Gumberg India
Gumberg Retail Ambience Gumberg Retail Parking Gumberg Retail Energy Efficient Gumberg Retail Facade Gumberg Retail Eco Friendly Gumberg Retail Plush Interiors
Retail News India
Gumberg India CEO B. Anantharaman interviewed by Shopping Centers Today
Publishing date: 04.12.2008

Author: Bora, Madhusmita

One of the last frontiers for the shopping center industry, but now mall mania seems to be evaporating in many major cities. Shopping Centers Today, December 2008

Anghrija Chakraborty swears by such brands as Levi’s and Puma and is an all-around shopping enthusiast. But the New Delhi resident works up little enthusiasm over many of India’s new malls. “A decade back my opportunities as a shopper were much limited,” said the 26-year-old, who works for the offshore offices of a Texas law firm. “Today there are these huge shopping malls at every tenth step that you take.”
Chakraborty’s disposable income has risen alongside the surging retail options and a roaring Indian economy. But none of this sends her on any sprees at the malls. She continues to frequent the city’s flea markets while sometimes buying at the malls. She says her expectations have risen with the increasing shopping options. Malls that offer unattractive stores and are poorly maintained simply do not get her money.
Meet the quintessential Indian shopper. She is brand-conscious and has the money to flirt with choices but is still an enigma for retailers trying to catch a piece of the Indian retail dream. India’s retail market will approach $450 billion by 2015, according to a McKinsey & Co. study. That year some 300 million shoppers will be patronizing organized retail, a number equivalent to the U.S. population today.

In recent years foreign retailers and developers have flocked to the country to cash in on this potential, triggering skyrocketing rents. “It’s one of the last frontiers for the shopping center industry,” said retail consultant Ian Thomas, who heads Vancouver, British Columbia–based Thomas Consultants. His firm is working with Indian real estate goliath Indiabulls Group on a 15-city mall rollout program over the next five to seven years. “The country has an incredible market size, an emerging middle class, which is astronomical in numbers.”
Yet for some the going has not been easy. Build-A-Bear Workshop abandoned India after failing to make a dent. Straps, an Indian chain that sold Wonderbra lingerie, closed its shutters. “Foreign players entering India today face stifling regulations, a clouded political atmosphere, soaring real estate costs and fiercely competitive domestic retailer groups,” said an A.T. Kearney annual report that lists the most-attractive emerging-market retail destinations. Vietnam this year ended India’s three-year reign as the top destination, the report says.
It is not just the foreign retailers facing hardships. “Despite lack of quality space in the market, the top eight cities in India are currently witnessing around 18 percent vacancy across the 40 million square feet of operational malls,” said Rajneesh Mahajan, director of retail services at Cushman & Wakefield, in a press release.

After some initial euphoria, the industry is experiencing growth pains, and mall mania seems to be evaporating. What went wrong? It is not all the fault of those regulations, politics and retailer groups, observers say. “The industry is only seven to eight years old in India,” said Phil McArthur, Ivanhoe Cambridge’s senior vice president for India. “Lack of proper design, strong merchandise mix, professional management and marketing, weak anchors have all been a problem.”
India is essentially where China was a decade ago. The country’s retail landscape is filled mostly with mom-and-pop stores that appear along busy shopping hubs. These traditional stores are entrenched in the Indian psyche and compete with the newer formats while pocketing rupees from shoppers such as Chakraborty. Part of their survival story is related to India’s socialist economy and government regulations. Single-brand stores such as Gap, Louis Vuitton and Nike got a head start against Wal-Mart and others needing to find a local partner.
Still, restrictions on foreign retailers have not dampened the enthusiasm of India’s real estate developers, which have been constructing shopping centers at a feverish pace for the past eight years. Chakraborty says the first few centers that sprung up had very few brand names and poor accessibility for the handicapped.
The pioneers set themselves up for failure, experts say. “Enterprising local developers jumped onto the bandwagon without understanding the ground rules of success and not knowing the pitfalls,” said Thomas.

They built centers using minimal planning, scant market research and little expertise. The structures looked glitzy and stunning from the outside, but the interiors were another story. “You immediately walk into exceptionally narrow corridors, poorly lit stores,” Thomas said. “What appears to be a modern, secular cathedral from the outside is actually a throwback to old Indian retailing practice.”
“Malls built to date have not been designed for the 21st century,” said Sandeep Mathrani, executive vice president of New York City–based Vornado Realty Trust, which entered into a joint agreement with Reliance Industries to build hypermarket-anchored shopping centers in India. The Vornado-Reliance partnership plans to service price points lower than what exists today, Mathrani says.
Malls also failed to tailor themselves to any particular demographic group. They priced out India’s lower middle class, an estimated 91 million people, while also failing to lure the rich customers who customarily shop abroad. In 2006 some 8.3 million Indians traveled overseas, spending some $3.5 billion when they did. That particular group has higher expectations, and they want to be pampered. The older centers, with smaller store footprints, narrow corridors and poor lighting, failed to engage them.
But this rejection of such centers is not necessarily a negative, says McArthur. “The true speculators are out of the market, and only the serious developers are successfully building malls,” he said.

In the past three years or so, developers have brought in experienced partners, architects and consultants from overseas. Bangalore’s The Collection and Delhi’s Emporio are targeting the upscale customer with their chic floor plans, swanky food courts and eye-popping retailers.
The McKinsey study predicts that organized retail will expand rapidly and change. “The life of a format in India is much shorter than the five to seven years in a developed country,” the report said. “The winners will have to redesign formats frequently to keep pace with the fast-evolving shopper.”
Traditional marketplaces are taking the cue. They have begun evolving and developing niches to keep consumers shopping. A prime example is New Delhi’s Khan Market, an affluent hub that positioned itself as the destination for high-end auto accessories.
For all the challenges, foreign retailers and developers continue to look into the market. “A country with a huge population, emerging middle class and a growing economy — given these factors, some will enter the market, but cautiously,” said Stephen Sterrett, CFO and executive vice president of Simon Property Group. Simon has explored investing in the country with a strong local partner, Sterrett says.

Meanwhile, the ones already on the ground are gearing up for a new era. Developers such as Sun-Gumberg, a joint venture between Pittsburgh-based J.J. Gumberg Co., Sun Apollo India Real Estate Fund and the Sun Group, say they have unwavering trust in the Indian market. “We are fully committed to developing world-class retail establishments across the country,” said CEO B. Anantharaman. The company is injecting $6 billion to create up to 40 regional centers anchored by domestic and foreign tenants. “For every multinational retailer that cannot adapt to this market, there will be many more that not only endure, but flourish,” Anantharaman said.
The next two or three years will witness a sea change in the industry, says McArthur. “Hypermarkets from Europe and Asia will open, specialty malls will emerge in the lifestyle luxury categories,” he said. “India will become one of the most important countries in the world.”
Copyright © 2009-2012 Gumberg India | All rights reserved Designed by