Auto outlets in malls

While the Indian automobile market is expected to grow at a CAGR (Compound Annual Growth Rate) of 9.5 per cent, amounting to Rs 13.008 billion by 2010, the commercial vehicle segment has contributed significantly to this market. The car market in India is set to expand from one million units per annum to two million units in the coming years. This would require more showrooms and workshops, calling for Rs 8,000 to 10,000 crore investments, considering high set-up costs including the real estate.

Riding the retail boom, big automobile companies are redefining their retailing strategies in order to rope in more customers and be ahead in the intense competition. Besides concepts of auto malls and auto parks, general malls too are catching on as marketplaces for auto retailing. Auto manufacturers need always look out for newer retail spaces across formats and regions. Malls, due to their wide exposure and easy accessibility, have certain advantages over other marketplaces. After populating urban areas, malls are presently expanding down to tier II and III regions.

 

Malls as auto marketplace

Mostly in industrial areas, auto showrooms are also located in high streets and highways. However, the concept of auto retailing in malls is slowly catching on.  Mr Zahir Abbas, Associate Director, Retail & Consumer Business, Technopak Advisors Pvt. Ltd, says, “Yes, we do feel that this concept will take off in India in future. We have already seen high-end cars and bikes being showcased in malls.” Then, he adds, “For example, BMW has opened its showroom in Ambi Mall, Gurgaon. Similarly, Honda has done the same in MGF Metropolitan Mall in Saket and Rolls Royce in Atria Mall, Mumbai. We have also seen automobile companies showcasing high-end bikes like Yamaha in MGF Metropolitan Mall, Saket. It has high-end super bikes displayed.”  Informing about malls as marketplace for auto retailing, Ms Tara Prabhakar, Associate Vice President, MindScape (Technopak venture), says, “This concept is already evident in a limited form in India. Some car dealers have started displaying select models in malls. These models are displayed at a small distance away from the entrance into the mall and are usually in the thoroughfare.” Further, she says, “Shoppers typically tend to stop, examine the car and those interested in the drive experience are asked to drop their cards or addresses so that company officials can contact them for a test drive.” Practically, there is hardly any category of products or services to which a mall does not provide retail space: offices, educational institutions, banks, shopping outlets et al have come up in malls. Since the onset of malls in India around a decade ago, they have been constantly evolving and, at the same time, spreading out fast. The result is two-pronged: a) emergence of new concept malls such as specialty malls (luxury, wedding malls and auto parts), mixed-use and open malls and b) malls coming up in tier II and III cities and towns. Today’s malls may not be very fit to accommodate auto outlets. But, the situation will soon change for the better. Some early-riser companies have already opened outlets in malls. Maruti and Toyota are already exploring idea of opening showrooms in malls to catch bigger footfalls.

 

Pros and cons

To have better sales, auto companies look out for retail spaces beyond the conventional ones. Owing to modern technological facilities, sure footfalls, wide exposure, add-ons and other factors, malls are today the most popular marketplaces and cater well to retailing of many categories including auto. Hence, auto companies cannot simply ignore malls. In today’s scenario or situation, what are the advantages and limitations of malls as marketplace for auto retailing?

Advantages: Compared to high streets and highways, malls do have certain advantages like high and ensured footfalls. Moreover, their distinctive features like good visibility, exposure and accessibility, large open free parking spaces and verdant ambience can make big centres an inviting, pleasant, hassle-free and pleasurable experience for visitors. Mr Abbas says, “Definitely, malls will help in increasing sales. This is because present auto showrooms are using the current format in the malls for showcasing their latest models and offerings to a captive audience. The key is to choose and open the showroom in a mall, which has the similar kind of positioning as that of the automobile being showcased.” Observing the plus points of malls, Ms Prabhakar says, “Malls will be low-involvement but high traffic. So, they are good for information dispersal and low-level evaluation.”

Sales driver: As regards sales, Ms Prabhakar opines, “Mall presence is one potent way of giving first-hand information to potential (both short-term and long-term) buyers. It cannot directly lead to sales but get shoppers to consider the brand and learn more about it. Mall presence is also a very good way to create some buzz around the brand as shoppers come to the mall in an inquisitive mindset, hoping to be entertained. They are likely to remember and talk about anything snazzy that they come across in this environment.” Going further, she observes, “Therefore, the mall is a great source of brand building. The sales will still have to come from the dealerships but mall presence may drive more people to the dealership.” Agreeing to this but perceiving a change to set in soon, Mr Abbas says, “However, this rule will also change as multi brands and multi format automobile players come into play in the near future.  Automobile retailing will move closure to the customer via malls, internet and many other innovative formats.”

