Causes of failure of malls

Malls as we understand, is a form of organized retailing. They lend an ideal shopping

experience with an amalgamation of product, service and entertainment.
The story of great Indian mall boom started from the emergence of Gurgaon, an industrial
suburb of Delhi. In a development that surprised many town planners, Gurgaon transformed
itself overnight by first housing the headquarters of many multinational corporations and
banks, and then calling itself the "shopping-mall capital of India".
Then to join the bandwagon was Rajouri Garden with a number of world class malls coming
up within a short duration of time. But this Mall Clutter led to a gradual & continuing
downfall of some of the malls in Delhi which was accelerated by the economic recession
affecting the world with India & specifically Delhi as no exception to this impact. But that is
a broader picture; we will specifically talk about the failure of some shopping malls & big
retail concepts in Delhi. In spite of big brand names existing in those malls & good location,
why these malls failed? What can be the possible reasons?
On the basis of Market research & analysis, it can be inferred that the most important factor
in the failure of these malls is the mismatch of the brand & the consumer. The brands
selected for the mall should be consistent with the kind of demographic profile of that region
or location.
Now it is very difficult to attract the brands first before deciding or finalizing on the location
of the mall & without proper specification & layout of the entire real estate. So, the better &
most logical approach is to finalize the location first & then attract suitable brands very
carefully. It is very important to keep the consumer or client profile of that region in mind.
The brands should be in accordance with the type of customers in that region because they
form the majority of the footfalls. So in order to understand the client profile, their
psychology, decision making criteria, buying behavior, tastes & preferences & motivations or
driving force behind purchase decision should be carefully examined & inferred. For
example, if the consumers of that region are observed over time to have spent more on food
than clothing, then a few good restaurants & fast food corners are a must for the success of
that mall.
A research was carried out in the region Shalimar Bagh in North-West Delhi, where a Mall
called Shoppin' Parkresulted in a complete failure because from survey it is established that
the majority of the population prefer to spend more on food & they prefer to shop Apparel
from local markets & approximately 30% of the population as found to be fashion conscious.
The remaining population is not bothered about the brand name or the values associated with
the brand. They lacked motivation to buy Branded apparels.
Another example can be the failure of Spencer's store in Ring Road Mall in Rohini, where in
spite of an excellent store in terms of ambience & assortment mix, the store is failing to
attract customers.
Moreover, the presence of a strong Anchor store is also a very critical factor in determining
the success of that mall. Strong brands like Pantaloons & Shoppers Stop acts as a pillar to
protect the brand. They attract
the majority of the customer through their brand names & it results in the increase of footfalls
in the malls & thereby generating more sales to other stores also.
SHOPPIN' PARK witnessed the downfall of "Indiabulls" as a retail store & hence the entire
mall crumbled down.
Adding to the woes is the rising prices of real estates. The real estate developers interests are
not matching with the retailers interests as the retailers are paying heavy rentals on real estate
& their monthly sales is not covering their rentals for months in continuation.
So the picture depicted for future of the Mall Culture is that the competition is fierce among
the malls to survive & only those malls will survive which will successfully go through a
detailed research on the consumer decision making process of those regions in particular.
This means taking a microscopic view of the consumer behavior including the study of
consumer psychology & studying their tastes & preferences & the factors which can
influence their buying behavior in a positive direction.
RETAILER’S MINDSET AND GOALS
There are certain objectives that a retailer has in mind before getting into private label goods.
Higher Margins- Private label goods are cheaper to produce than branded goods. Besides,
due to the lack of advertising and marketing expenses they provide double advantage to the
retailer when it comes to the profit margins. While majority of branded goods provide
margins in the range of 6-12%, private label goods can offer margins up to 40%. Not only
they give a higher margin to the retailers, private labels have also changed the balance of
power between brand manufacturers and retailers, giving the latter a decided advantage when
negotiating terms with the brand manufacturers.
Stronger Customer Loyalty -As the private label offerings increase and the quality is
assured; a high sense of loyalty is cultivated among its customer base. This customer loyalty
is the result of an affinity with the retailer brand which implies that the development of
private label brands can tangibly enhance the retailer’s brand itself. So in the long run, the
private labels become an important tool for the retailer to establish its positioning and
strategically attract the target customers to its outlet. Numerous studies have also shown that
private label buyers are more store-loyal and not as easily influenced as brand buyers.
Differentiation- Through private labels, retailers get a chance to bring in unique products in
their supply chains that have not been branded before. So if a retailer can cater to the local
tastes and preferences of the consumers will buy top quality private labels then they can
differentiate themselves from other stores and become destination stores. In effect, it’s a win-
win situation even for the producers who get a chance to display their produce.
Freedom with Pricing Strategy- A retailer promoting a private label has the added benefit
of greater freedom to play with pricing strategies, as a result of which these are overall
cheaper than brand leaders. For instance, in USA, some private labels are 25 percent cheaper
than leading brands. In addition, since it is an own private label, the retailer has the freedom
to create its own marketing strategy and have more control over its stock inventory. This
command of all the stages that a product goes through, gives the retailer high flexibility in
pricing.
Positioning during economic downturns- The growth of private labels is likely to continue
in the current financial environment as cash-strapped consumers' perception of the products
as a cheaper option changes. The price advantage of private labels leads to the belief that
these score in times of economic meltdown, and further that this newly-acquired market share
is maintained even as the recession swings out. Even after the economy bounces back,
consumers will naturally gravitate towards products marked at lower prices yet offering the
same quality, especially where the retail name is a trusted national or regional player.

