have chosen to take their custom to the malls in nearby Saket — the

Select City Walk and the DLF Place, which are better designed, better thought out and have a better mix overall.

What many people did wrong?• • The problem was that once builders and developers saw people

thronging the first few malls, everyone suddenly wanted to build malls.

• Many of these people did not have the faintest idea about how to build and run a proper mall — many of them saw it as just putting together a big enough air conditioned building, and then slicing it into shops and selling them off.

• The thinking back then was that we have built a mall and people will come and shop here.

• Lumba of Lifestyle says that one of the builders of early mall insisted on dictating terms to Lifestyle simply because he thought that the retailer would do anything to have a presence in his mall.

• Some builders confused malls with shopping centres. • Others converted other commercial projects into malls

simply because they wanted to keep up with the Ansals and the Rahejas, without thinking about the long term future of these malls.

• “Many of the first generation malls were simply shopping complexes:

• without proper designs, • parking lots, • entertainment zones or • proper mall management.

• The early mall developers did not think of competition.• or catchment areas while slapping together the buildings. As a result, there are plenty of malls in poor locations, or with bad entry and exit roads.

And there are also stretches — particularly in Gurgaon — where there are so many malls next to each other that there is not enough custom for all. Which is why, while one mall in the lot succeeds, all the others are just trying to stay afloat.

The problem is, 170 malls of the total 255 in existence today are in Mumbai and Delhi. This leads to enormous competition.

biggest sin

too many mall builders thought small. They built malls that would look like pygmies when the mega malls came up in their vicinity.

Noida’s Sab Mall, Spice Mall and Centrestage Mall, for example, or the Pacific Mall in Ghaziabad were big malls when they opened. But the next generation of malls — the Ambience Mall of Gurgaon, the Great India Place in Noida or the Shipra Mall at Indirapuram, Ghaziabad, for example — dwarfed these early malls. •

• Now it is 1-million sq. ft. Bangalore’s Mantri Square Mall, which is 1.2-million sq. ft, was one such example that took business away from many smaller malls such as the 400,000-sq. ft Gopalan Mall and the 250,000-sq. ft Eva Mall because of better choice, better parking and pure play retail strategy.

• Similarly in Chennai, Express Avenue, the 800,000-sq. ft mall, took away all business from City Centre Mall, a 500,000-sq. ft mall, because of its sheer size, number of brands and quality of service.

• In Mumbai, on the other hand, the average mall size doubled from 200,000 sq. ft in early 2000s to 400,000 sq. ft. To name a few: Huma Mall at Kanjurmarg (120,000 sq. ft) and Kohinoor City Mall at Kurla (250,000 sq. ft). Then there are the really big ones at Malad: Infinity 2 (800,000 sq. ft) and Inorbit (400,000 sq. ft).

• • Although these first generation malls still get enough customers, they have also been

replaced as favourite shopping destinations by the bigger malls that came up later. The issue is simply the overall shopping experience and variety of options being promised.

• The smaller malls fall behind in the number of retailers, anchor tenants or size of food courts they can offer the average shopper. Take, for example, Centrestage Mall in Sector-18, Noida.

• It offers Westside as the big department store to people coming to the mall. Bang opposite is the Great India Place Mall, which offers Lifestyle, Pantaloons, Shoppers Stop, Marks & Spencers and Globus.

• Take any category and Great India Place offers many more options than the Centrestage simply because of the different scales in which the two malls were built.

• • Apart from scale, the other big problem was the business model adopted by the early

developers. In most cases, the strata selling concept was the favourite of developers.•

Strata selling

• Strata selling involves selling of individual shops and spaces in the mall to different investors, who then can choose to either set up a shop there or rent it out to other tenants. The great attraction of this method for most mall builders was that it allowed them to recover their investment quickly and go on to build another mall with the money. The problem with this method was that it meant that there was often no cohesion or theme in the shops standing next to each other. So a luxury brand would stand next to a mass market brand — which is a no-no, say mall management experts.

• Similarly, there was little incentive in running a mall properly, keeping the facilities clean and maintaining them, or in weeding out bad tenants while attracting good ones. With multiple owners, there was no central agency to coordinate the running of the mall or think up new attractions to pull in fresh footfalls.

