Showing posts with label Foodcourts. Show all posts
Showing posts with label Foodcourts. Show all posts

19 June, 2022

The rise of Tier 2 towns

Have been on a pan-India tour for the past few weeks, visiting our stores, interacting with my colleagues, our valued franchise partners, mall managers, heads & ecosystem partners and of course, our esteemed customers. I must admit that my trips have been skewed to Tier 2 towns and by design. For, this is where India lives and spends. Over the past 24 months or so, we have witnessed a massive reverse migration from bigger cities to smaller towns, ever since the pandemic led lockdown began. Initially thought to be a short-term trend, things seem to have gained traction all across India for the past 1 year. So much so, that many employees across Industries and companies are now – literally demanding – that they be allowed to WFH with a hybrid model of physical presence at the office precincts.

One’s loss is another’s gain, they say. As a Retailer, I cannot complain!

The photo above was taken early June at Uttar Pradesh capital Lucknow’s famed Phoenix Pallasio Mall on a weekday. The 1 million sq.ft. Mall has a dozen or so international luxury brands, 3 dozen+ international premium brands, over 50+ domestic brands and scores of regional brands in fashion and food. This mall is located pretty much in the outskirts of the town and has a neighbour closely, the 6-lakh sq.ft. Lulu mall which opens doors in Q2 FY22. Last week I was at Guwahati, Assam and our Franchise Partners says the state is about to get 8 new malls. At a Starbucks cafe in Bhubaneswar’s Esplanade Mall, I saw for the first time more tables filled with family crowds than anywhere in India! The foodcourts across Malls are overflowing as though there is a shortage of food in some areas (sic). 

This kind of retail upswing in Tier 2 towns is unprecedented at best. As I celebrate by silver jubilee in Retail this year – 25th year since I started scooping ice-cream in 1997, I have seen multiple waves in retail. The first one was around 2001, when modern retail hit the streets. Around 2008, we saw a Mall boom, primarily led by the Metro cities and Tier-2 asking for department store chains like Central, Shoppers Stop, Lifestyle, Westside among others. Around 2014, the retail growth hit a peak with several unstructured malls (zoning wise) either shutting shop or turning coats to become a commercial (offices) dwelling. Since 2017, things swung back to action, especially after the introduction of GST, much to the surprise of economic critics and experts.

We live in a pandemic world – I don’t call it a post pandemic one – because the virus is just here to stay in some form or the other. Just that we humans have become more resilient. Every 6-8 weeks, the Media Industry fuels scare with new statistics, but consumers have been dodging these overtures since Sep. ’21. This shall continue for a while and eventually pass by. But the growth of Tier 2 markets is here to stay for sometime. One big reason for this is that there is money in the pockets of the aspirational middle class. Monsoons have been good for the past 2 years, so has been Agri-production. Oil crisis has been surging ever since the Ukraine-Russia conflict began. But India and Indians have adjusted. The statistic compilation on inflations seems to read otherwise, but that’s more theory I guess. The jobless have remain so by choice, not because there is a lack of opportunity.

While a small group of people were throwing stones and torching trains at Patna Railway station last week, I saw several hundreds of youth at retail stores and malls working earnestly for a better today and tomorrow for themselves and their families. Real estate, residential and empty plots - especially if it is of any indication, then the smaller towns seem to be a better bet in terms of wealth creation. The surge in Tier 2 markets across India seems to be unstoppable, atleast in the Retail sector, one that is integral to me personally and professionally. The rent for retail stores matches metro cities by 1:1, sometimes 1: 1.5 or even more. The challenge is supply (of spaces) and not demand. This will settle down soon, as well.

 

12 June, 2016

Is it Game Over for Malls?


Whose fault is it, I wondered, when I entered this iconic location last weekend. The Mall was nearly empty on a sunny Saturday afternoon. Car Parking area, which is the core identity of any Mall or Shopping centre such as a Retail Store or a Hypermarket was barely full, with a few cars parked intermittently.


