Realty developers may go for revenue sharing model

Realty developers are likely to go for revenue sharing arrangements with retailers to protect margins and minimise risk due to declining retail rentals and sales, says an industry expert.

"The concept of revenue sharing is likely to pick up with more developers becoming receptive to the idea as a result of the recent downturn," retail sector expert Hemchandra Javeri told PTI on the sidelines of the Franchise India Summit 2008 here.

He said when the revenue sharing model was first mooted around 2002-03, not many developers were willing to accept it. However, the recent downslide means that mall-owners need retailers to survive in their business and are therefore becoming open to new ideas.

Asked about UK-based Centre for Retail Research report which said that Indian retail industry has the highest percentage of shrinkage in the world, Javeri said that new equipment, tools and processes are required to reduce shrinkage and pilferage.

The retail brands should develop new and good concepts for the younger generation, who form an exclusive customer segment, he opined. "Young consumers are more aware about prices and the retail concept should be focused on young people."

The report had said that the average shrinkage in the Indian retail industry this year is 3.1 per cent against last year's figure of 2.9 per cent.

'Shrinkage' is a term used to define loss due to unaccounted merchandise at the time of inventory.

According to the report, total shrinkage in India in 2008 is of $2.54 billion, which is equivalent to 3.1 per cent of retail sales - an increase of 6.9 per cent compared to 2007, when the figure was 2.9 per cent.