FACTORS
There are many factors and things to be considered before introduction of the store brand.
The following are very important in order to make the brand a successful one; if the
following is not right then the brand cannot have a long term success.
a) Target customers:
Though there is a good response for the store brands introduced by the retailers, it should be
directed towards target customers i.e. to whom the products must reach. More over for a retail
store, the target customers would be the people above middle income group and people above
high income group (very rich). Because they are people with more income and as a result of
it they are often making visits to the retail store. PricewaterhouseCoopers (PwC) report
claims that the number of households earning more than Rs.45000 will go up from 30 million
in 1999-2000 to 81 million by 20015-16. It also further claims that the number of 'very rich'
households will increase six fold from 1 million to 6 million during the same period.
The PwC report further adds that the 'consuming class' and 'climbing class' – the two
segments that offer tremendous opportunities to retailers are expected to grow by 38.8% from
124 million households in 1994-95 to 159 million households by 20015-16. This increase in
the consuming class will lead to greatly increased purchasing power, signalling a bright
future for the organized retailing. So with the above facts if target customers are targeted
correctly then it do wonders for the store. The income of the people is on a rise, so if the
product is liked by them then it would be a successful one for the outlet.

b) Identify the needs of target customers:

Having the target customers, the store has to find the needs of the people which remain
unsatisfied. The needs of the customers have to be given due importance because the
consumers buying behaviour starts with it. If the needs are found, a product can made in such
a way that it satisfies their need. If the consumer finds that the product is satisfying him then
the retail store brand can be successful one. In order to identify the needs of the people,
survey can be made on the target customers. If this is costly, then information is got from
the key customers.
Feedback is got from the customers regarding their brands performance and if any need is
found not satisfied, the store would be designing a product based on that. The store is also
getting information voluntarily from their customers i.e. they would be giving the information
to their salesmen voluntarily and they are using this in order to design or develop a product.
c) Quality of the product:
First and foremost thing which makes the consumer to buy the product is theQUALITY of
the brand. If the quality of the product is good then customers will be attracted towards it.
When the quality is good, during alternatives (consumer behaviour) are evaluated, the
consumer attaches more importance to the retail brand. The store attaches more importance to
the quality of their brands and on anything else.
d) Price of the brand:
Price plays an important role in the creation of store brand. Most of the store brands are
purchased because they are priced 10% to 40% below the national brand. Because of this
most of the consumers are attracted towards the brand and this also used to differentiate the
store brand and the national brand.

