How safe are our Malls?

The recent dastardly attacks in the Westgate shopping mall in Nairobi have sent shivers down our spines. Moreover, they have shaken up the entire shopping centre management community across the world. They have sent a warning signal to every mall management to keep tighter controls to ensure safety.  No sooner did the attacks happen in the Eastern African region, than immediate steps have been taken to beef up security in malls and public places on a war footing in many parts of the world. The US Federal government according to NBC reports was to hold discussions with security agencies to beef up security in the US malls. Notwithstanding events of this kind, India has always been a target of terror. But yet the steps that are taken to safeguard and insulate our malls from such attacks are clearly inadequate by any standards of safety.

In the last few years, after the 26/11 attacks in 2008, our malls are guarded and for the first time a few steps towards ensuring security were taken by all organizations that manage malls.  We see the electronic security gates in every mall. The security staff screen and search every visitor in the mall. Some basic measures are put in place to safeguard our malls. But the entire security system is quite weak in many a mall in India. It’s not enough if electronic screening of visitors is done but it needs to be done with all proper security measures in place.

Though in many malls a security team may be pressed into operation, there is yet no measure followed on how many should be the minimum number of security staff employed either in relation to the space of the shopping mall or in relation to the number of customers who visit the mall. A minimum number of adequately trained security staff in malls is essential to carry out the implementation of personal safety measures in malls. The Central Industrial Security Force (CISF) does a very good job of ensuring security at our airports. They are trained well to have a hawk’s eye on the entire environment and carry out all the specified safety processes properly. The quality of the team and their training levels with certification to every member from the various relevant departments like fire department and police (not just to the mall management) should be specified and made mandatory.  Daily security walks and mandatory parades for every security team ensured by the mall management could address safety issues if any, on a daily basis. Security training must be taken up seriously by security agencies. Each security staff employed as guards in establishments should have undergone qualifying training requirements (on the lines of The Indian Home Guards) under certification by the state police department or by the Central Civil Defense Training Centres in each State.

Whenever special security beef up is required, say consequent on VIP visits, we see the mall security team engaging security dogs. The security screening of vehicles and parking areas may need the service of sniffers all the time. There are special breeds of dogs and there are special training needs for them to be efficient. All these have to be specified and made compulsory for every mall management to follow in India. Further the bag screening is also done only in a very few malls sincerely. Efforts have to be taken to ensure that every bag and every item shoppers might bring into the mall is screened for safety.  Every mall must follow a common policy on what items could be carried into the mall for reasons of safety.  The whole list of safety equipment to be carried in a mall should be made mandatory and certified for the trained and demonstrated operating capabilities of the security team in charge of the mall in a single security window by an authority like the state police force.

It is suggested that the security team of the mall works in tandem with the local police. The local police also needs to be in touch with the security agencies and the chiefs of every security team in order to ensure that the safety measures are in place. Local police, security agencies that malls work with and the mall security personnel have to work together to take a security audit of every mall and come up with the implementation of stringent measures to ensure safety.

The safety of visitors to a mall is directly proportional to the degree of seriousness the mall management may evince to ensure safety to all. Currently specified mandatory compliances are only routine safety certifications from a few departments to ensure basic safety. These are squarely inadequate in terms of the safety standards to follow in order to guarantee total security. One can ensure the serious guarding of our malls only when the safety responsibilities are co-owned by the mall management and the state police authority, who should not hesitate to deploy police presence in malls, whenever needed.

After all, safety is a matter of life and death, not to be taken for granted, any way!

- Dr. Gibson G. Vedamani

FDI in Retailing in India: Possible Effects of Cabinet Decisions taken on 1st August 2013

 The further easing of FDI conditions by the Government of India in multi-brand retailing, especially the most significant one of relaxation of 30% sourcing from micro, small and medium enterprise sector is a welcome move. This will give the required impetus for foreign retailers to revise their strategy to think of the Indian retail market as an immediate opportunity to invest in. It was this sourcing condition that was so far perceived by foreign multi-brand retailers as stringent and difficult to comply with. The liberalization proposals have come in at the right time. UK based retail consultant, Joseph Leftwich puts it this way, “Many foreign retailers had nearly relegated India to a mid-to-long-term ambition and mid-to-long-term means entry into India was completely off the radar.”

