Mall Management.

^INTRODUCTION
Before getting into the Intricate details of mall development and management, we need to
know the basic overview of mall culture.

I.I.I Definitions
The difference between a shopping centre and shopping mall will get clear once we have a
look at both these terms, as many a times these are used interchangeably.
"Shopping Mall": The Cambridge Dictionary defines a "mall" as a large, usually enclosed
shopping area.
"Shopping centre": Is commonly referred to open-air retail. In simple terms, a number of
stores situated close to each other in an unenclosed (open) area.

History of Malls
Period Description

15th Century AD Ishfahan's Grand Bazaar - Tehran • lOkmslong. • 58 streets • 4000

shops

1916 Indoor Mall - Duluth, Minnesota

1950 First fully - enclosed mall - Southdale Mall in Seattle was designed by
Victor Gruen (Known as Father of Malls)
1986 West Edmonton Mall - Alberta • World's largest parking lot • Largest
shopping centre

1.1.2 Types of Malls

There are 4 types of malls based on their size, number of anchors and location. They are:
• Regional Mall: Larger with 4,00,000 sq. ft. to 8,00,000 sq. ft., gross leasable area with at least 2
anchors.
• Super Regional: Over 8,00,000 sq. ft. and serves as dominant shopping venue for the region in
which it is located.
Mall Introduction 3

• Retail Districts: Combination of big box at one place. This one is the latest trend in the retail
market.
• Vertical Malls: These are in the form of buildings and are created when the land price is high.
Therefore, the space allocated to retail is configured over a number of stores accessible by
escalators linking the different levels of the mall. In this cases the challenge is how to encourage
shoppers to move upwards and downwards.

1.1.3 Some Largest Shopping Malls

The table below shows some of the largest shopping malls in the world.
Shopping Mall Stores Year Opened Total Area (sq. ft.) No.of Shops

South China Mall/Dongguan, China 2005 9.6 million 1500

Berjaya Times Square/Kuala Lumpur, 2005 7.5 million 1000

Malaysia

Mall of America, Minnesota, U.S. 1992 4.2 million 520

Mall of Emirates 2005 4 million 350

1.1.4 Retail Space Standards

Retail Space (Sq.ft. / Comment
Person)

USA 34.5 Wide range of retail formats - from malls to power centres to high
streets

Australia 25.8 Has followed trends from the US. Highly concentrated retail ownership

Singapore 21.5 Evolved from shop houses to western - style malls. High provision
reflects regional role
Kuala Lumpui 12.9 Retail offer has expanded rapidly in recent years

Dubai 8.6 Attempting to emulate Singapore's success and become retail hub for the
Middle - East region. Huge increase in supply - will have 3 of the
world's 5 largest retail malls by 2008

Hong Kong 6.5 Few opportunities for large malls and constrained by increasing retail
offer in PRC

Shanghai - 2.2 First western - style malls have opened over past 5 years

Mumbai 0.33 Vastly underprovided

Chennai 0.28 Vastly underprovided

1.1.5 Retail Scenario In India

India's retail industry, both organised and unorganised, is worth Rs. 11.8 lakh crores at present and
organised retail will form 15% of the retail sale by 2011, from the current 8% share.
New stores, more spending power and access to credit had led to organised retail's 50% growth in
2007.
Retailers have bought or will buy around 316 million sq. ft. of retail space, several times the 68
million sq. ft. of space they took up in 2006. For this Investment in space to pay off, the industry would
have to grow at around 50% or so, at this pace the mall space planned will get used.
Some of the features of the organised sector growth are:
1. Organised Retail: current Rs. 4.96 lakh crores, Rs. 18 lakh crores by 2010 and Rs. 256 thousand
crores by 2015.
2. Total Consumer Spend in 2006: Rs. 178 thousand crores of which Retail: Rs. 1080 thousand
crores, double digit growth expected.

3. Average salaries hike of 15+ per cent: there will be lot more consumption.
4. Leading retailers sales' growth : 50-100% in 2005-06.