• The Citi Mall in Lokhandwala in Mumbai is a classic example of the pitfalls of strata selling. It has so many owners that even fixing the mall and reviving it has become an impossible task because all the different investors cannot agree on what to do with it.

• “Single management is very critical while planning a mall. This allows the builder to manage things on his own without conflict of interest,” points out Venkatraman.

• Even where the mall developer did not sell off slices of the mall, the big sin was

often chasing the highest rents and not thinking too hard about the shopping experience being offered per se.

DLF

• DLF is candid about the fact that it has made mistakes. • Our earlier business model was to give space to retailers on

a first-cum-first-served basis and also to give preference to those willing to give higher rentals.

• Since then, DLF has invested significantly to think of positioning of malls, proper tenant mix and sundry other issues.

“We have realised that mall management is a long-term business,” says Bector.

Creating Good Malls & Reviving Old Malls

• The new malls being built are much better thought out than many of the older malls. This in turn increases their chances of success.

• It is relatively easy to avoid mistakes if you have already learnt from the disasters of earlier malls. • Bhatija was careful to study the mistakes of others while planning his own mall and -he made a proper survey

of the catchment and -design parameters that make or mar a mall. As a result, his 550,000-sq. ft mall is one of the more successful examples in Mumbai. It has the right scale and it has five anchor tenants — Shoppers Stop, Lifestyle, Spencers, Fame and Time Zone. • • design, • lighting, parking and • retail mix. • We did a check for the size of individual stores. As Too big would have been difficult to manage. Too small

would not have offered enough variety.• He spent a lot of time thinking about which brands would add value to his mall. • And he constantly studies them for sales and performance — replacing the weaker brands with new ones.

easy circulation• According to him, the good circulation design allows shoppers to move around easily and freely. Bad circulation

makes them lose interest quickly. • He also has started the rather novel initiative — “mall walk” — which entails throwing open the mall at 6 a.m. and

attracting people to do their morning walk within the mall itself. This allows visitors to see and check out the brands without crowds and pressure.

• • While building a new mall and making sure it is properly positioned and gets the design, tenant mix and management

right is the way forward, the moot question is: what does one do with the older generation of malls that have made quite a few mistakes?

• • There are some problems that cannot be solved, say analysts. For example, scale cannot be changed even if the

tenant mix can be fixed. Similarly, bad design can be rectified only to an extent. If it is merely a matter of breaking down a few walls to create a better circulation or layout inside the mall, that can be done even now. But if the basic architecture or the parking lot is flawed, there is no way the problems can be sorted out.

• • Still, there are plenty of older malls that can be sorted out and revived. Kishore Biyani, for example, reportedly paid

Rs 350 crore to take over Crossroads from the Piramals. He renamed it Sobo Central and spent a lot of money — another Rs 100 crore, according to sources — to completely change the internal layout. The external structure or shell remained but everything was changed inside to offer easier access and shopping experience to visitors. He also brought in good restaurants and fast-food outlets to get the right mix of food and shopping into the mall. Today, Sobo Central is a mall that is doing quite well.

•

Want to build a new mall?

• While building a new mall and making sure • it is properly positioned and • gets the design,• tenant mix and •

But what does one do with the older generation of malls that have made quite a few mistakes?

• • scale cannot be changed even if the tenant mix can be fixed. • Similarly, bad design can be rectified only to an extent i.e... If

it is merely a matter of breaking down a few walls to create a better circulation or layout inside the mall, that can be done even now.

• But if the basic architecture or the parking lot is flawed, there is no way the problems can be sorted out.

• Still, there are plenty of older malls that can be sorted out

and revived.

r• He admits candidly that DLF Place in Delhi was in dire straits because of bad tenant mix,

improper zoning and no actual theme. But they turned around the property by zoning the 500,000-sq. ft mall. Zoning essentially meant creating specific areas —

1. a kids’ area, a family area, and 2. a ground floor focused on youth and apparels. 3. They also got serious about food — from creating food courts for people in a hurry to

speciality restaurants for people who wanted to spend more time on their lunch or dinner.

• Having at least one high-end anchor at each floor also helped, as did electronic zones.• • • One mall management expert says that small things work in planning layout. • For instance, having electronic shops next to shops selling women’s apparels is a great

idea because it allows bored husbands to not only kill time but browse for their gadgets, while their wives are trying out clothes in nearby shops.