The cabinet also has made it clear that it's enough if the first tranche of 50% of investment is made in back-end infrastructure out of the 100 mn US dollars investment required mandatorily on the part of multi-brand foreign retailers to invest in India when they set up shop.  This clears the investment condition absolutely off any ambiguity, for enabling them to plan their investments in India.

As only 12 states are currently embracing the new FDI policy in multi-brand retailing, a decision was made by the cabinet to allow states to let foreign retailers to set up shop even in cities with less than 1 million population, which was not allowed earlier. This is considered to help foreign multi-brand retailers to spread wider into various potential smaller towns. But, it may take time for them to spread wider as we find even domestic retailers not being able to scale up their expansion into smaller towns.

The clarity of definition made by the Government in the context of control and ownership norms of governance of foreign organizations today, will also help foreign retailers to allay any fear relating to ownership, directorship and control issues.

FDI through the automatic route approved by DIPP for foreign direct investment in single brand retailing up to 49% will undoubtedly help many more foreign brands who are keen to set up joint ventures with partners in India.

Though it has been perceived to have come quite late in the day, the cabinet decisions made relating to FDI in multi-brand and single brand retailing will make a positive impact on intending foreign retailers to hasten their plans to invest in India soon. It is estimated that an investment of about 2.5 billion to 3 billion USD will be made in India by multi-brand foreign retailers over a 4-year horizon. It may take such a long time for investments to come into the country as foreign retailers may take considerable time to understand the Indian market and its unique and diverse consumer tastes and preferences before they expand with full throttled ease.

- Dr. Gibson G. Vedamani

Walmart's Waterloo!

Walmart hit the headlines in Chennai, Tamil Nadu last week when the site under construction for its wholesale business 'Best Price Modern Wholesale' by an independent developer was sealed by the Chennai Metropolitan Development Authority (CMDA). The action was taken by CMDA following agitations by those who oppose FDI in retail - a section of traders and others belonging to some political parties. The reason cited for such a drastic step taken by CMDA was lack of permission for carrying out construction activities in the premises.

One wonders why Chennai's political parties have this 'kolaveri' - murderous rage - against any of Walmart's activities in the state, even though the proposed wholesale format is allowed by the Foreign Investment Promotion Board through the automatic route! The seal on the premises is said to be for want of permissions though, everyone knows that the rage is against Walmart! Metro Cash & Carry of Germany, the pioneering foreign wholesale format to enter India is present in more than 15 locations in India. It is worthy to note that Metro Cash & Carry is present with multiple number of stores in the states of Karnataka, Andhra Pradesh, Maharashtra among other Northern and Eastern states. However the company has carefully stayed away from Tamil Nadu till now, even after almost 10 years of the company's operations in India (the first store opened in Bangalore in 2003).

Rumor mills work overtime in Chennai with the news that the opposing parties are planning to engage a whole train exclusively to travel from Chennai to Delhi and back soon to voice their opposition to the Union Government  further vociferously. The issue has been politicized to assume alarming proportions now! One is urged to ask oneself the question of how these traders - if they are the real ones who agitate at all - have the time or the capability to sustain consequent business losses as they spare all their energies and time to participate in such activities tirelessly!

A wholesale format of Bharti Walmart means that the Best Price Modern Wholesale offers products and services to its member retailers at wholesale prices which render clear retail margins that are said to be more than what the wholesale markets and distributors offer. This benefits those small retailers who currently buy from unorganized and semi-organized wholesale markets and distributors of Fast Moving Consumer Goods (FMCG). These wholesale markets and distributors operate with a differential pricing strategy, charging more  for those who avail unsecured credit and charging less for those who pay cash for their purchases. Often credit customers may not be able to avail of FMCG company initiated quantity purchase schemes and they are usually offset by the wholesalers for the interest costs they would incur on credit supplies/sales. The B2B model of Bharti Walmart is a distributing wholesale format that comes with a mock-store in the premises for training small retailers on stocking, shelving, planograms, etc. Walmart has also enabled credit purchases via a tie-up with a bank to offer credit and the retailer can use the authorized credit card. It has a 3PL (3rd party logistics) arrangement which helps the small retailers to avail of door deliveries at less than the standard transportation costs.

