Mall Mortality in the Sattelite City

7/27/2019 Mall Mortality in the Sattelite City

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MALL MORTALITY IN THE SATTELITE CITY

It all goes back to 2003. There was this sudden rush to bring in the retail nirvanato Navi Mumbai. It has today resulted in over 1 million sq. ft. of mall space

lying vacant in the satellite city. What began as a dream run in 2003 to build

these edifices of retail therapy into real estate gold mines has turned into a

horrible nightmare.

It all began when Navi Mumbais first mall, Center One, opened to a huge

response in 2003. Malls were touted to be the temples of urban convergence,

spaces where the young citys new-economy professionals would eat, live and

spend. And obviously, we read it all wrong, admits Bhupendra Shah ofBhumiraj Group and president of Builders Association of Navi Mumbai, whose

Full Stop mall on Palm Beach Road has been lying unoccupied for three years.

In hindsight, Shah feels the malls in Navi Mumbai are one too many. A

calculated study conducted states that as of now we have the demand for just 3

malls as compared to the 35 that we have in the city. Experts feel that there is a

huge negative gap in the demand and supply. There is no potential in the present

market to absorb such volumes.

Navi Mumbai, located in the eastern Trans harbour of Mumbai, Maharashtra, isone of the world's largest planned townships. It was developed in 1972 as a new

urban township of Mumbai. The population of Navi Mumbai has reached

1,119,477 as per the 2011 provisional census. Basic infrastructure worth 40

billion (US$610 million) is already in place. The city boasts a reliable supply of

electricity from various sources, and excellent motoring conditions, with

numerous flyovers, broad roads, and parking lots. These conditions at first sight

look to be very tempting for any new mall set up. The environment was perfect.

Yet many of the malls had a tough time even staying afloat.

The moment there was oversupply, brands and companies began arm-twisting

mall managements to lower rates. Companies realized that they had options to

look at. They played this card well on the mall managements. The malls here

came under pressure and were forced to give in to the demands of various

brands. As a result it was just not feasible to be in the business anymore due to

the resulting low profitability. In Mumbai alone, the list is longthe Centre

One Mall in Vashi, is 30 percent vacant, the Kohinoor Mall in Kurla is 70

percent vacant, and the Dreams Mall in Bhandup is 75 percent vacantto

name only the more prominent examples.
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Malls like Palm Beach Galleria, City Centre and Raghuleela, which witnessed

near-stampedes on weekends during their heyday a couple of years ago, are now

battling for survival. City Centre has already been shut down. The only thing

they had running for them till the end was the movie multiplex Cinemax which

saw a relatively decent crowd from the nearby residential areas and a few

colleges in the vicinity. The slide began during the slowdown in 2008, when

some premium brands downed shutters in Navi Mumbai after revenues did not

match their projections. While some big stores and international brands shut

shop when the abysmal footfalls left them deeply in the red, others migrated to

the newer, swankier Inorbit Mall that emerged as the hot destination for Navi

Mumbaikars when it opened in late 2008, says Vashi-based consultant Hiren

Thakkar.

According to industry estimates, 700 malls have been planned in the MumbaiMetropolitan Region, of which about 170 are already operational and barely adozen are considered runaway commercial successes. Seeing the once-operational malls facing rough weather, even upcoming malls in Navi Mumbaiare having second thoughts. The malls in Navi Mumbai today resemble ghosttowns. Some brands shutting stores in so much hurry that seeing mannequinswith their clothes still on are a normal sight. Its a sorry state to see. Malls

which at one point were the crowd pullers and where festive seasons meant

never ending clatter of people shopping with high spirits today are just soullesshollow structures. It is not only the controllable factors that pull a mall down.Sometimes its just bad timing. Like in the case of Navi Mumbai. The period of

boom in the mall culture was immediately followed by the recession which asof 2013 we have still not overcome. This has led to the budgets of every familygoing off balance. A sizeable portion of the disposable income now goes tosustaining family needs. As a result what will they spend in the malls on? Wesaw an increase in the number of up market brands launching themselves in themalls across the city but this was not in line with the income that people had. Itwas an obvious fact that there was going to be a change in their buying patterns.It was just a matter of time.