The ground floor has a Mercedes Benz Car parked in the atrium, with curious onlookers not even sure if they would like to go closeby. Basics, which has won the hearts of Chennaites being a local brand with an International appeal has shut store. And so have so many stores. Lifestyle Department Store, the Anchor store of the Mall wears a dull look. The security guard at the entrance seems unhappy and bored with almost no visitors for a while. Even some of the food outlets and a cafĂ© which were doing some basic business seem to be shut. I walked up the Escalator and was surprised to see empty stores all over!



The Foodcourt was the saddest. Half the counters were shut. The one or two who were functioning were neither providing tasty food nor were bothered about customer service. They were just serving a need, of thirst and hunger and nothing beyond. The dining areas was hardly populated, with many tables not even having chairs, forget patrons. Those who were having a meal were merely passersby and I couldn’t notice even a few of them with shopping bags.


McDonalds continues to attract crowds, perhaps the brand pull makes all the difference. The play area did have some crowds, but not sustainable to send them to other parts of the mall.


Inox Multiplex with half a dozen screens was barely empty, with 4 new releases this week. That food prices in the canteen area of Inox is a put off is another blog column by itself! Even then, people should come to watch a movie in the weekend? That was also not to be seen.


Despite being in the centre of the city (and hence its name), why is the mall so empty? What went wrong with the Mall which was once the pride of Chennai? A decade back, rental costs in the mall used to hover around Rs. 180-300 per sft. Now there are hardly any takers. Retailers have shunned the mall. Food Outlets, which would anyway attract crowds and make some decent revenues seem to dislike being in the Mall. Whose fault is it anyway? Is it that the customers walked away from the Mall to bigger and better options such as Express Avenue Mall which is about 5 kms away? Or have they gone farther to the likes of Phoenix Market city or Vijaya Forum Mall?


This Mall has huge potential given its location, a stone’s throw from the Marina Beach and easy access from the rest of South Madras. It has enough parking space for shoppers, enough shopping space, cinema, foodcourt, play areas, what not. With a little bit of effort, this Mall can be turned around. Will the authorities get a good consultant and work in the renovation? Time will tell.

13 March, 2014

Food Retail is tuff…

Restaurant business is damn exciting. While people don’t shop for clothes and mobiles every weekend, most people drop over for a good meal frequently and a great meal, once in a while. Great Meal, I mean is a bit indulgent. It could be a Michelin rated restaurant. It could be one among the top 10 restaurants in the country. It could be a celebrity chef’s eating place. Ofcourse, the Five-Stars. The list is long. However, the food business is also one of the tuffest to be in. In fact, it is also one of the retail formats where the churn is very high. For every 6 successful restaurants, three of them fail. And the reasons for failure are aplenty, Customer Service (or the lack of it) being one of the main reasons why restaurants cannot keep up in the short to medium term. Also, investors are not too keen to fund ventures that do not show the ability to scale. 2-3 outlets is not scaling up. It should be in double digits. Most of the restaurant owners are entrepreneurs, many having chosen the route to entrepreneurship after stints in corporate life. They invest their life time savings to open a restaurant (also includes Pubs / Nighclubs / Others) and usually find the going tuff within 18-24 months of opening. That’s when the business matures and needs further investment in marketing and PR – the machinery that keeps restaurants going. I was at a restaurant called “Tangerine” in the upmarket Alwarpet locality in Chennai. The last I had been there was about a decade back. The food was excellent, just how I remember it had tasted during my last visit. However, the place was a bit worn down. The kitchen, which has limited space and equipment cannot cook more than two dishes at a time, which increases the waiting time for guests. The staff fare not all that excited, since they don’t get regular footfalls all over the week.

