Many people I know treat shopping centres or malls as a new phenomenon, a progressive development of recent times or a modern blot on the traditional cityscape (depending on your point of view).

However, Grand Bazaar (Istanbul, Turkey) is the earliest known mall, with the original structures built in 1464, with additions and embellishments later.

In India, if one were to include open arcades, Chandni Chowk in Delhi is reported to have opened around 1650, with its speciality shopping streets. (Of course, more traditional bazaars have been around many thousands of years around the world.)

But even if one were to get more “traditional” about the definition of a mall, possibly India’s first mall was founded in the hottest city in the country then, Kolkata (New Market) in 1874.

In more recent history, Delhi’s municipal pride, the air-conditioned underground Palika Bazar was a novelty in the mid-1980s, while Bangalore’s Brigade Road saw several early pioneers with their shopping arcades in the late 1980s.

Then came the mall-mania beginning with Ansal Plaza in Delhi and Crossroads in Mumbai. Everyone started looking at malls as the new goldmine, being pushed ahead by a “retail boom”.

The early stage of any such gold rush usually has several experiments missing their mark, which is what has happened with the hundreds of mall-experiments that have been launched in the last 7-8 years.

Some of the significant and common issues are starting to be addressed, but many others remain.

Catchment-Based Planning is Needed

The top-most issue in my mind is “oversupply”. While this may sound absurd to many people, given the low figures quoted for modern retail, I am referring to the over-concentration of malls in a small geography. If 8-10 malls open 4-5 million sq. ft. of shopping in a catchment that can only support 1 million sq. ft., everyone knows that some of the malls will fail. But everyone also believes that their mall will succeed (otherwise, they would obviously not have invested in the mall).

What happens to the malls that fail? Depending on the design of the building, many of them can be repurposed into office space – another area where a lot of investment is still needed. So in the end, actually, most people win, one way or the other. Yet, there will be some losers. Does anyone “plan” on being one?

The second key issue in my mind has been that mall developers have been thinking as “property developers” rather than retail space managers. The successful shopping centre operators worldwide (now also in India), are actually as concerned about what and who is occupying that space as a retailer would be. They are concerned about the composition of the catchment, the shopping patterns, the volume of sales, the shopping experience. Therefore, the tenant mixes as well as adjacencies are factored into the earliest stages of planning the shopping centres.

In fact, if I were to identify the most critical operational problem for many of the malls, it is the lack of relevance to catchment and, therefore, the low conversion of footfall into sales for the tenants other than the food-courts. Customer flow planning within the mall is another factor that can make a tremendous impact on the success and failure of the tenant stores.

Once you start looking at these factors during the planning of a mall, another obvious aspect that jumps out is “differentiation”. Currently, there is little to choose from between malls (other than possibly the anchor store). However, with more clarity in terms of the target audience, the potential strategies for differentiation also become clearer. The visitors also become segmented accordingly, and there is a natural benefit to the tenants occupying the mall.

If, as a mall operator, you want to be in business for long, and also develop other properties in the future, the success of your tenants is probably the most critical driving factor for your business.

Integration into the Urbanscape

When we gauge malls from the perspective of integrating within the urban landscape, there are obviously some glaring errors being made. Instead of aesthetic design that reflects the heritage and culture of the location and its surroundings, or some other inspirational source for the architect, most malls that have come up are concrete and glass boxes.

Beyond the looks, some of the malls are a victim of their own success. They attract more crowds during the peak than they have planned for. Not only does the parking prove to be inadequate, there is no holding capacity for cars entering or exiting the mall. The result is a traffic nightmare – not just for general public, but even for the visitors to the mall. Someone who has spent 45 minutes stuck in a jam waiting to get into the parking of a mall will certainly not be in the best frame of mind to buy merchandise at the stores occupying the mall.

Some of the problems lie outside the mall-developer’s control – for instance land costs are a major driver of the cost of the project (and, therefore, the lease costs to the tenants), and land is a commodity which is independent. Real estate is available within the cities as brown-field sites (former industrial locations), but the regulations are convoluted and the strings are in the hands of too many different departments of the government (city, state and central). This needs joint creative thinking on the part of developers, the government and the public, if our cities are to develop in a more sane fashion than they have in the past.

Similarly, land deals are still not clean enough for foreign investors to be comfortable participating in many developments. This obviously is holding back a tremendous source of capital and domain expertise that could contribute to the growth of this sector.

