The great Indian mall boom is here.

Even Mumbai has found space

Mall Strategies for for over 23 mega mall projects since 2003. From construction
magnates, automobile manufacturers and even diversified
Establishing conglomerates - wannabe retail players are lining up to get a piece
Successful World of the mall pie. But there are warning signs that alls not well - mall
rentals in Gurgaon plummeted by
Class Malls
20% within a month in the first quarter of 2005. A leading retailer
recently vacated a prestigious mall in Mumbai even before the first
year of tenancy was completed. The construction cost of a mall of
Cedar Team
global standards is in the range of Rs 1,500-2,000 per square foot.
Thus mall investments are significant and require a break-even
horizon of anywhere from 5 to 10 years. To sustain interest in a
mall for that period of time requires serious thought and long-
term planning. Some of the key long-term strategic imperatives of
establishing a successful mall are:.

1. Get the Design and Aesthetics right

Mall design plays a key role in providing long-term value proposition

to customers. Globally, the mall GLA (Gross Leaseable area) ratio
varies between 50-60% to total floor area.

RE design parameters vs Vacancy

5,000 Rates 20%
4,000 17% 16%

% Vacancy
Sq Ft

3,000 12%
2,000 8%
1,000 4%
2%
0 0%
Mall A Mall B
Convex Public Spaces (CPS)
Axial Public Spaces (APS)
Vacancy Rate

However mall architects are pressurized to design high GLA (Gross

lease-able area) to total floor area malls even as high as 80-90%.
This might make sense in a spreadsheet, however compromises on
mall design parameters like Axial Spaces Ratio and Convex Spaces
Ratio. Convex spaces ratio (CPS) measures the degree of
“openness” in a mall and Axial spaces ratio (APS) measures the
level of fringing and accessibility of all mall areas. In addition,
spatial design of mall core, fringe and anchor spaces is critical to
ensuring mall footfalls are evenly distributed. Visual Discontinuity
through inconsistent interior design can indirectly cause reduced
span of mall visit. Lack of community areas can also restrict time-
span of a mall visit restricting browsing capability of high value
family shoppers. Research has shown a high correlation between
faulty mall design and high vacancy rates. Mall visitors are less
inclined to spend more time in, or develop sustained loyalty to a

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mall that does not give them the experience of an aesthetically
superior public space

2. Define a clear mall positioning statement:

A mall that caters to high volume and low margin players would
have different anchor and tenant strategies as compared to a
mall catering to the youth. In the Indian context, apart from some
prominent names, most malls are in the range of 50,000-100,000
sq ft of GLA which falls in the “Neighborhood mall” category. Only a
few come even close to the half a million sq ft “Super-regional mall”
sizes. However a lot of the new city malls do not have a clear
positioning strategy and attempt multi-anchor strategies without
having the GLA to support it.

Lack of clear positioning confuses both tenants and shoppers alike.

Global Research into consumer shopping behaviour has shown that
“browser” category shoppers tend to spend 15% more
unplanned money, however are less likely to develop mall loyalty.
So-called “destination” shoppers visit a mall for a particular good or
service and get locked in for longer periods of time and frequencies.
However destination shoppers leave home with a particular
destination in mind- a children's play area, a community area, a
furniture anchor, a book store, or even a cinema multiplex. In the
Indian context there is lack of adequate understanding of regional
consumer shopping behaviour such as North Indian target segment
versus an Eastern or South Indian target segment and respective
shopping or mall visit behaviour. A mall visit is about spending time
rather than only money and positioning to your target segment
allows you to create a destination through your tenants, public
spaces and entertainment mix.

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3. Build a sustainable Anchor strategy:

Anchors are the life-blood of a mall whereas the in-line stores are its
muscle and bone. These are large format stores which pull in mall
footfalls both from immediate as well as ex- catchments areas.
Anchors can take upto 25% of the total mall GLA. Increasing beyond
this can compromise having a robust tenant mix strategy which is
being discussed later in this article. Choosing a flagship anchor is
all about creating both merchandising variety and enduring
categoric strength in the mall relevant to the primary target
segment. In-line stores depend on the anchor for sustenance and
cluster around it to get a piece of the footfalls. “Category Killer”
anchors can decimate retail competition for that product for miles
however require a ruthless blend of range, price and brand in a
particular segment or product a rare and difficult expertise.

Well known category-killer anchors globally include IKEA for

furniture, Toys 'R' Us for toys and Plug-ins for electronics. There are
unfortunately few, if any Indian retailers which can come close to
being labeled as a “category killers” both in terms of size and
range. This leaves a large gap open for International retailers to
occupy. Space availability at sustainable rentals is also an issue for
Indian retailers with the capability to develop categoric strength.
Malls should realize that Anchor strategies are never about rentals -
anchors notoriously pay well below the market price for retail space
and most often than not just about pay break even rents. However
sustenance of in-line shops requires a robust anchor. To ensure
that rents are attractive it is important that malls forms a
“partnership” rather than a “rental” transaction with key tenants.
Many of the new Indian suburban malls are loosing out on high
quality Anchors and even key retailers on account of high rents
which makes the outlet unprofitable. A last word- placement of a

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large anchor within a mall space is dependent on the anchor
strategy, the spatial definition of mall core and siting of other in-line
shops. More often, wrong anchor placement can result in fringing
and inappropriate zoning thus causing in-line stores to loose
footfalls and ultimately pull out from a mall.

