Organized retailing in India - trends and the way forward - An interview with Mr.Anupam Yog, Director, Virtuous retail
Organized retailing in India - trends and the way forward - An interview with Mr.Anupam Yog, Director, Virtuous retail

With the turn of the century, a new phenomenon swept across the Indian middle class by storm. It came in the form of shopping malls that were seen as a western concept by market purists. In the last 10 years, shopping malls have revolutionized the way the Indian consumer shops. With a plethora of options under the same roof, the Indian consumer, rising on an economy boom had more options to spend his/her money.

Established in 2007, Virtuous Retail (VR) is an institutionally owned developer-operator of Community-oriented premium Lifestyle Shopping Centers in India's top cities. Virtuous Retail's pan- India portfolio includes prime city center locations in Bengaluru, Chennai, Mumbai, Pune, Surat and Kolkata making it the leading platform of quality retail real estate in one of the world's most attractive consumer markets for organized retail.

Virtuous Retail combines global expertise and local knowledge to create high performance retail Environments with strong urban connections. The company's long term vision is to create new social hubs for the urban Indian consumer. It does this through "Connecting Communities™" - a platform for cultural festivals, public-private partnerships and cross-border collaborations that encourage civic pride, strengthen the local economy and enhance the city's brand image.

In an exclusive interview with Tradebriefs, Mr.Anupam Yog, Director, Virtuous retail talks to us on their brand, retailing in India and much more. Some excerpts from the interaction

  1. Give us a brief background of organized shopping in India and the role shopping malls play in it?

Well located and well-built retail real estate are the key catalysts for organised shopping in India. Besides the strategic role it plays in terms of economic development and job creation, we believe that organised retail, if executed properly, can have an exponential impact on a city's (and a nation's) socio-economic and cultural progress. Successful shopping precincts, often anchored by shopping malls, are key to a vibrant city.

  1. How is the opportunity in tier 2 cities in India?

Centers from Virtuous Retail are positioned in the premium space, and are located in key micromarkets in 6 of the top 9 cities of India. We believe these are the markets which will offer maximum ROI and are also well positioned for organised retail.

  1. Do you think that mall shopping in India is a mature market? People still prefer to do window shopping in malls and just eat out rather than shop?

Mall development in India is at a nascent stage. This has a direct impact on mall shopping as Indian consumers are well travelled and have come to expect international standard service locally. At Virtuous Retail, we operate within this new paradigm, and build our Centers as high quality community oriented lifestyle shopping destinations. We find that such a strategy facilitates the right kind of footfalls, longer dwell times, increased frequency of visits and higher bill values.

Food, leisure and entertainment are equally important drivers for shopping malls as fashion and convenience retail. However, we saw an opportunity to get into the art & culture space as well. This has proven to be a successful model.

  1. Most premium brands are looking at premium mall spaces. How has the response from them been so far?

There is a lot of demand for well-located premium retail real estate. In Surat, India's richest city by per capita income with a population of over 5MM people, we are located in the new city center and have debuted several premium brands including Shoppers Stop, Swarovski, CK, FCUK, and several others in the city. We are the platform for choice for Zara, arguably on the most successful international retail brands in India, to debut in Gujarat. It helps brands to make up their minds when they experience VR Centers first hand, like in Surat, and recognize that it has been built to international standard with an eye to the future.

  1. As per SCAI, they feel that minimum guarantee with revenue share works for most malls?

Your views on that As an institutionally owned business, we have signed triple net leases with tenants, and as a policy do not deviate from minimum guarantees as a basis for rent agreements. We often introduce revenue share clauses in addition to minimum guarantees, as it aligns incentives and pushes both sides to perform.

  1. How do you track footfalls to conversion in malls and justify the high rents most shops pay?

VR Centers are designed and curated for experiential shopping. Moreover, our customer outreach focuses heavily on inbound marketing strategies that enable a sharper focus on our target customer, and result in quality footfalls. We track footfall conversion on an ongoing basis across floors, categories and stores and continuously introduce fresh marketing initiatives that achieve high conversion rates.

Having said that, a retailer's occupancy cost is a function of their store size, merchandising strategy, customer service, location within a mall, and brand positioning. We work with our retail partners to establish business goals to ensure occupancy costs are maintained at a level where the brand can succeed. However, this is a two-way engagement wherein the brand needs to work with the mall's retail eco system and ensure it sustains its performance at the agreed levels.

  1. Due to recession, there has been slowdown in store occupancy. Phoenix mall is still running 1/3rd empty(as per rueters). How do you tackle vacancy rates?

InOrbit Malls, owned by developer K Raheja, which altered its plan for a 500,000 square-foot-mall in Vadodara to 400,000 square feet, and added a hotel instead.

Consumer demand for organised retail remains high. Premium brands are seeking out quality locations and are hunting for space. Our 600,000 SF SuratCenter is 80% leased. We expect the remaining space to be leased at a premium within the next few months. We are also exploring expansion of the property as we see demand for quality space growing in the near to medium term.

  1. Retail rents are down 30-40 percent from peaks in 2008, according to ratings agency Crisil. That's especially painful for developers, when servicing loans is expensive at 12-13 percent interest. How do you tackle?

We are owned by an institutional investor, and have near zero leverage. Besides, our pricing is linked with the positioning of our Centers, all of which are well located in the top urban markets of India. In a supply constrained market, where retail demand is on the rise for limited quality space, our Centers command a justified premium. We believe this is sustainable as the consumer catchments support the sales expectations of brands.

  1. Government is preparing a framework for energy-guzzling shopping malls and very large institutions in the country to tap renewable sources like solar. Your views on the same Sustainability is at the heart of our design and development strategy.

We believe that in the near future, retail real estate development will see the emergence of energy efficient buildings, last mile connectivity with public transport, and in general a shift towards sustainable urban design. We welcome any steps the government plans to take to encourage such development.

  1. Some trends in recent times include Hotels clubbed with mall, diversification to other businesses also shrinking sizes of malls to improve productivity. Your views?

Mixed use developments are commonplace and some of our projects are a mix of retail and hospitality. This is reflective of lifestyle changes in urban India, and we will see more mixed developments in the future. Productivity is more a function of store sizes rather than overall development size. Given the size of our cities, we believe large scale developments have a greater likelihood of success. Of course, execution and management remain key.


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