Retailers switch to standalone stores from malls

Standalone stores seem to be back in flavor. Owing to an increase in high common area maintenance (CAM) which includes electricity and maintenance charges, built-up charges and high rentals, many apparel retailers are now shifting their focus

to standalone stores. Take the Tata-run Trent for example, out of the dozen outlets which it plans to open for its departmental store Westside in the current financial year, about two third will be standalone stores. The same is true for their electronic and durables stores Croma. It plans to open around 18 standalone stores.

According to a source at Trent, there has been a huge rise in the CAM charges in malls. Department stores like Westside can manage CAM charges up to Rs 12 per sq. ft. but today the charges in malls have risen to Rs 40 per sq. ft. Moreover, the rent at malls in Mumbai which used to be Rs 120 per sq. ft. a couple of years back has grown to Rs 400 per sq. ft.

Explaining more about the scenario, Harminder Sahni, Managing Director of management consultancy Wazir Advisors says that at malls, retailers get only 65-70 per cent of the carpet area, whereas in standalone properties, one can get a carpet area of 80-85 per cent. In luxury malls such as Delhi’s Emporio, the ratio between carpet area and built-up charges is even lower at 50:50. Standalone stores appear to be the best option at today’s date for departmental stores and stores selling durables, jewelry and furniture.

Agreeing with Sahni is Rakesh Biyani, Joint Managing Director, Pantaloon Retail. According to him, citing the current market scenario, standalone properties make more sense. However, it is very difficult to get the right property. As expansion plans, Pantaloon Retail in the current financial year intends to open about 100 large stores across formats such mall-based Central, departmental store Pantaloons and Brand Factory.

On the other side, Shishir Shrivastava, Chief Executive and Joint Managing Director at The Phoenix Mills says that yet for some retailers, malls have better advantages than standalone stores. A mall with good infrastructure and located at a good location is always favoured. Shrivastava runs the High Street Phoenix and Phoenix Market City malls in Mumbai and other parts of the country.

Some malls in the cities attract more than 100,000 people during weekends. Also, many of the stores have nine-year leases. Thus, malls can be of a good advantage opines Vasanth Kumar, Executive Director of Max Retail, the value retail chain of the Landmark group. However, delay in opening of new malls is another factor which has led to retailers considering standalone properties. A research by global property consultant Cushman and Wakefield estimates that nearly 44 per cent of the 2.27 million sq. ft. shopping mall space scheduled to be added in the January-June period were delayed. Moreover, this one million sq. ft. would be ready either in the second half of this year or 2013. The report also adds a fifth of the space in malls in major cities lies vacant.