The organized B2B wholesale model may soon become commonplace across India with even domestic retailers from India, getting into it. The format is being set up by a dynamic retailer in Tamil Nadu,  Shri Kannan Departmental Stores (www.shrikannan.com) with the first large wholesale format already established in Singanallur, Coimbatore in Tamil Nadu. The extended format of Big Bazaar, the Big Bazaar Wholesale Club offers customers bulk deals at wholesale prices operating in a membership model. The bulk of the wholesalers in the Indian towns yet deal with small retail buyers in an unorganized manner that often results in higher landed costs and the resultant squeezed margins. If small and medium retailers have to grow in India, a modernized wholesale set up could support it undoubtedly.

Small retailers can focus their energies to get cost advantages through alliances, collaborations and obtain the needed scale in purchasing power by forming retailer cooperatives. The Government can support small retailers by providing exclusive infrastructure support like building strip malls and organized municipal markets in small towns. The creation of special bazaars in Hyderabad by the State's tourism department to promote arts and handicrafts through a 'night bazaar' is a typical example of what a state government can do in terms of infrastructure support for small artisans, traders and retailers. In large cities the need of the hour is exclusive parking facilities to enable customers to walk the high streets peacefully when they shop!

Each State in India can have its own say with regard to allowing foreign retailers to operate and in that scenario it should prevail on the minds of those intending companies like Walmart to focus first on the favourable ones, which is a no-brainer. Why the heck does one have to invite trouble even with a wholesale format, when one has enough ground to cover and operate peacefully?

                                                                                                   - Dr. Gibson G. Vedamani

Percolating Starbucks!

The expansion of the retail market in India can be mapped in direct proportion to the expansion of its infrastructure – a town expands and proportionately its retail market too, into its new areas and markets. A small town like Tumkur in Karnataka had only one shopping area - the Mandipet main road market, until a few years ago. But soon came with the expansion of the town and its infrastructure, the new high streets like the SIT Main Road, SS Puram Main Road, that have now become the shopping haven for the Tumkur customers. The town of Tumkur is just one example and in the case of any Indian small to mid-sized town, as rapid infrastructure growth is registered during the current decade, shopping high streets have been emerging at a frenetic pace. These are tier three and tier two towns with population spanning from three to five lakhs and from over five to ten lakhs respectively. The real estate market has been witnessing a distinctly higher percentage of growth than that of the economic growth rate of the country. A larger supply of retail space is also projected by analysts due to an expected increase in the Floor Space Index in towns and smaller towns are expected to have a good supply of quality real estate spaces at affordable prices. Therefore one expects retail to grow by a good measure that is by double digits, in tier two and tier three towns this year (2013). That said, the growth of modern retailing in cities is on a different pitch. It has been estimated by industry experts that in larger cities like Bangalore, Delhi and Mumbai retailers may continue to ‘actively lease space in superior quality malls due to the limited availability of new space and the low vacancy rates in existing prime malls’. 

While seriously growth-seeking retailers and new retailers may aim to grow in affordable smaller towns, those that come with great investments – like the Starbucks kind – may continue to look for establishing presence in key established markets at higher occupancy costs. As I was hunting for a small retail space for a proposed new retail venture recently, I came across an interesting landlord who had a 300 square feet space in a prime location in Seven Bungalows and he said that he was keen to have Starbucks as his tenant! When I asked him whether he would come down on the quoted lease rental of Rs.500 per square foot per month, pat came the reply that he might consider a considerable discount. Therefore, many landlords may be willing to forge a joint venture with reputed brands being ready to settle for a percentage of the topline without even demanding a minimum guaranteed return every month on their leased premises. The situation seems to be hunky dory for big brands seeking to enter the country. The homegrown big brands do not seem to have such good luck! We are yet to see a Shoppers Stop open in the SOBO (South Bombay) region! This trend shows that the reputed retailers entering India may fill even the limited vacancies that may emanate in established malls in big cities. There may not be a huge threat to small retailers in small and mid-sized towns as the big guys from abroad may not immediately rush into these markets as they might take time to establish in big cities first. Strategically while domestic retailers may seek to grow outside cities, debuting foreign retailers of say, categories such as food and apparel, may logically look within the big cities first!