1.1.6 Growth of Retail in India

There has been tremendous increase in the number of malls in India In recent times. From 25 malls in
2003, the number has gone up to 211 malls in 2006 and is expected to reach 500 malls by 2010. The
reasons for this unprecedented growth are:
1. Largest young population in the world:
- More than 890 million people below 45 years of age.
- More English - speaking people In India than in the whole of Europe taken together.

2. More than 600 million effective buyers by 2010.

Mail Introduction 5

3. More than 550 million under the age of 20 by 2015.

4. More than 70 -million earn Rs. 8,00,000 a year - number to rise to 140 mn by 2011.

1.1.7 Emerging Trends in Retail Mall Real Estate

1. Larger formats and conscious differentiation: Developers are Interested in having larger retail
formats and are paying peculiar attention in differentiating their retail space to their competitors.

2. Growing interest towards mall management.

3. Innovative lease terms and models - Revenue Share becoming common.
(a) Revenue share as a model recently introduced in the major retail markets of Mumbai and
Delhi.
(b) Revolves around concept of Minimum Guarantee + % share of monthly revenue of retailer.
(c) Encouraging developers to become active participants in brand promotion along with
retailers.

4. Rationalisation in maintenance and services.

5. Mall developers have started paying greater attention to design and Infrastructure planning such as
parking.

1.1.8 Retail Mall Space Supply - Reaction to Vast Demand

1. Concentration of mall space still in Tier 1 cities of Delhi, Mumbai and Bangalore.
2. Delhi has maximum sq.ft. of malls currently as well as upcoming.
3. Mumbai has approx. 12.5 million sq.ft. of mall space coming up in 2008(E).
4. Currently (2008) Mumbai has approx. 5 million sq.ft. of mall space.
5. Chennal and Hyderabad demonstrate same trend In mall space growth, with Pune being the leader
among Tier 2 cities in terms of mall space.
6. Mall sq.ft. available per person Is high for Delhi and Pune with lowest being for Kolkata.
 6 Moll

Tier I Cities: Traditional Cities of Choice

The following are the reasons for choosing the cities for mall devel

Mumbai: Business Metro

1. India's Largest City

2. Population Base: 17 million
3. Financial Hub
4. Advertising, Fashion, Hollywood

Delhi: Political Capital

1. Political Advantage (National Capital Region)

2. Population Base: 15 million
3. Highest GDP/Capita
4. Booming Suburbs Bangalore: IT Hub

1. India' Silicon Valley

2. Moving up Value Chain
3. Population Base: 6 million
4. High Quality Labour

Tier II Cities: Today's Rising Urban Stars

1. Competitive Business Environments
2. Human Resources Availability
3. Telecom Connectivity
4. Urban Infrastructure
5. Governance
6. Real Estate Provision

Tier III Cities: Next Generation of Emerging City Winners

1. Proximity to Tier I Cities
2. Connectivity
 Mall Introduction 7

3. Education
4. Urban Infrastructure
5. Quality of Life
6. Tourism

1.1.9 Favourite Business Destinations (Retail)

The following are the favourite destinations with regards to the retail industry in Tier I, 11 and III:

Tier I Cities
Mumbai
Delhi
Bangalore

Tier II Cities
Hyderabad Chennai

Pune Kolkata

Tier III Cities

Nagpur Ahmedabad

Chandigarh Indore

1.1.10 Plans of Some of the Large Indian Retailers - Diversification/

Expansion
Expansion into all formats. 30 mn sq. ft by FY 10. The turnover to touch $ 6.67 bn FY 10-11.
Pantaloon
Reliance
$ 6.67 bn investment to set up multiple retail formats with expected sales of$ 20 bn by 2009- 10.
8 Mall Management

RPG Planning IPO, 450+ Music World, 50+ Spencer's Hyper covering 4 mn sq.ft.by2010.

Lifestyle $ 90 mn investment in next 5 years, expand on Max Hypermarkets & value retail stores. Home
& Lifestyle Centres.

Rahejas Shoppers' Stop, Crossword, Inorbit Mall, 'Home Stop' and recently launched hypermarket
named 'Hypercity'. 55 hypermarkets across India, by 2015.