Many other operational issues exist – manpower, systems, health & safety – some of them can be managed or controlled by the mall developers, and it is a question of time (and of their gaining experience). Other issues are more in the domain of the government, and need a visionary push to make “urban renewal” a true mission.

New Life for the Cities

In my opinion, one of the most interesting areas which would be in the joint interest of almost all parties (that I can think of) is the possibility of revitalizing the high streets and community markets, and reinventing them as the true centres of shopping.

Many of our markets are rotting (a strong word, but let me say it anyway). The individual stores are owned by individual owners who are not all equally capable of maintaining the same look and feel throughout. The infrastructure in and around the markets are owned or managed by several different agencies. To make matters worse, there is often no cohesiveness and no synergy in the interests of most of the members of the market association. None of these individually have the power or the mandate to recreate the shopping centre. But what if they could get together and take the help of a re-developer?

If an example is needed, New Delhi’s Connaught Place provides the example of one stage of redevelopment. Connaught Place had lost its pre-eminent position as a shopping centre, due to the spread of Delhi’s population and the new local markets that had come up. Further disruption was caused by the construction by Delhi Metro. But DMRC has reconstructed an “improved” centre, and the Metro connectivity has made the customers come back into CP, as it is affectionately known in Delhi.

There are clearly many such opportunities around India’s cities. These need to be looked at as a commercial opportunity for all concerned (revenue for the redeveloper, better sales for the store owners / tenants, more tax revenue for the government from additional sales and consumption). But it is also a broader social opportunity to breathe a new life into our cities, and to make them proud beacons of a growing India.

It would be a mission that would truly prove the worth of shopping centre developers, urban planners, regulators and the retailers themselves.
Any takers?

In several conversations recently, there has been reference to how much contribution comes from small-medium enterprises, the need to protect the small-scale industry (SSI) to provide diversity etc.

After all the conversations, one thought keeps coming to mind. While small businesses need to be enabled, and an ecosystem and environment created for them to thrive, there is no reason to keep them from growing.

Entrepreneurship is organic, a business is a living thing. Basic high-school biology teaches us that living things (as opposed to non-living things) grow. Preventing a living thing from growing is going against its very nature.

But that is exactly what reservation of certain manufacturing sectors for small scale does – it creates a government-regulated ceiling beyond which the business cannot invest (and, therefore, cannot grow).

The apparent objective of the policy is to “protect” the industry sector from competition from large companies. The underlying assumption is that large companies compete unfairly, and that small companies in the reserved sectors effectively cannot compete against larger players.

However, many industries and sectors in India are paying the price for that policy. For instance, even after the clothing sector was allowed a higher cap of investment in plant & machinery, and then finally removed from the list of SSI-reserved list, it struggles with its fragmented structure, against larger-scale and more efficient competitors based in China , neighbouring Bangladesh and other countries.

Obviously, in global trade, restricting the growth of domestic industry does nothing to make the country competitive. It only protects it from itself, and makes it inefficient.

So every time the list of industries reserved for small scale is reduced, in my opinion it improves the potential competitiveness of Indian industry. In that light, the government’s announcement this week of removing some more industries from the list is an occasion to cheer.

The government has identified mechanical equipment, electrical goods and stationery as the categories to be opened to larger scale manufacturing.

Consumers, retailers and consumer products brands have something to look forward to, considering that this may include products such as steel cupboards, doors, windows and ventilators, steel furniture, locks, steel and aluminium utensils, builders’ hardware, sewing machines, kitchen gadgets, and pens.

We await the final list with bated breath. And look forward to other consumer goods also being removed from the SSI-reserved list and being opened to higher investments.

For those who are familiar with Kutchh, and its people, there is no doubt that it is one of the most active hotbeds of entrepreneurship. A lot of the business in India’s financial capital, Mumbai, is in the hands of the ‘kutchhis’ (those from Kutchh). Many of India’s largest companies and financial heavyweights are from this region, while Surat has been a force to reckon with in the global diamond trade. Amidst all this, one of the most interesting group that I have come across are the craftspeople and artisans working with traditional methods of craft – textiles, metal, wood, leather etc.

