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Challenges in Building the Perfect Retail Space

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The retail sector in India has moved out of the traditional neighborhood formats to find its place in properties specially developed for retail. Each retail format has its own specifications related to location, space, store design, and catchment area. At the same time, the property prices and rentals are also soaring high, in tandem with the rising demand. This is posing a challenge to the retailers in finding the right space for their store.

The retail industry in India has seen great excitement and growth in the last decade. The learning in the last few years has seen retailers and mall developers optimise developments and store formats at their end. The Indian retail sector with a contribution of 14 percent to the country’s GDP has grown into an immense opportunity for the farmer, producer, consumer, the retailer, and the real-estate developer.

Let us explore in brief a few basic real-estate challenges faced by the retail sector and the evolution that has resulted in the quest for viable solutions. We would also touch upon the Indian high street that has changed little but has continued to share exciting shopping space with the new retail centers.

The biggest challenge for the retail segment today, whether a real-estate developer or a single-shop owner, is the real estate. The transformation of the local provision shop to the high-end supermarket and the shopping complex to premium malls has revolutionized the retail real-estate sector. Trends in the industry are changing continuously with the experiences and learnings gained from the new challenges being thrown up every day.

In the present scenario, developers catering to the supply side have limited access to debt funding or public borrowing. And borrowed equity or debt, while being tough to come by, has also become an expensive option to service, and this is over and above the rising cost of construction itself. These factors ultimately affect the cost of space occupied by the retailer.

The design of a retail center can to a large extent create viable zones for different retail categories, keeping in mind a retailer’s viable cost of selling space and the required numbers of footfalls. Next would be to shortlist sustainable mall anchors and take their inputs at the design stage itself, as this is vital to optimise the trading density of a mall when it operationalises.

The retail center model has evolved into a partnership at both design and rental model levels between developers and retailers, both of whom are looking at a long-term association for successful realization of mall- and store-level ROI.

While retailers are considering new ways to reduce the cost of occupancy, they are also focused on optimisation of the expensive real-estate available. Optimisation of store design is a major factor in acquiring new customers and providing a better experience to the loyal ones while bringing down the costs. The design should be flexible to the evolving merchandising strategies for the continuously changing consumer. This is best done by a well-researched store planogram.

With retail planograms, the retailer looks to maximise sales and the amount of merchandise on the shelf by arranging it in ways that make it appealing to the consumer while minimising wasted space.

Finally, the retail center and individual store designs have to work in unison to seduce paying consumers while they linger between their needs and wants.

As India flocks to metros and other urban areas, congested roads are proving to be another hurdle in the retailer’s path. For the high street, parking facilities and building amenities are fast becoming a rarity while rentals have not eased out due to a lack of supply. Complimentary amenities like valet car parking and redesigned pedestrian walkways do help to a certain degree.

The landlords in many cases have upgraded the store space (building requirements like stairway and lift and amenities like A/C and power back-up) for the opportunity to partner with a good brand as this would help in the appreciation of the property in the long term.

Shopping malls or retail centers are more defined in terms of consumer shopping mix, amenities, and support services. Malls have evolved over the last few years in terms of optimizing the activity mix and design and carefully intertwining the basic two threads – leisure and shopping.

A key element to keep in mind when developing a retail center is to make sure the very design features that today make the ambience do not become an expensive maintenance obligation tomorrow. Well-define the chargeable common areas and their tangible benefits to the retailer. Having an experienced mall management company on board at the design stage itself results in a cost-effective maintenance solution.

Some key elements for creating sustainable retail developments include an energy-efficient design, positive community relationship, integration to the natural environment, continuous market desirability assessment, and competition benchmarking.

About the Author
Vivek Nair is the VP and Head, Retail Business Solution at Vestian Global, Asia Pacific.

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