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Mar, 01 2007

The versatile small retail format

Shopping malls, today, have some small retail formats as standalone stores, and some in an anchor store under the shop-in-shop concept. Who will dominate the marketplace?

WITH the cost of real estate skyrocketing, the profitability factor in malls becomes questionable. While the builder and the promoter invests in the real estate and construction of the mall, it is the retailer who has to ultimately bare the burden of costs incurred, more specially the hike in the real estate price.

Understandably, to generate the maximum per sq.ft yield, optimum per sq.ft of space must be used along with reduced rentals or increased profitability of the outlet.

TFW Bureau conducted a survey in leading malls in six cities and noted that there are basically two formats in any mall that are more lucrative than the rest. These are large format stores, also known as anchor tenants, and small retail format stores of 50 to 500 sq.ft area.

Considering that small retail formats are the most profitable, leading brands are today opting for it and making optimum use of retail space in a mall.

Malls as a strength

Retailers as well as mall developers can assist in the profitability of the mall by employing the small retail formats. Says Mr Sanjay Coutinho, GM Operations Nationwide, Baskin Robbins, “It is the mall that attracts traffic directly, and not the brand. Our model is not so huge and does not involve a big backend operation.” Mr Rajiv Tibrewal, Director, Taurus Confectionery India (P) Ltd, also toeing the same line, observes, “Shopping malls attract a lot of visitors and shoppers, and small retailers cannot generate footfalls on their own. Other than that, they get security and ease of parking in a shopping mall.” Mr G.S. Matta, CEO, Mr Orange, says, “A small retailer enjoys low investment, high return on investment, and easy entry and exit (from the business). Brand building is also relatively easy since business can be easily replicated at multiple sites.”

Mr Vikaas Gutgutia, Managing Director, Ferns ''N'' Petals, says brand visibility is the biggest advantage in a mall, adding, “As far as our product is concerned, mall owners and promoters do not mind having a florist in their mall.” Mr Gutgutia clarifies that flowers are not impulse buying material. “Apart from flowers, we do have other products in our outlets, like, gifts and artificial flowers, which can be termed as impulse buying material. Flowers do not come under this category because, normally, flowers are meant only for occasions,” says Mr Gutgutia.

While endorsing these views, Mr Tibrewal states, “If a customer gets the same product in a shopping mall which is also available in a crowded high street, he would certainly prefers the mall, as he can easily park, take the stuff and drive away.” Small retailers, says Mr Tibrewal, have limited budgets to advertise and showcase their products to attract customers, therefore, malls are the ideal locations for them.

Ms Reema Menon, Retail Head, Parsvnath Developers, opines that these formats, if placed properly, can do excellent business and help in collecting a large amount of revenue. Commenting on the big brands, Mr Rajeev Dayal, Omaxe Constructions, says, “It is false to assume that only big brand’s outlets do good business in malls.”

“Small retailing business in a mall is dependent more on footfalls and location, and to a smaller extent, on the size of the outlet. The rental costs follow the reverse pattern and are fixed according to the size of the outlet. The format occupies less space for display of their limited offering, which are more impulse-driven purchase and therefore thrive on the footfalls that a mall generates,” feels Mr Dhiren Kanwar, Chef-Owner, Cocco''s.

Some problem areas

Dwelling on the negative aspects of being a small retail format in a mall, Ms Menon observes, “I do not see any drawback from a small retailer''s point of view. But, if the outlet is placed in a rotten fashion then the beauty of the mall is lost. In that case, they actually kill the footfall.”

Observing that the space acquired by small retailers is immaterial, Mr Dayal says, “As a developer I do not see any disadvantage as long as I get a committed retailer and a good brand.”

Though mall developers have their own views about these formats, small retailers, who are actually the investor and recipient, differ in their opinions. Says Mr Coutinho, “If the mall is a failure, you are stuck. It will not matter how good a brand you might be. Mall developers and mall management want bigger formats to be occupied first, and only then they look at the smaller formats, not in terms of brands but in terms of formats. When you have a bigger space you can negotiate for better rates, the smaller the space the higher the price you pay.”

On the disadvantage angle, Mr Dhiren says, “These arrangements are for a shorter duration (from a few months to a couple of years) as against a long term lease for the larger properties.” Going further, Mr Matta believes, “The business generated in small retailing is directly proportional to the footfall, therefore, there is high fluctuation in sales and profitability. The business format can easily be copied resulting in more competitors, high rentals and difficulty to get space in malls and uncertain tenancy rights.”

Mr Tibrewal feels that the overall cost of retailing is very high in malls in terms of real estate, rentals, and maintenance. From a florist''s viewpoint Mr Gutgutia, believes that going to a mall to buy just flowers is a big pain for any buyer. “Going to a mall would mean that a consumer has to first park his car in the basement, then go to the third floor to buy the flowers, and then back to the basement. Flower buying which normally takes five to seven minutes in a shop, may take half-an-hour to 45 minutes in a mall. To overcome such cumbersome process the consumer would prefer buying flowers from a standalone outlet. ”

Small retail format types

Every mall does not require outlets that are made for large retailers only, some space for small retailers is also available. We observed various formats of small retail formats in a mall, which include, kiosks, carts, lounges, strolling departmental stores, supermarkets, hypermarkets, play zones, entertainment zones, multiplexes, casino (a new concept), and bungee jumping in the atrium.

While Ms Menon feels that anybody can be placed in such formats, Mr Dayal, believes that the products in these formats should be something which does not pinch the consumer in actually buying it, or having to resort to organised buying behaviour.

Retailers and mall developers feel that there is a diverse product range which are successful in these formats, such as, cosmetics, small artificial jewellery, cards, gifts and souvenirs, food and snacks, watches, leather accessories, corns, video parlour, popcorn, candies, mini games for kids, chaat shops, books, music shops, mobile phone and accessories, art and craft, novelty and florist.

Standalone or anchor shop

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