Beyond the timeless creative wealth that traditional craft creates, a conversation with one such craftsman – a handloom weaver – highlighted to me the value of crafts as a force of entrepreneurship. While talking about the world in general, his choices in life etc., he said that the strongest reason for him to stick to his family’s handloom tradition was the fact that he was an entrepreneur. He was his own boss, not reporting to anyone else, and his fortunes not subject to the whims and fancies of some better-educated higher-up in “a company”. To him, the sense of dignity from creating his own products and running his own trade was far more important than ‘earning more in a safe job’. An important learning to keep in mind during these times of hectic corporatization of Indian business.

The other aspect that is specifically important to the fashion / lifestyle products sector is the diversity of product base and the product development edge it provides the industry. The product development, design and merchandising capability is a backbone for the lifestyle / fashion / soft goods industry in India, that keeps it in the global competitive arena despite wheezing infrastructure, rising costs and other competitive inefficiencies.

It’s quite amazing that “store productivity” doesn’t grab the attention of most people in the retail trade in India, despite the fact that real estate costs are riding an all-time high. It’s become quite typical for rentals to range 20-25% of sales, and in many cases even higher than that. (In those instances, a retailer could only hope to make money out of illegitimate activity or illegal merchandise, which is not part of the business plan of anyone I know!)

Many brands will (and possibly can) justify paying absurdly high rentals with the rationale that in the store portfolio, some locations will never make money, but are needed as marquee locations for “must-have” visibility. This can work if you do have a balanced store portfolio. The question is whether the low-rent locations actually have the capability to generate enough margin to support the unprofitable locations.

While some of the rentals are comparable to expensive real estate in the developed markets, gross margins in India are typically thinner than in Europe, USA etc., reducing the spread a retailer has for its operational expenses. Add to the mix over-estimation of consumer demand, and the scenario looks even gloomier.

In this context, to my mind, each store needs to be made as productive as it can be. There needs to be fairly sharp focus on store performance and category performance data.

However, in the last 18-months or so, conversations with Indian and international brands and retailers operating in the Indian market, showed that topline (sales) growth and new store openings were the focus for most retailers (even till a few weeks ago).  Most branded suppliers have also shown unprecedented sales growth on the back of new store openings – their own exclusive stores, as well as new sites being added by department store chains carrying their brand.

For instance, in March 2007, one (new) brand said that their business plan called for 50 stores by the end of 2007, and 100 by the end of 2008.

When sales growth can be achieved just by opening more new boxes (stores), productivity and efficiency don’t appear to be important.

I believe 2008 will see a change in management priorities. I don’t think the unnamed brand above will open its 100 stores. It is very likely that they will want their already opened stores to work harder.

Productivity is obviously linked to store operations (people, process, technology) – when the merchandise and the customer are both in the store, you need to make sure the two are matched quickly and effectively, and that there is a focus on conversion, average transaction values and efficient inventory management. But that is only one part of the story.

Support functions, such as marketing, supply chain, buying and merchandising have a huge role to play as well.

Category management, efficient and responsive supply chains, optimising store-footprint and catchment to ensure maximum walk-ins … these are some of the issues I believe top management needs to look at carefully in the coming 24 months.

If you are in a senior management position in a retail business, what are your priorities this year?

At a faux “pubby” restaurant, I asked a friend why she didn’t order fries with the fried fish she had asked for? (I was looking for a carb-fat fix, but couldn’t legitimately order a whole portion just for myself.)

A withering look accompanied the dismissal, “You and your excesses!”

Undeterred, I went on, “But if I suggested having fish and chips?”

“Well, that would be a fine. That’s standard British fare.”  That clinched it for me. “So it’s okay to have it when you call it fish and chips, but not if you ask for “fried fish and fries”?!”

[After all, the Brits call French fries chips. The stuff that the Americans call ‘chips’ are actually called ‘crisps’ by the Brits – more logical, isn’t it? After all, the fries are not really crispy so it wouldn’t do to call those crisps!]

This kind of dilemma generally doesn’t bother the rest of the world – they either pick British English, or American (more and more), or just dispense with English altogether. But for Indians it can be quite puzzling and troublesome, especially those that have pedigreed “convent-education” – i.e. whose teachers were also ‘convent-educated’, and have drilled in the “proper” (i.e. British) spellings and names – and they run into Americanized environments such as food courts.

That led us on to a profound discussion about one of the most global and globally visible businesses – fashion – and how it binds the world together.

One would think that, as a globalised business, at least the fashion arena would be more inclusive and speak a common language. It does, mostly.