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Since 2008 though, there has been a slump in realty and commercial markets.While all others improved, the retail industry didn't really take off. Bhanushali'scompany started the construction of three new malls from 2006-08, neither ofwhich have taken off. "Our company Max Realty Pvt. Ltd. developed Bhoomi

mall in Belapur and Gold City mall near City Centre. They were completed lastyear and we sold them off to investors. None of them has been able to rope inany retailers yet." Shiny, large structures, with smart interiors stand vacant withlarge X's over their windows. Desperate, developers plan to convert them intooffice complexes. "We are planning to convert them into nano officecomplexes, starting with Gold City mall," says Bhanushali. This has been seenas a good alternative to use up the mall space. Converting it into office tech

parks has fewer location barriers and also its better than just letting the spacejust be vacant.

Palm Beach Galleria, once a sprawling mall, is now a favourite dating spot forcouples to spend hours in the near-empty food court, uninterrupted by anymoral police. Launched with much fanfare in 2006 in Navi Mumbai, the 3.8-lakh-sq-ft space now only houses two storesVijay Sales and Mc Donalds. Andupon enquiry we found out that even these were shutting down to movesomewhere closer to the station. These are not the only ones, say propertyconsultants. According to Beyond Square Feet, a mall management consultancy,some 32 malls across India have shut in the last four years, with 12 of them inMumbai alone.

Shubhranshu Pani, Managing Director, Retail, Jones Lang LaSalle India, said:The growth in retail in terms of end use of consumption and buying for the last

two years has slowed down and is likely to continue. This is why no developerhas announced plans to launch any malls in Mumbai this year.

Besides poor consumption, lack of proper planning and management is beingcited as the main reason for the failure. Sushil Dungarwal, Chief Mall Mechanicof Beyond Square Feet, said other factors include bad design and retail mix.

The strata-sold model, wherein mall space is sold in parts, is also turning out tobe a hurdle with investors only bothering with their returns rather than themalls longevity, Subhranshu said.

Prescriptive options for developers to revive comatose malls include creatingkey anchor stores to lure other retailers, or using the centre for alternative usesuch as local shopping units, offices or commercial space, Subhranshu said. Bad

planning, bad sale model, poor management adopted by developers are some ofthe plausible reasons why most of these malls failed. After the boom period in

2003 it was almost like a knee jerk reaction that all other malls sprang up.


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It was assumed that the market would be big enough. No proper catchmentanalysis was conducted. Miscalculations led to the heavy price they are payingtoday.

Consultants said Indian mall management firms need to put in more thought ondesign, instead of their current approach of have-space-will-build. In a study,Mirae Asset said small things matter a lot while planning a layout. For instance,having electronic shops next to shops selling womens apparel is a great idea

because it allows bored husbands to browse for gadgets while their wives aretrying on clothes in the nearby shops.

The point here is that there are certain malls that have gone beyond repair andhence have shut down. But at the same time the other malls going through atough time still do have a chance of reviving themselves. Proper planning into

design, bringing about changes in the tenant mix, zoning etc. are some of thefew things that they must look into in a bid to get back into business.

To get an in depth understanding we now look at 3 malls in the Navi Mumbairegion and see how they went through the mall life cycle. The malls taken here

are 1) Palm Beach Galleria 2) City Centre and 3) Satra Plaza. We later comparethem vis--vis the Inorbit Mall which was founded much later in 2008. This willthrow light as to where the Malls went wrong and what they could now dogoing forward.


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Palm Beach Galleria

History

Architects: Vijay Raheja and Associates Rajeev Thakker

V. Raheja is an owner and developer of real estate in India. For over fifty fiveyears, the company has led the evolution of Indian real estate development

practices while building homes, hospitals, schools, offices, IT parks, malls andhotels across the country.

Since its inception in 1952, the Raheja brand has been synonymous withquality, value, transparency and contemporary real estate design. We haveachieved this reputation by remaining committed to our business philosophyand strictly adhering to our operational tenants:

Seek excellence in quality, throughout the development process. Set new standards in urban design, while promoting a balance between

function, beauty and sustainability.

Use the best quality materials and the most relevant technology &maintain a clear and transparent approach to deliverable schedules anddeadlines.

Working with notable partners such as SOM, KPF, Site Concepts, BillBensley and Vladimir Djurovic Landscape Architecture. V. Rahejacontinues to create projects of the highest quality, aesthetic relevance andenduring value across India.


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Executive Team

V. Raheja is spearheaded by Mr. Vijay Raheja, the Chairman of the group.Mr. Raheja has decades of experience in real estate development and is alicensed Architect (with an Architectural degree from the University ofTexas at Austin).