Piramyd 1.75 mn sq. ft. of retail space and 150 stores in next 5 years.

Trent Trent to open 27 more stores, retail formats adding 1 mn sq. ft. of space in the next 12 DLF
malls.

Trinethra Recently acquired by the AV Biria group, Trinethra (currently two formats - Trinethra,
Fabmall) plans 220 stores with a turnover of over $667 mn this fiscal.

Vishal Group An IPO and investment of $ 278 mn by 2010, targeting 220 outlets, taking its cumulative retail
space to 5 mn sq. ft. and sales turnover to $ 1 bn

Bharati Group Ties up with Walmart. Plans US$ 7bn Investment in creating retail network in the country
including 100 hypermalls and several hundred small stores.

NEW MALL BREED - LIFESTYLE CENTRES

Like insecure teenagers, malls keep changing their style. They are ripping away their roofs and dry-
walled corridors; adding open-air plazas, sidewalks and street-side parking; and rechristening themselves
"lifestyle centres". This new look may remind you of something: a vibrant urban street. Yet, while these
new mails may appear to be public space, they're not public at all - at least if you want to do anything but
shop. They represent a bait-and-switch routine on the part of developers, one that exchanges the public
realm for the commercial one. They're also enormously successful.
This is civic life in America, circa 2005, and its spreading. The International Council of Shopping
Centres estimates that 17 more lifestyle centres are set to open here. The Memphis-based developer, Poag
& McEwen coined the term in the late 1980s, but most centres have been built in the last two years,
typically near affluent suburbs. They are upscale outdoor shopping areas designed to look like city streets,
with an emphasis on restaurants and spaces for people-watching. They also have
Mall Introduction 9

what planners call " a mix of uses" - a bit of housing, some offices and occasionally actual people living in
apartments above the stores.
Shopping-mail developers believe that lifestyle centres will Improve the fortunes of medium-sized
malls, which have been losing customers to the mega malls. Ever since Victor Gruen constructed the first
Indoor shopping centre in a Minneapolis suburb the mall has been super - sizing Itself. Over the years, they
have become behemoths that serve entire regions, such as the King of Prussia Mall in Pennsylvania and the
Mall of America in Minnesota. All of these malls turn their backs to their surroundings and concentrate
activity in and on them. By contrast, lifestyle centres gesture toward their environments. With their street
grids and sidewalks, they convey a sense of being out and about in the world. Developers hope that, by
emphasising convenience and entertainment, people will visit lifestyle centres more often and stay there
longer.
Unlike the previous reinvention of the mall as a "festival marketplace", lifestyle centres do not
attempt to evoke some idyllic past. Faneull Hall in Boston, which opened in 1976, and the South Street
Seaport in New York, which opened in 1983, grafted a mall onto historic market, hoping to make shopping
feel tourism. At lifestyle centres, the most discernable theme is urbanism itself. Their developers recognise
that "shopping" is only one urban entertainment, among many, like eating at restaurants, people-watching,
open-air concerts, or looking at art. More incredibly. lifestyle centres do all the things that urban planners
have promoted for years as ways of counter-acting sprawl: squeeze more into less space, combine a mix of
activities, and employ a fine-grained street grid to create a public realm - a "sidewalk ballet", in Jane
Jacobs' alluring phrase. The irony is almost too perfect: Malls are now being designed to resemble the
downtown commercial districts they replaced. What sweet vindication for urban sophisticates!

KEY SUCCESS FACTORS

(A) Design
With regards to design the following parameters if followed by mall developers, would lead to
success.

Site Planning and Circulation

1. Adequate junctions and on-slte circulation to avoid traffic queues.
2. Phased & flexible approach to allow for future expansion in terms of parking.
3. Configuration: Placing the anchor tenants (super-regional mall/ hypermarket) on 1-2 levels.
 10 MaRM,

External Design

1.' Based on Internal design of shopping centre.

