SDM Assignment

Mall Marketing & Distribution

Mall marketing managers had been focused on creating a sense of community. Today, they
have taken a new direction. The emphasis is now firmly on driving sales.With tenants
struggling to make rent payments as a result of falling sales, there is a newfound emphasis on
translating mall visits into actual sales. It's a return to focusing on malls' primary reason for
existence. The point is not to create public gathering places. It's to provide venues where
retailers can profit.

This has altered the kinds of campaigns being mounted at regional malls. In the past, when
the focus was on prolonging visits rather than driving sales, mall managers focused on events
like fashion shows for women, concerts for teenagers, car shows for men and cartoon
character themed events for young children. These events, even when shared by sponsoring
corporations like PepsiCo or Coca-Cola or Sprint, cost thousands of rupees to put on. But
mall owners didn't mind, convinced that it was part of making consumers feel like their local
mall was a place to hang out and linger however long they wanted. Malls should be a places
where shoppers feel welcome even if they didn't spend a single cent. In the long run, by
fostering loyalty, these efforts would pay off by creating customers for life for a mall and its
tenants.

Hurdles on the Way

The organized retail’s big hurdle is high retail rent. In the past six months, the retail rents
have come down between 30 and 40 percent. Yet, this figure is high. Many retailers across
the country are asking for further reduction in rent as sales fall and the amount of rents as a
portion of sales remain high.

In the international market, rents for retail space account for 4-5 percent of sales. But the
picture in India defies logic. The rents have spiraled in the past couple of years to as much as
20-40 percent of total sales. It has been observed that if the figure goes beyond 28 percent, it
becomes difficult for a small-format store to garner operational profit.

The stores in the international market break even in one-two years. In India, this can take as
long as three-four years and sometimes even longer. Reebok with more than 720 stores in
India paid about 10 per cent of sales as rent three years ago.

The rent is a strategic tool for a retailer to garner profit. In early 2004, the hype of organized
retail made many of the brand owners blind. In their quest to have first mover advantage in
geography they paid whatever they were asked to pay. No one at that time bargained or raised
any concern. There are instances, when the rent per square ft went up even in a day. The
serious thought of weighing pros and cons were never practiced. As a result, the demand
outpaced supply.

Things might change as the biggies in the game are asserting reduction of rents. They are
closing existing stores and opening new ones at places where the rent is affordable.
Make it an experience and not just a place for buying new products

The touch and feel experience is likely to break the clutter of campaigns and connect with the
potential shoppers smartly. This explains Philips India’s strategy to open 45 exclusive
experience zones in the Delhi and NCR. Christened Philips Lounges, these zones are being
set up in the traditional as well as modern retail stores, which would educate shoppers and
allow them to touch and feel products before deciding to buy them.

The impetus to start this kind of experience zone came from its consumer research which
nbrand has taken this insight so seriously that it plans to rollout these zones across the
country in a phased manner. Each centre is weaved around a category such as Lighting
Lounge, Health Lounge and Lifestyle Lounge. The initiative is supported by local area
communication activities.

Philips India’s other retail initiative is Philips Arena, a chain of Exclusive Philips Retail
outlets, showcasing the entire consumer electronics range of products sold by Philips India.
These stores are aesthetically designed to enhance the overall ambience focusing on
consumer needs and also serve as the centre for test marketing products and technologies,
gaining invaluable insights into consumer buying patterns and launching new marketing
initiatives. As a part of its retail initiative, the brand involves executives who are not
associated with store sales to walk into various stores and interact with customers directly.

The experience mode of introducing a brand is a smart way to make a lasting effect. Bose’s
India-entry strategy in 1999 was primarily through experiential marketing. Bose’s stores
prime role then was to educate and offer experience of its products to anybody with an ear for
music. Every hour, people in groups, walked through the Bose experience—and walked out
of the store with Bose subtly implanted in their minds.

Clarity of Thought

Caiman plays up its products in its store at DLF Place in Saket. Clarity of thought is
evident. The brand has a distinctive style of offering experience to its shoppers. The structure
inside is neat and devoid of unnecessary frills. However, the demarcation is visible. The
categories are displayed separately. So are the sub-categories inside it. The kids wear are
hanging at low level so that the kids who come with their parents can touch and feel the
hanging coloured shoes.

The floor is segmented adding a texture to the overall ambience of the store. The light is
soothing and the counter is appealing. The store has been designed in such way that the
attention of a shopper is focused on the products. The variety of products in terms of design
and colour offer a wide choice. A stylish comfortable seat is there to try out footwear of your
size.

The design and ambience of the store speaks in a way the confidence of the brand and its
craft of making shoes. The store is not only a sales point, but also serve as the place to
experience the brand.
Use of IT

An integrated software solution could help in ensuring safety—and even watch the number of
footfalls. As the retail proliferates across the country, the safety inside the malls is gaining
importance. The technology has evolved and software solutions are now available to monitor
malls that cover over one million sq ft of space. Every sq ft of space could be watched 24x7
with the help of sensors.

Increase in physical security by deploying more security personnel would spoil the ambience
of a mall. Too many close circuit TV is another option, which is silent and less intrusive. But
the person managing the control room would find it tough to keep an eye on the monitor
displaying the visuals tracked by all the cameras. He might miss something because of visual
fatigue caused by watching the monitor for a long stretch of time. Honeywell has developed
an integrated software solution, which is capable of noticing even minor changes in the
environment and alerting personnel immediately to take appropriate action.

The software solution could detect minor vibrations through the sensors placed on different
locations inside a mall. An unattended packet or bag could be noticed easily and action could
be taken swiftly. It can even alert if a camera is damaged. A fire in the premises could be
detected early and thus could be extinguished promptly.

The software solution could also play a faceless guard in a store or a chain of stores when the
store is closed. It would set an alarm if the cash box is opened or people enter the store when
it is supposed to be closed. It can help a chain of stores to monitor security from a central
location and take prompt action immediately if something unusual is noticed.

Interestingly the same software could be used as a tool to track footfalls daily in a store and
thus assign the number of personnel needed to manage the store.

Looking into the Future

Long term prospects for retail chain expansion are still attractive. The report asserts that
the retail would go through a phase of consolidation. The current slowdown, according to the
report, might last for 12-18 months depending on government incentives in increasing spends
on infrastructure, development initiatives and other activities to stimulate the economy.

The analysts expect that there would be an increase in focus on value retail in the coming
months and a shift away from lifestyle goods. An increasing action in food retailing and
FMCG products is expected, as this segment is largely insulated from the slowdown. The
categories such as home-furnishing are less favoured.

The retailers are likely to close unprofitable stores and rationalize capital expenditure, as a
part of cost optimization. The frequency with which retailers liquidate slow-moving goods by
offering discounts to reduce inventory is likely to increase. From the point of location, as tier-
I cities become saturated, the retailer would prefer to move to tier-II and tier-III cities where
profits are higher due to lower rentals and operating costs.
Submitted By:

Kranti P. Singh

115/09

Section A