Lashakahari

The business is all the more difficult if they operate in niche categories. In a city like Chennai, there is a strong thrust on Veg-only restaurants. Yes, you heard that right. In fact, India is the only country in the world which has so many veg-only restaurants and that too, all across the country. I visited one last month. It is called La Shakahari. La, being a french word and Shakahari being vegetarian in Hindi language. The restaurant is located inside a residential area and I was almost being challenged by the Google Map in my phone to find the place despite its best efforts. But once we entered, we realized what a great place it was. They had a set-menu as well as A la Carte. The set-menu offerred more items for what we would have paid otherwise while ordering them individually.

One of the biggest challenges that Restaurateurs face is the inability to scale-up. Most times, it’s the lack of capital. At times, it’s the lack of intent and interest to grow. A potential investor would indeed be able to show inclination to projects which are tried and tested. However, many entrepreneurs just don’t expand. Another option to scale up is the Franchising route. However, the risk is you would lose consistency in the long term and many of them would probably serve food that tastes different.  For fear of not diluting their exclusive menu and taste that it offers, these restaurants remain standalone ventures and thus allow others to crop up in other parts of the city.

Of all retail formats, the F&B format is one of the toughest to operate. Many of them shut shop within 24 months of opening. If they withstand any further, then they strive to stay for a long time in their lifecycle. It also depends on the choice of real estate – Rent is almost 20% of Sales in Malls and about 12-15% at High Street locations. And that’s why you don’t find many of them in Malls not doing well or being priced exorbitantly. At the end of the day, the success of a restaurant is actually many factors playing in.

21 November, 2013

Brewing Cheer with Beer!

I recently happened to meet Rahul Singh, Founder and CEO of “The Beer CafĂ©”, an upcoming chain in Delhi NCR, based out of Gurgaon. Rahul comes across as an affable person, having spent over 20 years in the Indian Retail Industry. Before turning entrepreneur, Rahul was working for Reebok as Executive Director and was responsible for sourcing apparel for domestic as well as export markets. An electrifying guy, Rahul seems to have a natural flair for entrepreneurship. It was a chance meeting to discuss a business proposition but turned out to be a very engaging 90 minutes one on one. Prior to The Beer CafĂ©, Rahul  was responsible for creating the first ever indoor Golf centre along with F&B and Entertainment at Gurgaon, at the upscale Ambience Mall.

TBC 1

I couldn’t resist but to ask Rahul how many months did he take to come up with the idea of a Beer only place. He was quick to retort saying that it took him just two months! I loved the way he simplified his method of narrowing down the concept. According to Rahul, there are three broad categories in the F&B Business – Fine Dine, Quick Service and Fast Food. He chose the Fast Food model. Within that, there were two options – to focus on food or beverage and he chose the latter. And within Beverages (read Coffee CafĂ© chains like CafĂ© Coffee Day, Barista, Costa Coffee, Gloria Jeans and Starbucks which have more than 2,000 cafes in India), he chose cold beverages and that’s how the idea of Beer CafĂ© was born. Simple idea that relies on classy execution.

Rahul wants his chain to be the CCD of beer and conversations. Alcohol frees up the mind and the soul and today, one has fewer choices to consume a pint of beer, either at a restaurant or at a Pub (home parties are a limited choice though). So, he wanted to set-up Beer Cafes in convenient locations where people could drop by with their friends or colleagues at work for a quick chat or a relaxed conversation.

TBC 2

The Beer Café now has over 11 locations within Delhi/NCR and would have about 30 operational outlets within the next three months! With VC funding coming in, Rahul hopes to grow the café network substantially over the next couple of months. His only gripe: Real estate costs of First World with consumer spends of Third World. Every Retailer would agree to this quote. Operating Costs, especially store rentals are extremely high and staff attrition is another big challenge. Rahul is now looking for an able COO to run the business, so he could take a bigger role in managing Strategy and Expansion.

