Devina Joshi, Financial Express

Mumbai, 8 September 2015

Recently, there was news of restaurant reservation site EazyDiner expanding operations to Mumbai from the National Capital Region, having secured Series A funding worth $3 million led by existing investor DSG Consumer Partners, and Saamna Capital.

As per a PwC analyst, investors have pumped more than $150 million into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy, Zimmber and HolaChef, among others. Judging by the patronage showered upon them by customers and investors alike, it would appear that hyperlocal start-ups are all set to create the next big boom in the Indian retail sector. But is it really all that rosy? Probably not, as can be amply witnessed by acquisitions taking place in the nascent yet already overcrowded market.

Between November 2014 and February 2015, the Rocket Internet-backed Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured to be in acquisition mode with TinyOwl. Restaurant search app Zomato, which recently got into the food ordering space, is also reportedly looking to acquire minority stakes in food-ordering firms.

While investors are attracted to hyperlocal start-ups, controlling logistics well is key to sustained growth for these businesses — all of these will definitely go through a constraint in the supply of delivery boys, for example. In India, organising fragmented labour is a challenge and, hence, a services-based hyperlocal needs to figure out the mechanics of human capital even more than a traditional, product-based e-commerce firm.

For services, another challenge is customer stickiness. If a user uses an app to obtain the services of a plumber, for example, he may not go through the app to contact the plumber next time if his services are found satisfactory. Discounting can induce trials, but just like in any other business, prove fatal in the long run. Like what led to the end of HomeJoy in the US — excessive discounts to dissuade direct contact between servicemen and customers.

Even for product-based start-ups, maintaining data quality is a big hurdle as stock and prices may not be updated by retailers in real time, making it difficult to track offline sales.

Since the game is hyperlocal, you need to be physically present in the city to bring retailers aboard. For that, you need a city team. Other challenges include retailer verification and assessment, given that hyperlocals deal with small city retailers.

Stickiness is needed on both sides, and each locality will certainly evolve into having a market leader and a follower, with other players falling far behind. “So the critical success factor for a hyperlocal is being able to rapidly create a viable model in each location it targets, and then—to build overall scale and continued attractiveness for investors—quickly move on to replicate the model in another location, and then another,” says retail consultant Devangshu Dutta of Third Eyesight. As they do that, they will become potential acquisition targets for larger ecommerce companies, which could use acquisition to not only take out potential competition but also to imbibe the learning and capabilities needed to deal with microcosms of consumer demand.

(Published in Financial Express.)

The apparel retail sector worldwide thrives on change, on account of fashion as well as season.

In India, for most of the country, weather changes are less extreme, so seasonal change is not a major driver of changeover of wardrobe. Also, more modest incomes reduce the customer’s willingness to buy new clothes frequently.

We believe pricing remains a critical challenge and a barrier to growth. About 5 years ago, Third Eyesight had evaluated the pricing of various brands in the context of the average incomes of their stated target customer group. For a like-to-like comparison with average pricing in Europe, we came to the conclusion that branded merchandise in India should be priced 30-50% lower than it was currently. And this is true not just of international brands that are present in India, but Indian-based companies as well. (In fact, most international brands end up targeting a customer segment in India that is more premium than they would in their home markets.)

Of course, with growing incomes and increasing exposure to fashion trends promoted through various media, larger numbers of Indian consumers are opting to buy more, and more frequently as well. But one only has to look at the share of marked-down product, promotions and end-of-season sales to know that the Indian consumer, by and large, believes that the in-season product is overpriced.

Brands that overestimate the growth possibilities add to the problem by over-ordering – these unjustified expectations are littered across the stores at the end of each season, with big red “Sale” and “Discounted” signs. When it comes to a game of nerves, the Indian consumer has a far stronger ability to hold on to her wallet, than a brand’s ability to hold on to the price line. Most consumers are quite prepared to wait a few extra weeks, rather than buying the product as soon as it hits the shelf.

Part of the problem, at the brands’ end, could be some inflexible costs. The three big productivity issues, in my mind, are: real estate, people and advertising.

Indian retail real estate is definitely among the most expensive in the world, when viewed in the context of sales that can be expected per square foot. Similarly, sales per employee rupee could also be vastly better than they are currently. And lastly, many Indian apparel brands could possibly do better to reallocate at least part of their advertising budget to developing better product and training their sales staff; no amount of loud celebrity endorsement can compensate for disinterested automatons showing bad products at the store.

