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Shopping malls shifting to Tier II, III cities

By Staff Reporter

GUWAHATI, March 30 � Guwahati is among the Tier-II and Tier-III cities in the country where mall-based retailers are moving in on account of high rentals and low footfalls in major metros.

Industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM) said in its latest paper on �Shopping Malls Increasingly Loosing Shine in Big Cities� that under pressure of high rentals and low footfalls one-third of retail tenants at the shopping malls in the large cities like Mumbai, Delhi, Chennai, Bengaluru and Kolkata are shifting to Tier-II and III cities.

�... such cities where the mall-based retailers are moving in include Goa, Kochi, Vijayawada, Vishakhapatnam, Mysore, Coimbatore, Trivandrum, Guwahati, Ahmedabad and Surat and they still hold more potential for growth,� the paper based on an ASSOCHAM trend survey, said, adding that Nagpur, Jaipur, Pune, Indore, Lucknow, Ludhiana and Chandigarh are among major cities where the sector is moving in, too.

As per ASSOCHAM estimates, roughly 300-350 malls came up in the country over the last two years but 75-80 per cent of the spaces in these malls lie vacant. Around the same time, as many as 95 malls have shut shop.

�The major three core benefits for the retailer-tenants to move to smaller cities are lower operational costs and comparatively lesser competition and the novelty values still left in these areas where even the nearby rural population is thronging the air-conditioned halls and getting the taste of comfortable shopping,� ASSOCHAM president Rana Kapoor said commenting on the paper.

�High cost of operation, economic slowdown and wearing down of the novelty values have all combined to reduce the number of footfalls in the malls in big cities. One of the main reasons for the high rentals in the big city malls is the exorbitant land prices and high development costs� Thus, in the foreseeable future, making such malls profitable ventures will remain a challenge,� he added.

The ASSOCHAM said that in Tier-II and Tier-III cities there is greater scope for growth and larger chunks of land are available in these cities compared to metros and at lower cost.

�The shopping trends in metro cities have influenced the consumer behaviour in Tier-II and Tier-III cities that are now witnessing a major shift from conventional trader-run stand-alone shops to larger format retail malls.

�The trend can be attributed to factors like the dynamic change in the shopping trend, average spending power of the socio-economic classes in the Tier-II to Tier-VI cities, demand of various products under one roof and increase in brand consciousness are a few factors that multi-brand discount franchising stores drives on,� said the paper.

The ASSOCHAM said that the retail growth of about 15 per cent per year is expected through 2015 on account of increasing prosperity in the neighbouring rural areas situated near Tier-II and III cities.

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