E-retail next level of organised retail or just bridging trust deficit-III

By: Ravi Sinha

Track2Realty Exclusive

While most of the retailers in India blame more to the frontline cost of the real estate than supply chain hurdles, online retailers like MyGrahak project it as a cost competitive advantage. However, experts believe high occupancy rate is not the only issue and if the store is a magnet attracting footfall, there are mall developers even in today’s market who are ready to throw out their anchor stores free of cost.

Pranay Vakil, Chairman of Knight Frank India says if you want McDonald’s in your mall, you might just throw it to them for free. It is going to act like a magnet. Everyone else will follow and it will get you the footfall you want in the mall. These are things tried out in places like Indonesia extensively. People have been very innovative with this.

“The anchor is very important word. It does not necessarily mean a large space consumer. McDonald’s may take 3000 sq ft but it is an anchor. What most people hear and the mistakes that people have made is to chase large player because they take large spaces would act as their anchors. Now if you were to give a concession to such a large consumer, then you have a problem. But if you know the definition of an anchor, give a space of say 3000 sq ft out of 300,000 sq ft to that anchor, it won’t hurt you at all, says Vakil.

Atul Modak, Head of Mumbai-based Kohinoor City agrees that a price gap of even 250% works well with the realtors, only if the retailer is a footfall driver. “We have been putting this methodology to use at Kohinoor City Mall. You will be surprised, we have our entire mall to a brand for an entire year for free. We are saying that please come and start the mall, just give me the expenses. And it is working fine,” says Modak.

Kruti Jain, Director, Kumar Urban Developers is more candid from a realtors’ perspective when she says, “We have learned many finance models from other industries. From us, what the other industries have learnt is the so-called waterfall cash flow where you are saying that I will have an average rate where I start selling a product under my cost, I lease it to say, Pantaloon at Rs 18 per sq ft because they are my anchor tenant in my mall. And my other tenants are paying 200-250 per sq ft. And that is how I average out and yet make money. And that is the biggest learning other industries have taken from us.”

….to be continued