All V. Raheja projects are designed and constructed by the in-house teamof Designers and Engineering professionals. The team of qualified

architects at Vijay Raheja & Associates is lead by Architect Vijay Raheja,with 44 years of experience in Real Estate.

Business Philosophy

V. Raheja recognizes the importance of equitable and transparentrelationships with all purchasers. V. Raheja projects are based onselecting the Best Location & heavy emphasis on Design. So Location &Design are the two key factors that go into their projects.


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The V. Raheja approach to project execution is disciplined andmeticulous. The in-house planning, procurement and project managementteams ensure that they achieve their milestones and deliver on every

promise. Furthermore, in order to ensure that their commitment remains

unperturbed, they conduct a good selection of business partners, suppliersand outsourced service providers, who are as passionate and committed tothe core principles of sustainability and discipline.

The current scenario

Palm Beach Galleria Mall located in Vashi, sector 19 D, Navi Mumbaiwas once one of its kind with a blend of all the fashion, fun, film, food &entertainment under one roof which made the mall partners & shopperssay that they are unique.

It is now a favourite dating spot for couples to spend hours in the near-empty food court, uninterrupted by any moral police. Launched withmuch fanfare in 2006 in Navi Mumbai, the 3 lakh-sq. ft. space now onlyhouses two stores - Vijay Sales and McDonalds (as of October 2013)

The mall witnessed a sudden steep decline in sales after the movement oftop retailers and subsequently the smaller ones to the Inorbit mall nearVashi Station that opened in 2009.

Brands at Palm Beach Galleria realised that customers were not verywilling to go the extra mile and spend time at their mall. It suddenly

became obvious that visiting a mall that was a stones throw away from

the station was much more feasible than travelling 3km to Palm BeachGalleria.

During Gallerias boom, customers flocked there for major brands likeAdidas, Biba, Levis, Metro Shoes, Vision Express, Nandos and

McDonalds. When competitor Inorbit opened up near the station it

became impossible for many brands to sustain especially those in theapparel and footwear segment.

Galleria also witnessed a declining sales due to the nearby Centre OneMall. One primary observation was the entrance into the mall / shop.Customers had to go through a main entrance and then to their destination

brand depending on where it was located inside the mall. At Centre OneMall however, the brands having maximum or more frequent footfallswere immediately available to customers on arrival at the mall as their

respective entrances were parallel to palm beach road.


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On interviewing retail chains in that area it was found that retailers whodid not leave till date (October 2013) opened shop and stayed primarily

because sector 19 D was a heavy residential and developing area.

Mr. Nikhil, Store Manager at Vijay Sales said, It is difficult to saywhether Galleria will rise in footfalls from the current situation. As ofnow it is very evident that customers are finding Inorbit more convenient

a mall than Galleria and that is primarily due to location but a further risein residential complexes nearby should boost the mall back into action.Our store in Mahim has a footfall of almost 350 per day but here it isapproximately 20 on an average. However our conversion rate here ismore or less 50% and that is what we concentrate and deliver on. Themall as a whole may do badly but we as an individual retailer are doingfine. The purchasing power of our customers is high enough in ourcatchment area here so we get only customers who are serious about

buying our products.

Sector 19 D also has a number of educational institutes in the vicinity.Educational institutes mean students and students mean junk

food. Thus one would find Gallerias second retailer viz. McDonalds,

overflowing with sales and doing extremely well.

While having everything a mall must have to service customerseffectively, it was a typical case of wrong mall location for Palm BeachGalleria that had a huge impact on the footfall and subsequently led to thefall in business for the mall.


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CITY CENTRE VASHI

Vashi is the most developed part of Navi Mumbai. It is a residential andindustrial area and is closer from the suburban and central Mumbai. CITY

CENTRE mall is 2kms away from Vashi station and is located on Palm Beach

road with numerous residential complexes in the vicinity. It is blessed with the

advantage of immense footfall but unfortunately did not do well.

City Centre, once buzzing with people witnessed near-stampedes on weekends

during their heyday a couple of years ago, are now battling for survival. Themall was developed by Akshar and Wellwisher Group.

City Centre mall believed inproviding a complete and smoothing experience

to its customers rather than just shopping says Akshar developers.

