With rising rentals in shopping malls, stiff price competition from e-commerce have made life difficult for retailers who are now looking to expand in smaller towns and adopt omni-channel strategy to run healthy businesses, according to property consultant JLL.
“Retailers are struggling at various fronts apart from rising rentals. :Under-performing, less efficient stores with huge inventory pile-up of merchandise, stiff price competition from dominant e-commerce players and poor inventory management are some of the challenges retailers are facing,” said Managing Director - Retail Services, JLL India, Shubhranshu Pani.
To deal with these challenges, he said, retailers are shifting to tier II and III markets, where the brand presence is minimal. In these markets, real estate costs are 30-40 percent lower than those in metros and tier 1 markets.
Besides this, Pani said “retailers are optimising store sizes, creating multiple touch-points for consumers along with having an omni-channel presence within the sphere.”
While releasing ‘Urbanisation, Aspiration, Innovation - The New Paradigm of India Retail' study on Tuesday, the company said amid rising rentals across malls, low occupancy rates and the onset of alternative retail formats such as e-commerce, retailers are now preferring better performing Grade A/prominent malls over others where the rental deals are purely on a revenue share basis.
The consultant said that leasing transactions are being renewed at steep premiums in malls where occupancy is around 90 percent. Many marquee malls have seen a three-fold jump in rentals. “Premium brands are renewing their leases at almost twice the earlier rents. This has resulted in the tenure of mall leases being shortened, and thus, many brands are finding it difficult to survive under the burden,” the report said.
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