Till you hit ‘Sportswear’. It is a little strange.

I’m sure there is a conspiracy afoot – though I’m not sure who’s behind it, or who’s the target. All I know that it gets very confusing.

The first – most obvious and logical – image that springs to mind is that of athletes, active sports, and performance.  Caps, headbands, T-shirts and sweats, wrist bands, shorts, track pants, terry socks – you get the picture.

It’s quite clear.

You may be on the treadmill trying to lose weight, or on the court just keeping fit, or even on the fairways networking with your peers – there is an action-orientation as there is activity involved and a sporting game (whether team or individual).

There is a need for comfort and freedom of movement, a need for allowing sweat to evaporate and keep the body cool (but not too cold in case you are playing in the colder climes), and sometimes a need to prevent the odd wobble.

There is certain kind of clothing that fits the bill, and all of it is not appropriate to all sporting occasions or types of sport. For instance, swimwear on the tennis court may make the game more interesting to the spectators, but is of very little practical value to the players. (Having said that, “convergence” is a big buzzword nowadays, and some of the recent trends in women’s tennis apparel seem to be leading to the same conclusion.)

Good, then, you say – sportswear should be quite, quite clear – it is functional, and meant to enable specific performance.

Or is it?

Scan the websites, shelves or magazines, and the variety of merchandise that parades under the sportswear banner quickly dispenses with that image.  The category encompasses ‘sports-inspired fashion’ (and a truly inspired marketing person must have thought up that term) to casualwear, to clubwear, to the ‘I don’t know where-to wear’.

The sports-inspired look that grew big a few decades ago (think sweatshirts, track pants and sneakers) … and for some brands it seems to have become big again in recent times. The link back to active sportswear is quite clear in terms of styling, fabric and so on, so the use of the term is understandable.

The sporting brands also wanted new avenues to grow.

So you’ve got adidas, Reebok, Nike and their ilk doing casualwear or ‘leisurewear’, even as they plaster the billboards with sportspeople from basketball, football, cricket, and other games. But it’s not their problem – if someone with a ‘comfortable’ Body Mass Index wants to emulate the active image of Shaq or Air Jordan without really meaning to get down to the court, who is the brand to complain? Just make the ‘sporty’ clothes looser, bigger.

But somewhere along the way, sportswear seems to have become the ‘catchall’ category – a melting pot of styling (or the dustbin of style cues), depending on whether your perspective is inspired or inspiration-challenged.

For instance, it is easy to imagine that somewhere along the way, someone who did great T-shirts thought that actually he could increase his sales by selling jeans and chinos as well. And then others caught on to the trick.  Since these brands were already labeled sportswear, the definition stretched and then expanded to accommodate – just as sportswear does!

So now it is understandable to find some casualwear masquerading as sportswear.

But then you have menswear clearly targeted at the sport of ‘pulling birds’ and the womenwear geared for hunting at night. What should be clearly labeled clubwear is pretending to be casualwear and inching surreptitiously close to the sportswear label.

Then, there are these preppy types bringing on their University-team type look.

And the ‘ethnic’ print inspired skimpy halters and skirts whose only sporty function is to increase the heart-rate (the onlooker’s, not of the person wearing them).

The big thing about sportswear is ‘cool’.  Often it is about cutting edge.  So if the ‘cutting edge’ style looks like it won’t remain alive long enough to become a category by itself, it’s conveniently shoved into the sportswear category.

Sportswear is about slick and quick. It’s so fluid, so large, and so all-encompassing and messy (where are the boundaries?), that if there is a businessperson wanting to grow a brand fast, sportswear would be the category to follow.

It’s clearly a category for the Indian market, because there are plenty of bright young businesspeople who want to grow it big and quick.

I’m expecting a sportswear deluge. Just don’t ask me for figures or growth projections – let’s just say, they are elastic and accommodating like the category.

[Just to complete the story I began with – I got my friend’s fries, and wolfed them down, the waist elastic of the sports-inspired track pants expanding comfortably. None of that clubwear masquerading as sportswear for me – I was geared for the active sport of mall-crawl.

My friend meanwhile was going on about this particular store in New York, when I said, “I didn’t know they had shops for people interested is the social and historical study of mankind.” And that started a whole new argument – but that’s another story for another time.]

[This was the closing column “Checkout” for the inaugural issue of the Indian edition of Sportswear International.]