Technology can certainly be leveraged better at every step of the operation, from design through supply chain, from planogram and merchandise planning to post-sale analytics.

Also, some of the more “modern” operations are, unfortunately, modelled on business processes and merchandise calendars that are more suited to the western retail environment of the 1980s than on best-practice as needed in the Indian retail environment of 2011! The “organised” apparel brands are weighed down by too many reviews, too many batch processes, too little merchant entrepreneurship. There is far too much time and resource wasted at each stage. Decisions are deliberately bottle-necked, under the label of “organisation” and “process-orientation”. The excitement is taken out of fashion; products become “normalised”, safe, boring which the consumer doesn’t really want! Shipments get delayed, missing the peaks of the season. And added cost ends in a price which the customer doesn’t want to pay.

The Indian apparel industry certainly needs a transformation.

Whether this will happen through a rapid shakedown or a more gradual process over the next 10-15 years, whether it will be driven by large international multi-brand retailers when they are allowed to invest directly in the country or by domestic companies, I do believe the industry will see significant shifts in the coming years.

Following on our article (“Numbers and Stories”, 23 November 2009), our friends at Retailwire.com thought it would be interesting to run a poll to ask the Retailwire community what they thought about retailers using research. The original discussion is here on Retailwire, but we’ve reproduced the comments and the poll results as they stand today (16 December 2009).

As evident from the graph below, the short answer is “no, companies don’t use research well”; only 15% of the respondents felt that companies are “good” in using research, at their best. Should we blame the companies or the researchers? The comments seem to suggest that the blame needs to be shared equally.

Comments below:

 

This sounds a lot like a chapter we wrote for ESOMAR’s Best Practices book. We have devalued research in favor of insights, which can rely much more on a good narrative and much less on good data. A management team that expects insights from research all the time is asking for trouble down the road. A research team that doesn’t focus on quality first and insights second is doomed to failure when management makes the wrong moves. Research needs to give management the best information possible in a way that management can understand it. Management needs to understand that research is providing the best information it can within budget constraints. The two need to work together. [Stephen Needel, Managing Partner, Advanced Simulations]

One of the concerns I have at present is how SKU rationalization research is viewed, so quickly judged, and acted upon. Many retailers are looking only through a narrow interpretation based on shear numbers and not taking into consideration other more visionary factors about specialty brands, niche items, and growth brands. If this keeps up, consumers will have very few choices and most of the stores will all look the same with exact assortments. Only price will differentiate one from the other. The results will be rather ironic. [David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates]

I agree that there is a lot of bad “research” out there in the world. Any analytical study has to be right, applicable, and actionable. If a study doesn’t meet these criteria, it is worse than useless–it can actually pollute the minds of decision makers by letting them think they know something they don’t. Before spending any valuable share of mind on numbers, executives should ensure:

1) Is it right? If I only had a buck for every time I’ve seen a big name consulting firm presentation with numerical “findings” using a flawed methodology or with no statistical significance…. I’d be retired in Paris right now.

2) Is it applicable? So, some other retailer says their TV spend has a 150% return (or some consultant claims that). So what? Your business is different. Consumers react differently to every retail concept. You do need to know for you.

3) Is it actionable? Oh, we all know about the study designed to validate the CEOs hunch. Want to guess what the consultant’s findings will say? If you are going to do research, you’d better be prepared to act on the findings–either way.

This is why in-market testing is such a powerful technique in retail. While it does take commitment to do it right, it is one of few techniques that almost always meets these criteria. [Jonathan Marek, Senior Vice President, APT]

It is absolutely true that marketers do not often take the time to understand the basis of the research that they are presented with. Understanding how the research is developed and the analysis approach used to develop recommendations is an important, if misunderstood, part of the job description for a data-driven marketer.

I do find, however, that marketers more often do not carry out sufficient research to draw conclusions, even when that research is relatively easy and low-cost to execute. If you have access to email addresses, you can execute basic research surveys to customers and gain valuable insights in less than a week, at a very low cost. Those opportunities to “fill in the gaps” are often overlooked. Sometimes those insights can make the difference between success and an indifferent failure of a key initiative.

