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Oct, 01 2006

MALL CREDIBILITY GOING BEYOND THE HYPE

Retailers are readily setting up shops in grand establishments called malls. The article informs what aspects you need to consider in order to judge your future place of business.

MALLS come in various shapes and sizes and provide a grand environment and the ideal space for retailers. This ambience also attracts a large number of footfalls. In the recent past, the mall culture has redefined shopping and brought about a retail revolution in the country. With the growth in the number of malls the retailer has found a space to do business in a modern day format.

Most malls are spread over a sprawling area, with a swanky design and various floors. For the retailer, it may seem as the best place to display the products and attract a burgeoning number of customers. However, before taking a decision on leasing space in a mall, the retailer needs to carry out a thorough check of the mall. Yes, some research is absolutely necessary, on the safety, security, legality and various other aspects which can make or break your dream of having a profit-making outlet in a mall.

Study the potential mall

In the recent past some malls in the country got a fair share of the news headlines for all the wrong reasons. Not much time has passed since the PVS Mall in Meerut caught fire and the builders faced charges of illegal extensions. The complete destruction of a major super store in the fire has put many retailers on high alert. Such aspects not only lead to negative publicity for the mall but also put the retailers in an indecisive frame of mind.

In such situations, the mall owner alone cannot be held responsible, as there is a whole lot of retailers who completely ignore the guidelines and parameters laid down by the authorities. This mad rush by retailers to grab the tempting opportunity to open shop in a magnificent mall, and thereby sidetrack various important issues, including security and safety, is dangerous for him as well as the customers. Though retailers have the right to check whether the mall is built according to proper guidelines, they just refuse to take notice.

Referring to the PVS Mall episode, Amit Sirohi, MD, Sirohi Constructions Pvt Ltd, says, "Before buying space in a mall a retailer should do his homework. He should take note of the complete mall plan and its security concerns like fire, theft, and parking. He must know about the future extension plans from the developers to avoid such mishaps."

Speaking from the retailer's perspective, Nitin Khanna, franchise manager, Spykar Jeans, says, "We as a brand prefer to go to a mall where there is good mall management and where they ensure safety."

Adds Dr Rajesh J Aeren, Vice Chairman Aeren R Enterprises, "Retailers have every right to ensure that the building is as per the safety code."

Caution for retailers

Even tier-II and tier-III cities in urban areas are witnessing a sudden spurt in mall development like never before. This mall mania has overwhelmed retailers. They forget the fact that they pay a high price for their shops in the mall; and thus more the need to confirm the credibility of the mall developer. A retailer can hire a professional consultant to look into the matter and check all the legal aspects pertaining to the mall. Besides this, a consultant can also help in the selection of the kind of space that will work best for the retailer. The consultant can also verify various other factors such as the catchment area, footfalls, zoning plan, tenant mix, and anchor stores that the mall owner claims to provide.

Avneesh Sood, Director, Eros Group, a real estate developing company, points out, "Most of the mall operators adopt a sale model which allows them to move out once all the space is sold, ignoring important safety aspects."

Here Spykar's retail strategy seems just right, as Khanna says, "We actually prefer to go to a mall which doesn't sell on an outright basis but wants to give the property on lease. This ensures that they would have a proper mall management system in place."

In case a retailer goes to a mall which sells space on an outright basis, the investors will then have to form a society (which rarely happens) to appoint some agency for maintaining the safety of their premises.

According to Sirohi, "If possible, before investing in a mall, or signing a contract, a retailer should consult with a good real estate consultant to avoid any unnecessary situation."

A retailer should get adequate legal information and must pay heed to whether the mall is insured or not. Insurance is available for goods and stocks, machinery, and for third party. Though mall developers go in for fire insurance on their part, to be on the safer side, retailers can also take insurance coverage for their property and its contents.

Sirohi further cautions, "Before investing any money in such property, retailers should check all the essential documents which are issued by different government departments, like fire department, municipal corporation, etc."

Rajit Kakkar, MD, Silvercity adds, "Safety and security are of paramount importance in the case of large public gatherings. In a shopping mall, at any given time, a large number of visitors are present. If the developer has not taken adequate steps for their security, it leads to negative publicity, which in turn has a spiralling effect on footfalls and retail sales in the mall."

Credibility of the mall

Another mall being built at the metro stations in Delhi is also part of a controversy between the Delhi Metro Rail Corporation (DMRC) and the Municipal Corporation Delhi (MCD). The case is in court and the retailers have become a worried lot. When contacted by The Franchising World to comment on the issue, the mall developers refused to give any statement.

It is the duty of the mall developer to get the plan sanctioned. However, to be on the safer side, a retailer could check the legal status of the mall. If the retailer makes an investment in the mall at the planning stage, then he needs to check such documents. Says Dr Aeren, "The agreement between the mall owner and retailer should have clauses that force the builder to follow the approved plan, and put in these essential facilities. If these are violated, the builder should be liable to compensate the buyer." He advises, "Retailers should not blindly invest in a mall just because it is available at an attractive rate, or because the location is desirable or the builder is reputed."

Research of the catchment area and other valuable facts only from the mall developers are not sufficient, a retailer must use his own resources to verify all the facts stated by the mall developer. Research agencies are one of the major sources a retailer can rely on to provide an objective feedback on the mall developer. Small retailers can also take a word of advice from anchor tenants.

Clearance from a few agencies becomes mandatory for the mall developer to avoid any issues in the later stages. Broadly, the mall must have all the statutory approvals including land use sanctions, building plan approvals, environmental sanctions (if applicable), completion certificate, etc. Land certification and land usage certificate are some of the essentials which a retailer must check.

Making the mall work for you

The various benefits that a mall offers a retailer cannot be denied, but a retailer needs to keep his ears and eyes open. Take due notice of all the facts and study each and every aspect well. On part of the malls, they can offer opportunities to the retailer to run their business successfully by following all the essentials required by the authorities.

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