4. Have a balanced tenant mix:

Typical International Mall Tenant Split by

Area

6%
69%

25%

Retail Food Entertainment

A well-planned and executed tenant mix can help a mall sustain its
“destination” status even in the face of ferocious competition. The
objective of a tenant mix strategy is to maintain the delicate
balance between diversified product and service offering and
revenue imperatives of the leasing business. Jewelry and food
tenants typically pay the highest rentals while occupying the least
rental area. Books, Music, Apparel and footwear pay the next
highest rentals while anchors such as departmental stores pay 25-
30% of the per sq ft rentals of the in-line stores.

Maintaining a balance between entertainment, food and retail

space is equally important to ensure that lack of sufficient options
of any one of these does not become a differentiating factor in a
mall- visit decision. International benchmark for entertainment
space is at close to 25% of total GLA and for good reason. A mall
visitor would find it excruciatingly painful to spend an entire half day
in a mall only browsing shops. An entertainment break can increase
the customary two to three hour mall visit to double the time. This
can translate to one more visit to the food court or another look at
the new jewelry shop. In the Indian context families are a large
target segment and absence of an adequate children's play area or
a senior citizens resting area can be decisive in a mall visit decision.

Malls also need to balance between the relatively modest price and
high range option of the food court with specialized and maybe
higher priced restaurants. Close to 40% of total GLA of a mall
should be occupied by in-line shops with each category not
occupying more than 5% of the total GLA. Globally apparel shops
occupy the highest GLA after Anchors and Entertainment.

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5. Parking:

An often ignored part of long-term mall strategy is parking. Malls

that target middle to upper middle class consumers have to provide
adequate parking for visitors. Absence of adequate parking can
cause visitors to be turned away frequently. This can reduce mall
loyalty besides revenue loss. Global standard benchmark is one slot
for every 200-250 sqft of GLA in a mall. Hence for a 50,000 sq ft
neighborhood mall, at least 200 parking spaces need to be
provided for. This is rarely the case especially in cities such as
Mumbai and Delhi. A 200 capacity car park may need anywhere
from 15,000

US Mall Parking Benchmarks

GLA # of # of Parking GLA /

# Location, Name
(sq. ft.) Stores Spaces Parking

Los Angeles, Del Amo Fashion

1 3,000,000 361 12,500 240
Centre

Orange County, South Coast

2 2,700,000 280 15,000 180
Plaza

3 Minneapolis, Mall of America 2,656,082 428 12,500 212

4 Chicago, Woodfield Mall 2,274,000 245 10,300 221

Detroit, Northland Shopping

5 2,200,000 120 10,000 220
Center

New York, Roosevelt Field

6 2,146,029 220 9,143 235
Mall

Ft. Lauderdale, Sawgrass

7 2,100,500 300 12,000 175
Mills

Dallas, TexasNorthPark
8 2,100,000 160 7,842 268
Centre

Chicago, Oakbrook Shopping

9 2,014,962 175 11,000 183
Centre

10 Miami, Aventura Mall 2,000,000 134 5,006 400

20,000 sq ft of space to be budgeted. In cities such as Mumbai,

this can be a difficult proposition to meet and can even make
projects financially unviable. However all mall strategies can be laid
low if parking is inadequate and customer is turned away from the
gate by the security guard.

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 Apart from these key issues, a mall strategy will also include zoning
of tenants, mall maintenance strategy, competitive positioning, and
a promotion and marketing strategy for the entire mall off and
during festival seasons. Mall managements also need to manage
mall-wide tenant behaviour. A leading mall in Mumbai has tenants
opening and closing shop at varying times. To ensure mall visitors
know where they stand in terms of mall timings, malls should have
standard opening and closing times for all tenants- with
entertainment and food zones being the exception only.

Although there are many malls that have mushroomed in the Indian
context, the market is still ripe with opportunity. This is reflected in
the famous quote of John Wooden “It is not so important who starts
the game but who finishes it.”

Cedar Team

About Cedar
Cedar is a global consulting, advisory & analytics firm. With over 25 years of experience, it has assisted over a 1000 clients globally.
Formerly part of Renaissance Worldwide, a $1 Billion consulting firm, co-founded by the creators of the Balanced Scorecard. Cedar,
winner of the 2010, 2011, 2012, 2013 & 2014 Best Advisory Firm Awards, is US headquartered with 16 network offices worldwide.

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