Homegrown brands make way for global brands at leading Indian malls

Top performing malls are increasingly giving prime space to foreign retailers over domestic brands. In a latest development, at Mumbai’s upscale Pheonix Mills, Future Group’s Big Bazaar outlet has given way to Hennes & Mauritz (H&M). The deal was struck after year-long active negotiations between the parties. Similarly, Zara has been eyeing the prime space in the same mall where Aditya Birla Group’s Pantaloons is at present. After serious negotiations, Zara has finally got the space.

Ever since international brands have forayed into the retail scene in India, mall owners have had to play favourites. In the last one year, mall developers have had to relocate or resize stores of local brands in order to accommodate big global players such as Gap, H&M, Zara etc. A few examples have been, Armani replaced Satya Paul in Mumbai’s Palladium, H&M relocated Pantaloons and Food Bazaar in Delhi’s Select CityWalk mall and Globus made way for Hamleys at R-City mall.

Relevance is important for a mall

Today, consumers are much more knowledgeable about brands. Also, disposable incomes, growing aspirations and an exposure to the world have made consumers discerning and demanding of the latest global brands. Also, a slew of e-tailers have made consumers aware of latest styles and designs, better fits and colours. So, it’s a challenge for mall developers to stay relevant to this hugely aware customer. As Arvind Singhal, Managing Director, Technopak points out that it is brands like Zara and H&M that can pull the numbers in terms of footfall to the malls. And once shoppers come for this brand, they would automatically go to other brands, thus profiting the mall in the longer run.

Short term agreements work better

Most malls sign a brand for shorter period so that it’s easy to rework terms later. In India, on an average 20 per cent malls are vacant, thus putting immense pressure on retail real estate. Also, in the face of stiff competition, malls have to remain visible so as experts points out, long-term agreements don’t make sense. In today’s scenario, they limit a mall’s capability to innovate. As a result, length of anchor tenant agreements has halved from 18-21 years in the early 2000s to 9-10 years. Tenures for vanilla brands have shortened from 9-10 years to anywhere between 2-3 years.

Retail business is all set to undergo major changes in the near future. Big international players such as Uniglo, Zara Homes, Massimo Dutti, Ikea etc all have plans to open shop in India. This demand will be compounded by the expansive plan of Zara, H&M, Forever 21, Gap etc. So in reality it’s tough to visualise the real estate potential that these expansion plans can throw up.