Limitation: Despite advantages, existing malls presently do not fulfill all the factors for making ideal auto showrooms. For example, usual malls can hardly provide provision or space for test drives.  High rental is another factor, which limits vialbility. Mr Abbas says, “This will be surely a case for marketing and promotion campaigns. However, it is yet to see if these showrooms also do sales to recover the cost of investments. As of now, the rental in malls is very high and it becomes difficult for low to mid range car companies or dealers to open a full-fledged showroom and make money on it.” Underlining the shortcoming of usual malls in the case of auto retail, Ms Prabhakar says, “Malls bring the product to the shopper. It subtly changes the power equation between the brand and the shopper in this category. Selling through malls is unlikely to happen for such a high-involvement category as the serious mindset associated with a high-involvement category is largely lacking in a mall. Unlike other white goods, cars depend very, very strongly on the drive quality experience, which is difficult to provide in a mall.”

 

Auto malls

The concept of auto malls is no longer foreign to Indians. These are specialty malls for the automotive. Developed over the past few years, these are comprehensive marketplaces for auto products. Worldwide, auto malls are doing well and India is catching up on the concept.  On the viability of the concept, Ms Prabhakar says, “There is great merit in the concept of a 'car mall' where all the brands are brought under one single roof. Some other services such as entertainment etc. can be built around this concept rather than having a car outlet in a general interest mall. In this type of concept, the cars become the anchor category and draw people in. This seriousness of intent enhances the prospect of sales.”  Followings are two important auto mall projects.

Senior Auto Mall:  Senior Auto Mall is a major specialty mall project, which is presently under construction in Gurgaon. This vast auto showroom - with 10-storey display - will serve as a one-stop shop where prospective customers can see car models of various companies and also test-drive them. Also, three to four banks and insurance companies will have branches in the mall. There will be a test-driving track located on the terrace of the building. The showcasing will be in such a way that people will be able to see as many as 190 cars from outside the building.

Autopolis Mall:  Prajay Autopolis in Hyderabad, project of Real Estate Company Prajay Engineers Syndicate Ltd, is the first-of-its-kind automobile mall in India. It is planned to be a one-stop retail destination for auto and auto component companies. The estimated cost of the project is Rs 400 crore. The mall will be on the Mumbai Highway (NH-7) and will be just two km from the Outer Ring Road and 10 km from Hi-Tec City. Autopolis will be established on a land area measuring 35 acres, and will have over 30.87 lakh sq. ft of constructed area. Prajay Autopolis is a novel initiative in auto retailing where consumers can buy automobiles in a multi-brand retail space. It will be an end-to-end automobile solutions location, comprising sales, servicing and warehousing across more than 18 lakh sq.ft. It will also have an exhibition and convention area to organise new product launches and other events. Prajay Autopolis is expected to open in the second-half of 2008. The company is in talks with several leading automobile companies in India to finalise space bookings in Autopolis.

Allied marketplaces

New marketplace formats are always coming up. Reliance Retail and Big Bazaar are in talks with Bajaj Auto and Hero Honda to set shop in their hypermarkets. RIL also plans to acquire some existing automobile dealerships in the metros. Initially, it will use the surplus real estate of the petrol pump network. Differing from conventional auto dealership, RIL will retail multiple automobile brands of 2-wheelers as well as 4-wheelers under one single roof. However, auto companies have to separate the area of sales between existing dealers and Reliance Retail so as to avoid any clash of business. Reliance Retail’s automobile retail venture would be undertaken only at highway based hypermarkets. Other marketplaces are as follows.

Reliance Autozone: Spread over an area of 15,000 sq.ft, Reliance Autozone offers 4-wheeler and 2-wheeler services under one roof along with retailing of tyres, batteries and a wide range of automotive accessories. Reliance Autozone’ aim is to give customers unmatched value proposition. Its vision is to create customer delight by delivering world-class automotive products and services with wide choice at best prices. It is a comprehensive solution to all vehicle owners. Being part of Reliance Retail, Reliance Autozone would leverage on its prime location, pan-India presence, supply chain strength, CRM and strong brand equity. Apart from regular maintenance and running repairs, it also provides unique value added services like car care, car detailing and many other services not catered by usual automotive workshops. At Reliance Autozone, customers can get the vehicles serviced quickly at reasonable charges.

Virtual auto malls: Internet provides a big marketplace. Over the past two years, online retailing websites have come up in large numbers and these sites are performing no less than real markets. Like, Automat.com, which is an online auto mall, virtual malls provide all kinds of services in auto retailing including selling and buying of even used vehicles.

 

Auto marketplace in future

The future of Indian automobile market is bright as it looks forward to manufacturing and implementing new innovations such as electric cars and bikes besides existing CNG and LPG fuelled vehicles. And, increasing popularity, acceptance and presence of malls in Indian retail market and their flexibility (towards new needs) will be one of the sure solutions to auto retail space crunches.

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