Ground floor of the mall had big size shops facing atrium and it also had multi-

purpose stage for alluring live music performances, product displays, launches,

etc. First and second floor of the mall had an entire gamut of impressive

brands. Brand retailers and two huge hypermarkets within the mall was an

added attraction which helped in getting more footfalls.The mall also had food court located exclusively on the third floor. It had a huge

line up of food courts each offering scrumptious and specialized cuisine,

making this level an exciting place for everyone.

Fourth floor had 3-screen Multiplex with the seating capacity of 300 persons,

sprawled over 2 levels (third & fourth floor) lined with world class facilities and

equipments. The multiplex offered two entries from the ground level,

(independent entry from outside and from the mall) and one from the access to

the kingdom of ultimate fun easy.


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There were 2 levels of parking for more than 650 cars parks in the basement and

an additional open surrounding parking facility for at least 2000 cars was also

made available.

Intercom network connectivity connects shops on each floor with other shops

and with multiplex, food courts and the security cabin. To ensure that all shop

owners and customers are enveloped in security and also provided them with

sophisticated smoke detectors.

Some of the stores in City Centre malls were Lee, Levis, Rosebys, Wrangler,

Globus, etc.

With all these excellent services being made available for the customer, the mall

still couldnt sustain for long which ultimately led to the shutdown of the mall.

In Vashi alone, as many as four mallsPalm Beach Galleria, Satra Plaza,

Wedding City and Raghuleela - wear a deserted look, even as their

managements struggle to keep the ventures afloat. It all began when Navi

Mumbais first mall, Center One, opened to a huge response in 2003. Malls

were touted to be the temples of urban convergence, spaces where the young

citys new-economy professionals would eat, live and spend.


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There is demand for just three malls, but the supply is 35.There is a huge

oversupply of retail space and the satellite city just does not have the potential

to absorb the volume.

The moment there was oversupply,brands and companies began arm-twisting

mall managements to lower rates. It was just not feasible to be in the business

says Bhupendra Shah of Bhumiraj Group and president of Builders Association

of Navi Mumbai.

Malls have to be perceived as long-term assets by developers, rather than short-

term commercial projects. Its very important to prepare an infrastructure

accessibility report and do a catchment area analysis, failing which, even well

planned malls can be failures.

The mall is right now being renovated under new hands and there are plans of itbeing changed to a commercial complex. It will become operational at the start

of 2016.

Seeing the once-operational malls facing rough weather, even upcoming malls

in Navi Mumbai are having second thoughts.


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Satra Plaza

The third mall we will be looking at is the Satra Plaza. Just an overview aboutthis Plaza. Firstly it comes under the umbrella of Satra Properties. Hence from

the word itself , it is a real estate development company. Apart from its coreactivities, it also engaged in trading in properties and transferable developmentrights. It focuses on the real estate development; which include residential,commercial premises, retail, malls and hotels.

The projects undertaken by the Company includes Satra Plaza, Vashi, NaviMumbai and Satra Park, Borivali, Mumbai. Projects undertaken by theCompanys subsidiary include Dreams the Mall, Bhandup, Mumbai and Satra

Hills, Ghatkopar, Mumbai. Satra Park consists of 16-storey residential towers

with three wings.

The Companys subsidiaries includes Satra Property Developers PrivateLimited, Satra Buildcon Private Limited, Satra Infrastructure and LandDevelopers Private Limited, Satra Lifestyles Private Limited, Satra EstateDevelopment Private Limited and Satra International Realtors Limited.

Satra Plaza is located at Plot No. 19 & 20, Sector No. 19D, Palm Beach Road,Vashi, Navi Mumbai- 400 703.


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Satra Plaza is referred to as the shopping centre now and gone are the days ofwhen it was referred to as a mall.

Satra Plaza is located in the heart of Vashi and is on the main Belapur highway

as said by many people and employees sector 19 though it is still developing isstill regarded as a crowd puller and a happening place to shop. Satra Plaza facedimmense competition from shopping malls like City Centre and Palm BeachGalleria. After already having two shopping malls at the side, Satra Plaza wasstill determined that it would get business and attract attention.

If we look at the industry attractiveness model, we can see for itself thatcompetition from within the industry is really high because of its neighbouring

players who set up shop before Satra Plaza.

But if we look at todays reality the dream that the malls would be a standout inthe satellite city is actually a failure. One may look at these options as either aglass half empty or half full.

As learnt from the previous malls, why would a company want to start a thirdmall side by side? What is the companys intention? It is rocket science to wantto burn your hands in the fire especially when its burning hot.