2. External signage, prominence of anchors.

Internal Design - Visibility and Circulation

1. Horizontal-avoid dead ends (anchors to generate pull; avoid d""'' dark corners), straight/Prefer curved corridors, central
courts/ i

2. Vertical - encourages people to visit upper floors through vertical a:

(department stores, decked car parking), escalators and lift, visibility b levels (set backs and line of sight)
3. Clear signage/directions throughout.

Internal Design - Finishes

1. Avoid overly complex design - will conflict with retailers' store front;

Internal Design - Layouts

1. Based on the attraction factor of anchors, allocate highest margin n to highest footfall locations.
2. Create broad zones to allow comparison shopping.
3. Keep flexibility to deal with changing retailer market - modular, fle in design.
High quality environment to encourage dwell time - shopping as a I experience:
1. Different zones - some relaxing and calming; others dynamic and b
2. Lighting (natural light, artificial light).
3. Make the mall a meeting place.

(B) Tenant Mix

i Mall developers must create convincing offers to maximise footfalls and
size. This can be achieved by:

Right Balance Between I

1. Anchors - These are characterised by low margin and high volume. | (e.g. hypermarket, electronic, furniture)
Mail Introduction 11

2. Retail gallery - Characterised by high margin and low volume.

3. Entertainment and F&B - These are included to improve leisure experience, by Increasing dwell
time and broaden appeal.
Obtain high quality anchors (not luxury but with "est"): biggest , best , lowest prices, fastest
service....
1. Improve financing (pre-lease to credit tenants).
2. Generate footfall by offering best value and wide selection of goods.
3. Confidence In project to pull In high quality retailers at lease.
4. Marketing and promotion.
Ensure sufficient choice of operators In each category to ensure strong negotiating position for each
retail unit.

(C) Asset Management

Develop partnerships with retailers:

1. Improving their turnovers will improve rent potential.
2. Bring to multiple locations.
3. Maintain flexibility in design for future reposition.
4. Establish training programs' and property management systems.
5. Commitment to high quality marketing and branding.
12 Moll Management

MARKET SCENARIO
Competition Current
Competition

* Emergence of New Breed of Pan India i

Developers with a Strategic Vision & Ambitious National Expansion
Plans. . - DLP planning 100 malls in 60 cities within next 8-10 years. -
Ambitious plans from Emmar-MGF.Unitech.Rrestige ^ Rahejas.

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1.4.1 Future Competition

Prozone Plaza Center

Indiabulls Wadhawan

1.4.2 How they will respond to the entry of other players?

1. Volume pressure : Developer like DLF/ Kshitij/EDPL always exert pressure on brand not to sign
up with other developers in same area using their existing national footprint in CBDs (Central
Business Districts).
2. TOM(Top of the Mind) recall due to very high advertising expenditure, use strategically if you see
any local/regional threat.
3. Use, reduce/increase their lease policy to make new players bleed.
Mall Introduction. 13

4. Use best resources from Central pool, cost of which is diluted on number of existing operational
mall on the new player, if they consider that mall a threat.
5. If they find any USP, they will replicate the same Immediately with lightning speed.

1.4.3 How can the new players respond to competitor's response?

1. Fair deal: Most of the developers use unethical means on lease, if they stay transparent they will
earn confidence from retailers.
2. Deliver on time - Single most important element which can win retailer's heart - If they announce
a date, deliver on due date.
3. New players should keep 10-15 % spaces for new format and keep 10-15 % lease on short-term,
so new brands/formats/innovations can be Implemented to keep the best in business proposition.

1.4.4 Who else might be able to exploit the same opportunity?

1. International mall developers have years of experience and core competence from design to
delivery and relationship built over years based on results. They will not go through learning
curve and work with clinical precision.
2. If context changes, like FDI permission in retail, then the international mall developers will have a
headstart to bring in existing relations to India. Second, other mall developers who have existing
proven properties or CBD malls in highly potential cities, example UB city in Bangalore, DLF,
Times Square, are already spending lot in getting the international brands into India, securing
place in their malls by becoming a partner through franchisee/ licensing route.
Other changes could be to mature customer and consumer, which is already happening, will put
pressure on bottom line, they will demand more.