Marketers must understand the opportunities that research affords them, even when timelines are tight. Obtaining the Voice of the Customer, particularly the Best Customer, is a practice that should be followed religiously. Only then will marketers be able to gain insight and make truly data-driven decisions.  [Mark Price, Managing Partner, M Squared Group, Inc.]

We have to keep in mind that corporations are run by human beings that often make decisions on emotion rather than logic. I have many clients who have been very successful making decisions by shooting from the hip, yet they always prefer to see my research, just to be sure. Most of my clients are very bright people and my research generally confirms their own instinctive thoughts. There have been times when I have been brought in to do an autopsy on a project to find out why a store failed. Typical reasons are:

Researchers did not want to offend management so they candy-coated the results.

Key decision makers are suffering from some kind of physical or emotional impairment which affects their ability.

Corrupt middle managers that change the research results.

Researchers leaving out a key piece of data (i.e. not telling management that the Mexican format store they have planned is in a Puerto Rican neighborhood).

Overall, I don’t think retailers have a narrow view of research. Researchers can do a better job in communication by simplifying the results, being blunt, and putting their integrity ahead of their paycheck. [David Livingston, Principal, DJL Research]

I think there are two elements at play here:

First and perhaps foremost, retail is an emotional business. We can have reams of data and still use the words “It feels like….” and make significant decisions based on those gut feel moments. Certainly this has long been true in the world of merchandising. Something “feels like” it’s going to be a home run or a dog, and it “feels like” we’d better take a markdown or run a promotion to goose traffic. And actions are taken accordingly.

Now, can I tell a retailer in all honesty to ignore those gut feels? I really can’t. I can encourage them to use data to support actions taken based on those feelings and obviously that’s what I do…every day. But I can’t ask them to ignore their gut completely.

This brings me to the second issue: we don’t always present data in an easily distilled and understandable format. Our retail survey respondents repeatedly ask to have their Business Intelligence delivered in simpler ways. While “red light, yellow light, green light” might be a little too simple for some decisions, the data just has to be usable and quickly actionable.

Finally…if a retailer (or any company really) is going to make such a dramatic shift, it has to be driven from the top. And the C-level exec driving the initiative also has to LISTEN to what he/she is being told in response. Otherwise you get a company similar to Home Depot under Nardelli.  [Paula Rosenblum, Managing Partner, RSR Research]

Decisions are always made without perfect information to support them. But sometimes, decisions are made that ignore the available information or decline the implications.

Research is clearly most valuable when it can be turned into actionable recommendations. We are all too aware that research can be used as a fishing expedition without a clear objective. However, there is also a danger in using research designed just to prove a point rather than develop real, new learning.

On balance, I believe that research, properly done, interpreted, and acted upon, can vastly improve the decision making process. [Ray Jones, Managing Director, Dechert-Hampe & Co.]

I’m reminded of the Samuel Taylor Coleridge quote “Water, water, everywhere, nor any drop to drink.” Research/knowledge is the raison d’ tre for The Luxury Marketing Council www.floridaluxurycouncil.com; it’s what I do. The highest level executives or those who will someday sit in the corner office recognize the value of research. They’re able to sift through the myriad of information to find what’s relevant and actionable.

There are a couple trends re: research. Some executives don’t want facts to get in the way of their vision. Historically, these individuals’ careers stall. Also, there are many companies that have pared down their employees to the point that executives don’t have time for the facts–they’re too busy keeping the ball moving. The third group often doesn’t understand how to read the research, how it affects them and/or how they can use it for their benefit.

Relevant research is an imperative for retailers. Having a 360 on your targeted customer and understanding their collective experiences is the key to personal and business success. [Chris Ramey, President, Affluent Insights]

Devangshu Dutta mentions many of my personal concerns regarding research. But before I go any further I have to add, my name is Joan and I am a researcher. I’ve spent many years working in the industry to help alleviate some of the barriers Mr. Dutta listed. There is still much to be done of course.

In this world of easy access to numbers/statistics, upper management demands and gets “stuff” by which they make decisions. Trying to explain the difference between good research and everything else often falls on deaf ears. Management expects those who supply the data, whether they are staff or outside consultants, to bring the quality, validity and relevance required. And in turn they do not question the underlying premise of what they are buying, or what they are buying into.