We will never actually understand why the mall Satra Plaza came into being,

but we can surely debate on the impact that it has today recently created. As thesaying goes Jack of all trades master in none can be applied over here.

If its supposed to be a shopping mall it is supposed to entice the customers and

act as a magnet to draw in the passer bys in. Satra Plaza for one is quite timidand not as dynamic as compared to a Phoenix in Lower Parel or an Inorbitthough they are also located on the highway.

For a mall to be a success its important that it is filled with customers and for

this to take place there should be top of mind recall. On visiting the place the

thought of Satra Plaza as a name for a mall sounded very low and it gotassociated with something that is more formal or businessy. Yes the travelling

bit was quite tiring if you dont own a four wheeler or a two wheeler. Apartfrom the travelling time being a problem one needs to also consider the costinvolved.

Now since the prices of all goods and services have increased the cost is a factorto be considered when in that location as by buses schedule is never on time.


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In todays competitive environment it is imperative to stand out and to be

noticed. It is important to be differentiated and unique. Why would a customercome to your mall if they dont see a benefit?

Again in a mall what could be a differentiation factor? It could be the brandsthat are in the mall. May be it could be a combination of speciality stores,discount stores, apparels electronics, etc.

Can entertainment make a difference? Can celebrities pull their fans? How doyou increase your brand equity? Are you a market leader or a follower?

Customer is king hence it is first important to know the customers and theirprofile. The market huge and filled with opportunities hence segmenting ofmarket is very important. But is that all? No targeting is also very important.

Depending on the location and the purchasing power of the consumers will onebe able to set up the necessary brands as required. Should one target thepremium class, middle class or the economy class? All decides on the missionand vision of the company.

Opening a mall requires a huge investment which is an opportunity cost to thecompany. Hence when such ventures take place a company cannot think shortterm. Long term strategies are required. One should be equipped with a plan A,

plan B plan C etc, why because of the changing economy. The external

environment which is uncontrollable and sometimes enforceable and out of thecompanys hands. But it is precisely this that is important to look after else

projects and investments will all come crashing down and looses will be tooverwhelming and this could lead to insolubility leading to bankruptcy andfinally an exit out of the market.

Hence hiring a good team and conducting a market survey and a thoroughresearch is very important. One must not follow the other with blinkers on. Just

because it works for competitors doesnt really mean that it works for you.

Apart from the team it is important to be in full connect of the knowledge of themarket. There should be a constant survey and constant bridge between the two.Talk to customers; come to know their preference and their choices and wantsand desires. As the market is dynamic and customers are even more keepingcustomers happy is the number one objective and need of the hour. Sitting in thehead offices and not wetting your feet in the waters is taking the high way.Malls are long term investments and sustainability is what is required.


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Being different and having a plan B is crucial. And to some extent this Plaza didmanage to bring in a different outlook to the shopping mall format. Theyconverted the mall into a shopping centre, that makes it look like a retail storerather than a mall. The concept is based on convenience. They have targeted

only certain stores targeting a certain type of customers. The customers targetedare premium and middle class SEC A. Initially it was a speciality centre onlyfor electronics. The first brand to set shop was the Arcee group of Samsung,L.G and Panasonic. It has been 2 years since they have opened up. Targeting acertain group of customers is far easier than targeting the whole market. Thiscaters to the middle class.

Now as part of their strategy they have roped in High End premium brands likeSharman Wheels, Drapers, high end jewellers etc. Now Mercedes considers thisas their strategy because of the clients from the satellite city itself. This is anexpansion strategy. And it makes sense for them to be a part of this location

because of the area. It wouldnt be feasible for them to start up shop next to the

station as the class category targeted would be wrong.

Satra Plaza has in a way turned around its strategy by focusing on particularsegments.

Now if we look at drapers it makes sense that they are also a part of this targetstrategy because drapers are also into apparels and their target audience is

schools.

The footfall of these shops daily is a minimum of twenty. The strategy is thatfew customers premium goods less number of units need to be sold to achievetargets. This is clearly the strategy they are following.

Another observation is that given their expertise in Properties they have turnedthis mall to retail to commercial properties utilising their strengths and lookingat the cup half full.

On interviewing the employees at the Satra Plaza one would think that becauseof the failure of the other two neighbouring malls Satra Plaza would be highlyimpacted but on the contrary the employees were very optimistic about it.

One can only hope for the best that their strategy pays out and losses arereduced.

Documents

Mall Mortality in the Sattelite City