The café is very appealing, with bright lights and a friendly attitude of staff. On a weekday evening when I passed by at the Beer Café at the Ambience Mall at Gurgaon, there were many who were having a good time seemingly. And many more would be in times to come.

07 November, 2013

Should Cafes Advertise?

I came across two special offers by India’s leading cafĂ© chains CafĂ© Coffee Day and Barista today. One was through a email campaign – Buy One (Cappuccino), Get One Free. And the other was on newspapers – a combo offer of a Cappuccino and Egg Wrap at a discount of over 35%. And this was not an isolated case – both these cafĂ© chains have been advertising in the mainline media for quite a while now and have also been continuously offering discounts over the past couple of months on their products. And all this for attracting footfalls into their cafes. with the onslaught of new cafĂ© chains such as Starbucks over the recent months and those such as Gloria Jeans, Costa Coffee and other regional cafĂ© chains, this space has been witnessing active poaching of customers. However, the regulars haven’s shifted loyalty, and that’s in the proof of the pudding. If that were the case, monthly sales of these chains fluctuate quite much, which has not been the case.

Barista

The biggest effort for cafes, contrary to what we believe is not just retaining existing customers but attracting new ones as well. CCD, as it is popularly known has followed a deep penetration strategy in large cities like Bangalore (where it is headquartered), Mumbai, Delhi, Hyderabad, Chennai and Kolkata. There are over 8-10 cafes of CCD within a 3 sq. km radius in Bangalore and all cafes are full with guests in peak times. Chennai, the hotbed of the South Indian Coffee culture has grown slower for CCD than other cities. That’s perhaps because the iconic Filter Coffee available in regional restaurant chains such as Saravana Bhavan, Ananda Bhavan, Vasantha Bhavan, to name a few are just unbeatable. The modern cafes also do not prepare the filter coffee and are more popular with the Cappuccino, the Latte, the Americano, the Espresso and ofcourse the cold coffee varieties which are difficult to replicate and are not easily available at other restaurants. Barista, which has slowed down its growth over the past three years and has focused on store profitability rather has been a pioneer of the coffee culture in the North, especially in Delhi. It has also been heavily advertising especially in conjunction with India’s leading newspaper Times of India about various offers.

CCD

So, this set me out thinking, “Should cafes advertise?”

The first answer that comes to my mind, is Yes, indeed they should. Every company must advertise its products and services through relevant media to their target customers. There are two kinds of advertising, I would say. One is the Corporate form; CCD came up with its campaign “sitdownism” a few months bacj which was an instant hit among the youth and was well appreciated within the Advertising faternity. And the other is advertising its products and services. But then, for cafes, in my opinion, being present in a locality is itself the best form of advertising. The store itself is an advertisement (and holds true for other retail formats too). Be it Malls or High Streets or Airports, CafĂ© are often point of direction or a meeting place. CCD at Bangalore Airport is located in a very prominent place such that no one can ever miss seeing it. Same applies for Gloria Jeans at Hyderabad Airport. However, At Delhi Airport’s T3 Terminal, Starbucks is quite tucked away and is almost missed by everyone.

The café should rather focus on the following to retain customers and to attract newer ones mainly through word of mouth;

  • Ambience
  • Convenience
  • Familiarity
  • Consistency
  • Quality

These are some factors which potential customers would consider before they step into the cafĂ© for coffee and conversations. Most of them, even college kids who are the most targeted for such cafes do not like to indulge on products that are heavily discounted. Or would like to be seen in places which are positioned as being “discounted”.  I would wonder then, why do cafes scream so loudly that they have products which are “discounted” and gain adverse publicity. A satisfied customer would get ten more, goes an old saying. Cafes would do better in attracting newer customers if they provided top quality Coffee and other Food & Beverages to its customers with consistent quality and convenience (Read: Furniture, Sofas, Chairs, Plug points for Laptops, Wi+Fi, toilets) and make the place a familiar one for them to revisit. Afterall, cafes are meant to be the third alternative place after Home and Office and hence need to be the first point of recall for customers to walk into.