And when forecasts don’t work out as expected, new products fail and marketing strategies are ineffective, it’s all about how research failed to deliver. Researchers preach to the choir when they have meetings about quality standards.

CASRO (Council of American Survey Research Organizations) has a Code of Standards and Ethics. Companies who belong to CASRO must adhere to them. And this is one way in which clients can insure research results are reliable.

CASRO is initiating an ISO certification program. I believe more client companies and executives will relate to and understand ISO (because their own companies go through similar ISO certification processes), perhaps choosing vendors and staff accordingly. In my opinion, this could be a turning point for the acceptance and recognition of true quality marketing research. I hope so.

As for the story telling aspect of research…well that’s another “story” entirely. I’ve mentored many researchers and advised them to always answer three basic questions, What? So what? And Now what? These questions get to the heart of why research is conducted in the first place. Good reporting and presentation requires training. If you believe that anyone can be a researcher and choose vendors or staff based on that assumption, you get what you get and it may fall below the standards Mr. Dutta advocates. [Joan Treistman, President, The Treistman Group LLC]

During my 11 years with Kenosia I used a phrase with clients “One truth.” By combining disparate data sources, a retailer or a brand manager can get to the “one truth” and then make a business decision regarding direction. Far too often, decisions are made using one source of data which can lead to less than effective results.

Example, if a retailer only views their loyalty data to make business decisions about advertising, are they understanding all the trends happening in their market? Probably not. Combining their loyalty data with demographic data makes it better and adding additional information from a syndicated data provider makes it even better yet.

The great news is, there are a dozen technology solutions to help both retailers and brand managers combine data and the data to combine is available and affordable. It boils down to first understanding the questions and then going out and combining all the best data sets to create the answers. [John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC]

The use and misuse of research, data and “insights” varies widely across retailers and brands. Typically, the larger the company, the more primary research they have and the more reliant on primary research they are.

Unfortunately, great research and insights are, as many here are illustrating above, not nearly as commonplace as they should be. There are many reasons for this:

– Flawed and biased methodologies (e.g., let’s “Focus Group” this”);

– Vendors who specialize in one research/data collection area over another;

– The research goals and objectives themselves: pure answers to hard marketing questions rarely come directly from research but rather from what is done with it, i.e., what is the data needed to create information to support or disallow a hypothesis?

Budgets, which have mostly seen cuts for the past two years; though the cost of collecting data has come way down in many cases.

All these challenges with research underscore the importance of knowing who your customers are, having an ongoing dialogue and relationship with them, and gleaning insights from them. There is nothing better than customer (transactional) data to gain an objective perspective and insights for your business.

Unfortunately, many companies are data rich and insight poor. Even worse, many companies, retailers included, don’t know their customers or how they behave. This is continuing to change for the better, however, and those who are focused in this area are the ones who will make better decisions and be more successful in the long run. [Phil Rubin, CEO, rDialogue]

One simple question expresses the confusion around statistics: “Why do we have Democratic and Republican Pollsters?” I think it was Harry Truman who when confronted by economists telling him “Well on one hand the statistics are saying this, but on the other they could mean this” said “Someone get me a one armed economist.”

The thing with retail is that we don’t need answers to thousands of different questions. We ask the same questions a thousand times: how does this product sell, what is its net profit, how important is it to my customers, does it fit my brand objective, how does it relate to other products, are there viable substitutes, etc? Instead of poring over tons of numbers, the POS data should be used to construct answers to questions.

So the fundamental reason retailers (and anyone, really) make bad decisions from raw data is because they don’t know what questions they’re trying to answer. Start there.  [Bill Bittner, President, BWH Consulting]

The fact that information is available and is being used effectively are two separate things! Usually a company uses too much information, regardless of correct or incorrect, or it does not use information. Very few companies strike and maintain a balance between insight, gut feeling/intuition and relevant, timely information in decision making. [Pradip Mehta, Principal, Mehta Consulting, LLC]

I’ve found that the overall views of research within companies goes in cycles. Of course, leadership changes come into play with the research points of view as well. Some executives understand how to use it better. Some have used it so much they can go by gut.

In any case, a research cycle may start when a huge mistake is made by using strictly gut instinct (Tropicana?), then more and more insights will come from research and less from gut until, one day, it is determined that there is too much science and not enough art, and the cycle starts all over again.

