Aditya Birla Retail’s (ABRL’s) new more.Megastore in Mumbai stands at the same place in Palm Beach Galleria mall in Vashi, where Max, the value retail store of Landmark group, once stood.
Before more.Megastore, the 54,000-square feet hypermarket, set up shop here on Thursday, a majority of retailers such as Max, Levis, Adidas, Provogue and Odyssey had exited the mall due to reduced footfalls and emergence of malls such as Inorbit in the area.
But Thomas Varghese, the chief executive of ABRL, is least perturbed about the past history of the mall. He says: “We have repeatedly demonstrated that we are capable of driving footfalls on our own and do not need external factors to drive traffic.”
Varghese says more.Megastore was the sole tenant in R Mall in Thane and City Centre in Rohini in New Delhi for eight months before other retailers came in. After closing or relocating supermarkets and neighbourhood stores in the last two years due to poor footfalls and dwindling revenues, retailers are getting aggressive with their hypermarkets, the larger version of supermarkets.
If more.Megastore is betting on not-so-successful and new malls, Easyday Market, the hypermarket chain of Bharti Retail, is outbidding other retailers in booking mall spaces.
Three months ago, Easyday signed a deal with Neptune group in Mumbai. It offered 20 per cent higher rents than Spencer Retail and ABRL, which were in talks with the developers for space in the mall. Easyday also offered to take the first and second floors of the mall, leaving the developers to lease the ground floor to other retailers. While Spencer offered to take the ground floor, ABRL wanted the ground and first floors. Typically, hypermarkets prefer the ground floor of malls. According to property consultants, Easyday also outbid other hypermarket chains in Pune and Bangalore in the last couple of months to book properties.
Bharti Retail executives could not be contacted as they were travelling. Though rents should account for 3.5 per cent to five per cent of total sales to generate decent profit, some retailers are even paying seven to eight per cent of their sales to mall developers to book properties, according to a property consultant.
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“There is a huge competition from retailers for anchor spaces. In the expectation that foreign direct investment will open up in the coming months, some retailers are grabbing anchor properties in malls,” says Samantak Das, national head, research, Knight Frank, a global property consultant.
“Besides, both developers and retailers are upbeat about overall economic growth. Retailers are planning stores to reap future benefits.”
A chief executive at a large retail chain says delays by property developers have also spoiled the expansion plans of retailers, which is why many of them are vying with each other for the same properties. He says most of his chain's upcoming stores are delayed by six to nine months.
“It (delay in deliveries) is getting worse now,” he said. Retail analysts point out that retailers have a lot of catching up to do, given the kind of plans they had announced earlier.
For instance, while announcing its retail foray in 2007, Bharti had talked about a retail space of 10 million sq ft and an investment of $2 billion to $ 2.5 billion by 2015. Today, it has over 100 Easyday supermarket stores and nine hypermarkets. Bharti Retail planned to have 125 Easyday and 13 Easyday Market stores by the end of 2010, the company had said earlier.
ABRL had also plans to open 1,500 supermarkets and 150 hypermarkets by 2010-11. The chain now has 527 stores and nine hypermarkets. It plans to open 125 supermarkets and seven to eight hypermarkets every year.
Spar Hypermarkets, confined to south India with its five hypermarkets, is also looking at northern and western markets. Spar, a licencing agreement between Dubai-based Landmark Group's Max Hypermarkets and Spar International, is looking at adding 30 stores by 2012-13 at an investment of Rs 550 crore. However, retailers like Viney Singh, managing director, Max Hypermarkets, say they are expanding sensibly. “We book properties which are within our budget and we do not bid,” Singh says. Varghese says he approves new openings only if a hypermarket can be made profitable within 12 to 18 months.
Retailers say hypermarkets make sense given the economics involved. “Though retailers can generate sales of Rs 20-30 crore per year from supermarkets and Rs 40 to Rs 150 crore from hypermarkets depending on size, cost per square feet is almost same,'' says Rajan Malhotra, president, strategy, Future Group, which plans to open 60 Big Bazaars, the group's hypermarkets, by June 2011.