28 October, 2013

Chennai Airport is a sham(e)!

Even before I was part of the exciting world of Airports (in 2006), I have always been a big fan of the commercial opportunities at transit points, be it the railway stations or bus terminals, let alone airports. It was always a craze to have a cup of coffee at the railway station when we would go over to pick up our loved ones arriving from long distances, especially if the visits were made once in a couple of years. It was yet another joy to consume within trains – from Rajdhanis to Shatabdis to the passenger trains that would have hawkers selling everything from peanuts to guavas to oranges to chips and snacks. The joy of consumption during travel would somehow take over the joy of travel itself.

2013-06-18 05.38.25

I have been using airports for just over 15 years now. My first flight was to Mumbai from Chennai to attend a job interview with a leading Retail Chain, with air tickets being sponsored by the company. That was the first time I was inside an Airport terminal, although I have been several times before that to drop off or receive guests from the Chennai Airport. The airport was and continues to be an important piece of the growth story of the state (of Tamilnadu) as well as served as a gateway to the rest of Southern India. In 2005, when the Government of India announced privatisation of Airports, the most protests were seen outside the Chennai Airport, the maximum being only second to the city of Kolkata. The staff of Airports Authority of India (AAI) and allied agencies protested that their livelihoods would be lost if the airport was privatised. The Government succumbed to pressure; Chennai’s loss was to the gain of Bangalore and Hyderabad. Both the cities claim to be the Gateway to South India and came up with world class private airports in the outskirts of the city in 2008, albeit the cities have been growing faster in their respective airport corridors over the past 8 years. Mumbai and Delhi somehow managed to keep the privatisation tab on. Delhi’s T3 Airport Terminal, which is managed by the GMR Group  was built in record time and is now ranked among the top 5 in the world, consecutively for the past 3 years. Mumbai Airport, managed by the GVK Group built two new terminals for Domestic and International passengers and is struggling the political onslaught for space within its precincts which has been occupied by the public at large. Kolkata and Chennai Airports were allowed to be redeveloped by AAI and the work completed early this year with a time overshoot of over 9 months and a cost escalation of several hundred crores.

According to a recent survey by passengers on sleepinginairports.com, Kolkata Airport has been ranked 2nd worst in the world, with Chennai following a close third. What an infamy for a state which is considered the Detroit of India housing majors such as Ford, Nissan, Hyundai, Royal Enfield, Ashok Leyland, Hindustan Motors, MRF Tyres, Saint Gobain, Nokia, Samsung and many more! Chennai Port handles one of the highest loads in the peninsula. Chennai’s knowledgeable crowd contributes significantly to the Indian economy with Chennaites occupying important positions in the Indian Government as well as in global positions worldwide. And we have such a dud of an airport!

2013-04-17 05.36.48

I feel quite disappointed, first as a citizen of the country and then as a resident of the city to pass through such an unglamorous airport every week, when I travel on work. The facilities are poorly planned. The Four Cs of airports, Comfort, Convenience, Cleanliness and Customer Service are shameful, to say the least. The only saving grace is the imposing façade which looks attractive for those passing by on the Grand Southern Trunk Road outside, but nothing more inside. There are no refreshments available outside the terminal, save for a sole counter which sells local cuisine at thrice the price of what’s sold downtown and a small kiosk of CafĂ© Coffee Day. The check-in hall has two ‘counters” where one needs to stand and eat snacks or sip coffee, just next to a dustbin which usually overflows, as though it’s a sort of a punishment. There is no bookshop or any other similar offering around; the only thing that solves passengers’ woes being the complimentary newspapers. The Departure areas are even worse. The layout of shops and other convenience is so bad that one would rather not step in than feeling disappointed thereafter. Cookieman and Frech Loaf are the only saving grace in the mess, although tehir products are meant to be take aways rather than consuming then and there. No Foodcourts or QSRs, just a restaurant located at the far end of the terminal. Services such as Taxi Operators and Forex are abysmally managed, with long queues for taxis in the peak hours in the evenings with unavailability of taxis for passengers. Airside services such as baggage handling are terrible. There are only four baggage belts and checked in luggage may arrive anywhere between 15-45 minutes after you land at the airport. There are only four aerobridges and the buses which provide ground transportation from the terminal to the aircrafts are poorly maintained. There is no complimentary Wi+Fi within the terminals. The airline staff and security staff from Central Industrial Security Force or CISF have a similar attitude as those who manage the airport – one that is indifferent and unfriendly. After all, it’s not just their fault since there is no one to oversee how good (or bad) their service towards passengers is.