It may be a rat race and a race for the survival of the fittest, as domestic retailers may keep moving fast outside cities into the smaller and smaller towns while foreign retailers who may seek to spread their wings into these markets closely following their heels.  But the foreign retailers may have to become Indian completely. The question of expansion feasibility of Starbucks into smaller towns to give a tough fight for Café Coffee Day that has already achieved scale of expansion in India having established in many small towns, may be answered within just the next two to three years and both the brands may compete on a level playing ground soon! After all they say that Starbucks in India has indigenized itself completely with its entire foodstuff sourced from Taj Stats and the coffee beans from Tata’s very own estates in India though the brand identities may only remain Starbucks!

- Dr. Gibson G. Vedamani

STALE SALE!

Sales in retail stores in India peaked on 26^th January. Newspapers carried full-page advertisements announcing even an unbalanced offer of ‘Buy 4 Get 7 Free!’. Reputed companies advertised their offers in their supermarkets and hypermarts, competing with each other! It was as though the world was coming to an end and there could be no other opportunity for these stores to clinch sales! A few years ago the Future Group hit upon its most popular annual Republic Day Sale. The maiden event was scheduled only for one day - on the Republic Day (sabse sasta din) - and it may yet remain green in our memory that there was a big scramble to gain entry into the Big Bazaar stores, almost resulting in a stampede. Later the event was planned to span over a period of a few days (sabse saste 5 din). 

Competing organizations I felt have run out of ideas and opportunities that they had to respond immediately too, to counter competitive moves! I often think that competing organizations like Reliance are so big and rich with retail talents that they do not have to toe the line with competition but could create many innovatively differentiated events to achieve greater sales in various time frames. Now the Republic Day has come to be more associated with SALE than with parades and celebrations. Gone are the days when people gathered in public places to celebrate the Republic Day but now they gather in queues in front of retail stores and malls expectantly waiting for their doors to open! This 26^th January, newspapers carried full-page advertisements that were very similar to each other in body copy and one could hardly remember or recall to memory which store carried the sale items and in what prices!

I walked into a few malls in the last two days to check out offers. The bargains were great! A couple of reputed apparel brands sported signage at the entrance like this: ‘FLAT 50% OFF’. In my humble understanding, everything that was sold in the stores was at 50% off. But when I was browsing I was disappointed to know that majority of the items were sold at 20% off and 30% off! Only a kids’ brand lived up to its claim of selling all the merchandise at a flat 50% off! Some genuinely made an announcement that the items on sale were ‘up to 50% off’ and some others said that ‘a lot of stuff were at 50% off’. I left the malls with a sad feeling failing to understand why reputed brands needed to con customers into entering their stores!

There were a very few other stores who stood out from competition, having either gone on sale earlier or waiting to go on sale later. M&S is one such store that did not go on sale during this period of heavy clearance of merchandise but was quietly cashing on the footfalls the malls were bringing to the store as a result of price promotions in other stores.

Quality accidents, shop-soiled merchandise, line close-outs and wrongly bought and accumulated unsold merchandise were always the reasons for organizing SALE in retail stores, but now it has become a strategy to pump up the topline a couple of times in the financial year to achieve budgets and so careful merchandise planning is done to organize merchandise for sale.

Has SALE overtly become a gimmick and a strategic move to increase sales more than being an attempt to clear unsold merchandise or overcome merchandising and operating failures?

- Dr. Gibson G. Vedamani