Saturday, 31 August 2013

The shopping Malls In Patna and how they can be profitable.

Malls in Patna; A Vision
At the outset, malls were thought to be the drivers of growth for the retail and entertainment sector in India and therefore Patna too. However, factors such as bad location, poor planning and lack of maintenance and absence of leased models in mall space have given a setback to this business across our country and Patna too.

In metro cities, shopping malls have received a good response comparatively. On the other hand, Tier II and Tier III cities like Patna are witnessing huge empty space in malls, in smaller towns; over a third of the space is unoccupied in 2013, as against just 7 per cent in 2007.

Analysts say 80 percent of India’s 255 malls are failing. Reports suggest that about US$4.2 billion has been spent to build these approximately 255 malls, of which about 65 percent are in Delhi/NCR and Mumbai. Other challenges to tide over include high rentals, overall slowdown, issues with the mindset and execution at the management level. Developers do not put in the effort to maintain and select the brands or eateries that should be a part of the mall. Instead, they sell it off to investors or individuals who offer attractive rentals for the space. 

 Selling mall space – Most malls that have been successful are the ones managed and maintained by the developers/owners. For instance, Oberoi Mall and Phoenix Mall in Mumbai have been successful models as they lease the space to brands and end up having the right blend of products and food joints for the customer. On the other hand, owners who sell the space, in parts to individuals further lease it ahead to any bidder offering them a high price. Therefore Mall developers in Patna  should focus on managing and maintaining the malls themselves.

 Catering to selected people – Some shopping malls don’t want to be everything to all people. A select target group will do leaving out the others to flock back to the age old kirana stores and nearby shopping complexes. In Patna "NICHE" shopping malls based on themes like wedding, jewellery etc. need to come up, rather than general shopping malls.

 Bad entry or Exit – Any location with poor infrastructure at the entry or surrounding area of the mall dissuades customers from visiting it. Just try to remember the horror of exiting the P&M mall in Patna from its parking.

 Disappointing growth in Tier II and III cities -The industrial development or progress on economic front is still around Tier I or metro cities,. The industry was expecting shift of wealth to Tier II and Tier III cities like Patna by 2010 but it has not happened at the expected speed. That is why we see an area of empty mall space in Patna.  However the future potential of commercial and retail development in Tier II cities like Patna is still bright.

 Demand-supply mismatch – The future demand in the retail space was not anticipated correctly due to lack of proper planning and study. People with capital in hands and huge parcels of land started constructing malls in the hope that the booming economy will produce huge demand, but that did not happen in proportion to the supply provided.

So, now what can be the appropriate solution for Malls in Patna?

Few steps which can help make the malls a success in Patna are:

• Rentals on revenue-share models
• Bringing logistics cost down
• Improving and investing in back-end supply chain infrastructure

 • FDI in retail
• Keeping rentals low to beat the slowdown
• Business models based on leasing only
• Shifting industrial and service industry to Tier II and Tier III cities like Patna.

The future of malls can definitely improve if these solutions become effective. The business model of giving preference to high rentals will not work as malls are not just another piece of real estate but demands organized planning, brand selection and maintenance on the part of the owner/developers in Patna.

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