2013-09-30 05.58.39

I still believe there is hope. There is a plan to privatize the terminals through an open tender and the decision is expected to be taken by the end of this year with work to begin early 2014. Senior Executives from the companies which plan to bid had visited the airport to conduct a survey two weeks back were apparently welcomed by protestors from AAI, shooing them back not wanting privatization. But this time around, the Government doesn’t seem to back out. Hopefully, good sense would prevail and the airport would be handed over to a competent agency to serve passengers better.

An Airport is the face of a city and must display pride of place. It is the first point where international visitors to the country alight at. It is indeed important to put up a great one and maintain it as well. Lets hope.

28 September, 2013

Restaurants in Malls…

I was recently at Forum Vijaya Mall (Chennai), one of the newest in town. It was a Sunday and I was there for lunch, but the upper level of car parking was almost empty around noon, which took me by surprise. However, I was told two days later by someone who works for the Mall that there were over 45,000 footfalls on that day. The Restaurant that I was supposed to visit was located on the second floor of the Mall. As is usually the case, I checked the reviews of the restaurant on the Zomato app on my iPhone. Most of them had written good things about the place and its menu, not to forget their wonderful service. Here is a sample;

After such a good meal, the bill came to around 2500 bucks. "Not bad at all!", we thought, given the amount of food we had eaten. The service too was perfect. The waiters were very watchful, responsive and most importantly, proactive. – Amruth

A great place with tastefully done interiors and food! The options on the menu are limited, but every single item you are served taste good and also look really good on the plate! – Nandhini

If I have to be perfectly honest, there could not be a more unfortunate location to host such a lovely restaurant. A mall in Vadapalani is hardly any place for a classy place like this. Where venue fails, Salt takes North Indian Cuisine and gives it a fantastic twist, to ensure they stand out from the others. I expect much more of this restaurant in the near future. – Vaishnavi

Apart from many reviews, the one above set me thinking. Are Restaurants in Malls a viable option as compared to those on high streets? Are Mall shoppers the right TG for specialty restaurants in Malls? For the cost of operation in Malls, do restaurants make any money at all as a business option? When I spoke to the gentleman who runs the restaurant, he mentioned that the rent is about Rs. 65 per sft per month. Assuming they have an area of 2,000 sft, their rent per month would be about Rs. 1.30 lakhs. Add to that all other expenses which would be around Rs. 2 lakhs pm. On a conservative estimate of Rs. 15 lakhs of sales per month and an operating margin of 50%, the store would recover its expenses and have an EBIDTA of about Rs. 2 –3 lakhs per month. Given the way the outlet has been done, their investment would have been about Rs. 70 lakhs. So, the restaurant makes about Rs. 25 lakhs in profits (before interest and taxes a year)  and would take about 3 years to break even.