In some it can also be premium store brands. There are two strategies for this. The first
strategy is to identify the gap in the market in accordance launch a premium store brand.
e) Positioning:
Positioning attracts the customers a lot easily towards the brand. When positioning of the
store brand is perfect, then pricing the brand above premium is possible. Moreover, when
introducing store brands, retailers may use either a differentiation strategy or an imitation
strategy in positioning the store brands. "Food Bazaar" positioned its private salt brand as
premium health salt which is available in the price of the ordinary salt. It enjoys 40 - 45%
market share in its category among all the "Food Bazaar" outlets. Thus it has used the
differentiation strategy and got success. The long-term losses that can happen due to
retaliation (imitation strategy) from national brand manufacturers who may withdraw
promotional and advertising support, which are essential to the development of the category
itself. Such support helps the whole category because it builds awareness and drives traffic to
the store.
f) Packaging:
Packaging plays a very important role because even if the customers are not aware about the
store brand, the packaging will make the consumer to see the product and it makes the
customer to inquire about the product. The store have a special unit for packing their store
brands and the design, look etc., of the package is vested with the packing unit. It is already
said that the customers of the retail outlet will be middle and upper class people. So the
packaging should be in such a way that it matches their taste.
g) Training to the employees:
Training is said to be important because the customers of the store will not be aware about
the store brands, its uses, its merits, etc. In order to fill this gap the employees of the store
must be given adequate training regarding their brand. Every time when the store introduces
its new store brand, they are providing one month training to their employees. The main
advantage of giving training to the employees is that, media advertising is not given for the
store brands, so the training can act as a substitute for advertising.
h) Promotion of the store brand:
Promotion is that aspect of marketing communications that keeps the product in the minds of
customers and helps stimulate trial and repeat purchase. Most retail owners and marketing
managers are familiar with promotional strategies such as:
• Advertising
• Personal selling
• Sales promotions (buy one get one, coupons, introductory offers, etc.)
• Public relations & publicity
For a retail store, media advertising is not needed, because it is already provided by the
national brand.
Feedback from the customers:
Feedback can be got from the customers regarding the store brand's performance and its
improvement. Feedback gives the satisfaction level of the customers. The store receives
feedback from the customers regarding their brand's performance. Feedback can also be used
for improving the qualities of the brand.
What are Own brands?
Own brands are the names given to consumer’ products produced by, or on behalf of
distributors and sold under the distributor’s own name or trademark through the distributor’s
own outlet. The development of own brands has strengthened the position of large scale
retailers as they gain extra control over the value chain. Own-brands are also known as own-
label brands.
Types of own brands
There are four main types of own brands: Generic, Price-led retailer brand, quality led own
brand, and exclusive own-brand.

1. Generic: Generic own-brands are plain packaging with no branding but may have the
retailer’s name. They are unadvertised and offered as a lower grade alternative purchase.
Generic brands are more popular in poorer areas and at times of recession.
2. Price-led retailer brand: Price-led retailer brand carries the name of the retailer. The
packaging is designed overtly to communicate the impression of value and of lower price.
The strategy is to provide better value than the manufacturers’ brands by setting a lower
price. Price-led retailer brand is followed for products purchased in large volume.
3. Quality led own brand: Quality led own brand focuses on quality of the brand. The
packaging is designed to reflect product quality. It competes directly with established
manufacturer brands. This is positioned as a close competitor. It builds brand image of
retailer, expands product assortment and increases margin.
4. Exclusive own-brand: Exclusive own brand is manufacturer based. The manufacturer
produces exclusive own brands to be sold through one retailer. This is a niche strategy based
upon differentiation to earn higher margins.

Advantage of own brands

The following are the advantages available from own-brand.

1. Boosts store patronage: A good quality own brand can boost store patronage. Improved
store loyalty occurs as consumers seek out a popular own-brand. The retailer’s brand on the
package acts as a constant reminder when the product is used at home. Own-brands
reinforce brand loyalty.

Offers greater price flexibility: Goods carrying an own label cannot be directly compared
on attributes in other retail outlets. Own label offers greater price flexibility. It does not need
to be repriced often.

3. Enhances store image: When the own brand is well received by consumers, the store
image is enhanced. The two reinforce each other as there is a circular reinforcement effect of
one on the other.
4. Attracts high levels of custom: Own brand products offer advantages over the
competition. This aspect will attract lot of customers and offer consumers a wide choice.
They can purchase from a wide range of the store’s products. Higher profits occur through
increased sales.
5. Free from restrictions: Retailers are free to follow their own methods of display,
promotion, pricing etc. But manufacturer’s brands are subject to the conditions imposed by
the manufacturers.
6. Becomes powerful and competes with manufacturer’s brands: Own brands offered by
super markets become powerful in the market. They place pressure on some of the major
branded manufacturers to offer concessions in order to avoid their brands being delisted.
7. Fills gaps left by the competition: Own brands are used to fill gaps left by the
competition. They are also positioned to appeal to the specific tastes of a store’s customers.
8. Lowers launch and distribution costs: The distribution channels of conventional
manufacturers are rather lengthy. So, launch and distribution costs for new products are
higher. But store brands are sold directly to stores’ customers. Such direct channel lowers the
distribution costs of own brands.