Creating the right retail mix

India has indeed started shopping in malls and new malls are mushrooming in every nook and corner of important cities in India. But it goes without a second thought that if malls have made a huge difference in the ways India shopped, they have also invited unnecessary worries and the foremost being that of the tenant mix. India is scaling new heights in every sphere of economy, which has boosted the retail sector. Retail sector is seeing immense expansion in national or international brand listing. And with malls catering to the interest of every prospect buyer, stores of all kinds are easily found everywhere. Hence, there is a constant competition amongst retailers so as to generate maximum footfalls and, therefore, it can be witnessed that malls have started renovating and are roping in architects for a facelift in order to maintain the footfalls.

Brand, retail mix

Retail mix can be understood as the brand outlets in a mall catering to the interest of the target audience, which depends on factors such as city and location. Mr Astitva Sen, Vice President, Retail & Consumer Goods, Technopak Advisors Pvt. Ltd, explains the basic difference between retail and brand mix. He says, “Retail mix refers to the plan of category-specific space allocation within a mall. For example – what would be the break-up of space allocated, say, to food and non-food? Within non-food, how much apparel, footwear, jewellery, books, music, etc. This should be arrived at through research and analysis of the catchment - in terms of demographics, psychographics profiling of the population, assessment of competition (current and future projects), public infrastructure at the location (current and future planned) etc. Brand mix refers to the space allocation plan for various brands (national as well as local) within various categories. This, again, should depend on the location, positioning, target consumers of the mall. A poorly designed project is one where one sees incoherent retail mix (such as a luxury/premium retailer next to a discounter!).” Adding to the concept, Mr Pradeep Seth, CMD, Stadia Group, says, “The brand mix in a mall is the mixing of tenants depending on the market the mall is targeting at. For a mall to succeed, it is very important to have an appropriate mix and a critical mass associated to its mix. A mall with 10 brands is not a mall. A mall with only anchors is also not a mall. A mall has to be conceived in such a way that it targets its market with full support. For example - in a mall, a hypermarket can hinder the existence of high profile brands and vice versa. A hypermarket would best coexist with brands and anchors targeting the mid-level market. A star category hotel can add value to a higher profile mix use development.”

Zoning

Zoning is placing the right tenant at the right place. Zoning is planned very carefully and in accordance with the targeted audience and also keeping in mind the shopping behaviour of consumers. For instance, men’s stores are located at the ground floor because of their limited interest in shopping. While, according to the set notion, women are shopaholics and they can reach any floor of the mall. Mr Sen explains, “Zoning is the concept of logical adjacency planning of categories and brands within a mall with an objective of providing the target consumer a consistent and convenient experience. The key criteria consist in clearly defining the character and positioning of the mall, understanding shopper dynamics (for the target shoppers) and aligning stores in a logical manner (for example, babycare store could be next to a lingerie or cosmetics store – both targeting women).”  Mall developers, therefore, first identify their anchor tenants and build their tenant mix around them. Malls are built around the three concepts of zoning, comparative buying levels and adjacency.

Further, Mr Seth elaborates on zoning, “Zoning is a criterion that is usually followed in larger scale developments. This is done to facilitate the end consumer in the selection of goods by making specific sections. Usually, zoning is product-specific and / or consumer-specific. For example, one case of consumer-specific zoning would be separate areas for men’s wear, women’s ware and accessories, kids section, electronics and home products. Product- specific zoning is usually placement-oriented.”

Anchor tenants

The selection of anchor tenants is an important ingredient of the success of a mall. Anchor tenants are considered to be the crowd pullers and contribute immensely in making the mall a favourite shopping destination. Commenting on this, Mr Seth says, “An anchor tenant is a larger format store (usually, a departmental store) that supports the development to get more footfalls. The anchor stores are placed in such a way that they even out the traffic movement and act as crowd pullers and smaller tenants survive because of this traffic. The stores usually get a better bargain in terms of rentals, and are a must for the survival of a mall anchor.” It is critical for any mall developer or owner to plan and finalise anchor tenants and, then, rest of the retail mix.  Talking about the advantage that anchor tenants have, Mr Sen says, “Anchors are the traffic pullers and support the mall as a destination. Due to this, they typically occupy larger space, enjoy favorable terms from the developer such as lower rentals, better conversion ratios and dedicated parking space. Ideally, anchors should be considered as close business partners and stakeholders in decision making along with the developer and mall managers in mall management and marketing of the mall to make the mall a success.”

Selecting retail mix

Brand mix is one such area where one cannot afford to go wrong. The mix has to be selected and decided carefully. It depends on various factors such as target audience, city, location and anchor tenants. ‘Complementary’ is a word of utmost importance while choosing the tenants of a floor. For instance, a jewellery brand is located next to a sari store and Mc Donalds can have a kid apparel store next to it. Stating the importance of right selection of retail mix, Mr Seth says, “It is very necessary for a mall developer to understand its audience. It then becomes easier to understand what the mall’s tenant mix should be. Zoning plays a vital role in making the mall a successful venture. There are various factors that affect a mall’s zoning. The most important of them is placement. For example, a restaurant in between two clothing brands can be negative for both. Another major factor is the placement of anchors. The anchors make the mall to get the maximum footfalls. If one has two anchors, they should be placed in this way that they balance out the crowd movement. The anchors need more eye ball contact and, thus, they need better visibility.” It’s very critical that a mall developer decides on its audience, tenants and delivers what consumers expect for this helps in generating footfalls in the long run. Adding, Mr Sen says,” Zoning and right selection of tenants is as critical as merchandise planning and category management is to retailers. They present the character of the mall and distinctiveness to the target consumer, critical for gaining customer loyalty in a highly competitive scenario. Thus, it is critical for both retailers and developers’ profitability and success. Some of the key questions that need to be answered through formal research and decision-making process are: Whom does the mall target at? What are the products, services, brands and infrastructure that the targeted customers are looking for? How do I distinguish my mall vis-à-vis other competing projects in the same catchment?”

Success factor

To run a mall successfully, it’s of utmost importance to study the consumer behaviour and follow a slightly different approach. For instance, if the mall is big and spread over a large area, then splitting up the anchor and key tenants can generate footfalls on every floor and push the attention of consumers. Giving a few golden rules for being successful, Mr Sen says, “Some critical success-factors are: (1) right-sizing the mall in accordance with the catchment’s projected consumption capacity; (2) creating distinctiveness; (3) providing adequate infrastructure (circulation, parking, and loading and unloading bays) and (4) partnership with key retail tenants.” Mr Seth puts forward his opinion, “The way Indian retail industry is growing definitely promises a great deal in the success and growth of malls. A major factor deteriorating the growth of retail would be the rising prices of real estate. For the industry to have a comfortable stand, developers would have to locate and build affordable developments." Hence, the process undertakes researching on the pattern of shopping behaviour and then planning the anchor and other tenant mix in a mall. And to make consumers drop in again and again would be possible by introducing new attractions like a change in tenant mix, periodic revamping of the mall and organising promotional events.