I do believe though, that research is one of the faults with our nation’s fashion business today. Too much science, not enough art. The talent and guts it takes to take a big chance on new, fun fashion seems to have been relegated to trend reports, focus groups, ethnography and best seller lists. The rare exception to that rule is Forever21…instincts still survive there. Perhaps they can teach the industry a lesson. [Lee Peterson, EVP Creative Services, WD Partners]

Where would Disney be without fairy tales? SMWeiss’

The problem, dear Brutus, is in ourselves. Retailers and brands have created vast action machines with thought paradigms behind. Anyone doing research is likely to be looking to fit information into the existing machine. And for each individual, when they formulate a research query, they bring their own current thinking into it–obviously! This means that the results they get back reflect, in far too great a way, their own predispositions. This, coupled with the fact that lots of research is “ask” type research–interviews–guarantees a sluggish and distorted view of reality, what I call the Picasso business view; shared distortions, unperceived as such by both researchers and respondents.

The partial antidote to this is “observational” type research, and the hierarchy of truth. And observation here must be of the real world, not some laboratory simulation, which typically just further cements the existing distorted paradigm. The hierarchy of truth means distinguishing between what is most rock solid and least likely to be distorted, and that which may be as changeable as the weather. (That’s right, Maude. It used to be just common sense that the weather changes. ; )

One example near and dear to my heart is OBSERVING how many items people buy in a store. The most common number, whether in a convenience store or a supercenter is ONE. But the “world” absolutely refuses to believe this, because it does not match their own conceptions/perceptions. An observation like this is at the pinnacle of retail truth, and must be allowed to shatter any part of the paradigm that does not conform to it. THAT’S “revolutionary,” but it is also the route to racing past the competition that is spending their time dancing on peanut butter.

No one should reproach themselves for participating in a social Picasso view of their business. (Although I may insult you from time to time. ; ) All of us are afflicted with the phenomenon noticed many years ago, about historians and their “research” of the past. Looking into the past, for a historian, is much like looking at a reflecting pool at the bottom of a very deep well. The image the historian tends to come away with is a reflection of himself. Business people are no different. [Herb Sorensen, ScientificAdvisor, TNS Global Retail & Shopper Practice]

There are plenty of great tools to make sense of all of the information. The challenge is balancing it with the human side. Take, for example, the stores. Are all corporate employees required to walk the stores and report what they see? View the stores in the evening when store management has left for the day. These age-old problems are still far too common, yet they are the source of some of the most valuable information available anywhere. Sales will be increased, labor decreased and earnings improved if this information is acted upon. [Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM]

In the last few months, I’ve interacted with retailers and their suppliers from a number of countries in North America, Europe and Asia and, except for a handful, the conversations have not been happy.

In November-December companies in France, Belgium, Germany and the United Kingdom were dealing with a season where there was as much red on the P&L statements as in the Christmas shop windows. In January 2009, the National Retail Federation’s annual convention in New York had participation that was somewhat thinner than in past years, but the gloom in the atmosphere was thick enough to slow everyone down.

On the other side, the factory of the world, China, had been battered by a Year of the Rat that brought increasing costs, erratic power supplies, slowdown in orders, safety concerns and product recalls. All of this culminated in reports of factory closures and migrant workers at railway stations on their way home for the Chinese New Year holiday carrying not just clothing, but all their possessions including fridges and TVs. The resultant unemployment figures expected currently range from 20 million to 40 million people.

The Indian retail sector, of course, has had its share of pain. In an idle conversation on a sunny December afternoon, a real estate broker in Ludhiana had a pithy description for one of the retail chains: “Unhone apne haath khade kar diye hain. Bakee logon ne abhi tak toh haath neeche rakhe huey hain – unke bhi upar ho jayenge.” (“They have thrown their hands up in despair. The rest still have their “hands down” – but they’ll also give up eventually.”)

On the one hand you have the gloom-seekers. In the eyes of some of these people, the retail boom is over. In the eyes of others, the retail boom was all hype anyway, a big bubble of artificial expectations.

On the other hand, you have other people asking some uncomfortable questions: here’s a country that apparently has the largest population of under-25s, where millions of new jobs have been created and incomes have been growing. How can retail businesses be showing a decline in their top-lines?

I don’t think anyone has all the answers, but I can offer at least one speculation, borrowing from the title of a book that came out some years ago, named “Irrational Exuberance”. Robert Shiller’s first edition was related to the dot-com stock bubble, and his 2005 edition added an analysis on housing bubble that was developing at the time. He had, in turn, borrowed the term from the US Federal Reserve chairman Alan Greenspan who in December 1996 had said in a speech: “…how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…?”

We now seem to be in such an unexpected (but was it really unexpected?) and prolonged contraction. Of course, consumers are feeling more cautious about spending, even if their actual income has not been affected (just as it wasn’t affected when they were feeling suddenly wealthy 12-18 months ago). Obviously, stores that should not have been opened will now get closed, or excessively large stores will be reduced in size. Companies that are over-stretched may collapse completely.

But I would label the mood prevailing now “irrational despair” as far as a consumer market such as India is concerned. From a position of over-optimism, the pendulum seems to be swinging to the other extreme of utmost misery, dejection and complete pessimism, and I think that is a swing too far.

I think it’s worth reminding ourselves of the factors that make India a market for sustained consumer growth. The country looks likely to have a large under-25 profile well into the next several decades. These young people will grow older and get into jobs. They will get married and therefore expand the number of consuming households. If the policy-makers don’t really mess up, real incomes should go up. Infrastructure projects should largely remain on track, regardless of the political party or parties in power, facilitating industry, trade and wealth distribution.

So the time is right for business plans that have sound fundamental assumptions – or as the cement ad says: “andar sey solid” (solid from within).

I’d like to repeat issues that I have highlighted earlier as top priority for retailers and consumer products companies in India. These are as follows:

1. Realistic demand estimation: Let’s work with realistic sales expectations, and not expect all consumption to multiply like cellphones have in the last few years.
2. Productivity Analysis: As a retailer (especially in food and grocery), margins are thin. Except for marquee locations there is no excuse for continuous losses. Store productivity depends on merchandise availability, staff capabilities and store operations, customer traffic and a host of other factors, and you need to know what’s working and what isn’t.
3. Moderated growth: Many retailers in India have had tremendous growth in scale without growth in sophistication in processes or people. Some have been driven by motivation to capture market share, others driven by their investors who want an exit, and a few might have been driven by ego. I’m not asking anyone to grow slower that they want to, or slower than they should. However, I would say: do look at Intel. A manufacturing company that makes its own products obsolete in an industry where rapid change has been the norm for the last 40 years. Intel alternates changes in its production and supply chain processes, and products – it doesn’t change everything at once.
4. People: A leader of the industry pointed out a few months ago that there is no shortage of people in India. But the race to the top of the heap (or as it seems now, the bottom of the loss-making pile) has created artificial scarcity of talent. One benefit of the downturn is that artificially inflated compensations for people jumping on the “retail boom bandwagon” will disappear (at least for now). If we can use the experience of people who have been in modern retail trade in India for decades, and train others who are fresh but committed, it will provide a more solid and lasting impact for businesses.

A number of companies worldwide that we know as market leaders and businesses to be emulated found their feet in the depths of the Great Depression of the 1930s. That should give some hope to entrepreneurs and professionals.

However, does that mean that only bad companies or unprofessional managements will fail in the current downturn? Certainly not. Does it also mean that all good companies or competent entrepreneurs will succeed? Again, the answer is, no.

Some bad companies will manage to ride through this trough, while some really deserving people will run out of cash, ideas and opportunities. Life and “natural selection” processes are not fair.

But, by and large, if we can get our heads down and focus on getting the right people together, making money to get through and having something left over to invest in the future of the business, we would have more chances of succeeding than by over-stretching, or by swinging to the other extreme and being totally defensive.

I won’t even attempt to predict how long the current downturn will last. The Great Depression lasted a whole decade, was “walled” by the Second World War, and the first blooms of real recovery only appeared in the early-1950s, or about twenty years from the first downturn. Other recessions have been shorter. In 2000, after the dot-com bust car bumper stickers in the US quoted a political satirist, saying, “I want to be irrationally exuberant again.” Within a few short years, many people were showing those very signs.

We can be pretty sure that such a time will come again. But I’m also quite sure that durable companies are unlikely to be built on bursts of such exuberance.

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?