2013-09-22 16.17.12

On the contrary, business would be double, if not more were it to be on a High Street. There are a number of good quality specialty restaurants that are garnering those numbers already. So, why do Restaurants still prefer Malls? Perhaps, Brand building and familiarity. I don’t see any logical reason why someone would invest so heavily in a Restaurant inside a Mall and wait for 3-4 years to break even, when it could be faster in a High Street. What works best are for established brands such as Rajdhani, Sigree, Mainland China, etc. which have built reputation over the years and have hence chosen to be within Malls to leverage their brand value. For first timers in the Restaurant business, Malls are probably not the place to be in. This is not restricted just to Chennai but to other cities as well. I was at Chandigarh a few weeks back and they have a brand new Mall called Elante. I was almost alone at Chilis on a weekday evening, which is located in the same floor as the cinemas on the fourth floor of the mall. Restaurants in India’s most successful Mall, Select City Walk face the same fate – Restaurants are empty through the week with weekends being their only busy times.

So, what ails Restaurants in Malls?

Mall shoppers are mostly for spending time, probably window shopping. Conversions for Retailers too is lower than on high streets. The sheer number of footfalls make up for lower conversions and therefore helps Retailers and Restaurants. Unless you are a destination such as a Shoppers Stop, Lifestyle, Café Coffee Day, Starbucks, Subway, KFC, Pizza Hut, etc. These are places which plan to visit and hence drop by. Eating out is way to expensive these days, given the cost of ingredients. And Restaurants are trying their best not to upset their clientele by absorbing losses as much as they can. But then, consumers are staying away from eating places on a regular basis, as was the case a couple of years ago. For example, a could of years ago, the neighbourhood area of Koramangala in Bangalore had almost 50 eating joints, a third of whom have closed over the last one year.

2013-09-26 14.05.49

Mall hoppers prefer food courts instead, which are usually pathetically planned. Mall planners in India somehow do not build large enough food courts, with thousand of chairs and a breathable exhaust system, that are modular and scalable as and when consumers increase. Instead, they try to lease all counters at one shot thereby not having scope for further expansion in future. What would cost around Rs. 600 for a family of three in the food court would probably cost over 50% more in a fine dine restaurant within the Mall.

Restaurateurs would do well to experiment new concepts first on the High Streets. That is where people frequent. There are no SCAM, errrr CAM expenses (Common Area Maintenance) on High Street Locations and no restrictions to close the restaurant at a stipulated time. The biggest benefit of being on High Streets is that the signage builds familiarity among customers over time. No wonder, there are more successful restaurants in India and the world over on High Streets!

22 May, 2013

Inviting patrons for a great feast

The Hotel Industry in India is facing tough times ever since the global recession occurred a couple of years ago. In my current role at Royal Enfield as Head of Business Development, I travel atleast 2-3 days every week across the country. Whenever I try to book rooms in small and big cities, the room rates just surprises me. I was trying to look for rooms in Hyderabad for stay over the next few days and was surprised to find discounted rates at 5 star hotels for as low as Rs. 5000 (USD 90). The Leela and Grand Chola – both touted as 7 star rated properties in Chennai are offering over 40% discounts on printed rates, to as low as Rs. 7,000 (USD 130). Same is the case in Delhi, Gurgaon, Mumbai, Pune and is even worse in smaller towns. I stayed in Trichy, a city in central TamilNadu which connects a number of other towns of prominence in business and culture within a 100 km radius during the first week of May 2013. On the MakeMyTrip mobile app for the Apple iPhone, I could get a double room for three adults and two kids for as low as Rs. 2,500 (USD 55). The room was quite large to hold a King size bed and two single beds. I have stayed in cities like Coimbatore, Dehra Dun, Jammu, Patna and many others for similar rates in well maintained properties. The outlook for hospitality in India as such wears a glim look and with increasing inventory and competition, not to forget the choices that customers make, the pricing is aggressive at most of the properties. This is where ancillary income to Hotels are helping them.

Cappucino

Most of the hotels have in-house restaurants, mainly to cater to resident guests. Many of them advertise these restaurants quite heavily, thereby attracting visitors through the year irrespective of peak season or otherwise for room occupancy. While this practice has been there for long, its quite evident these days with a number of hotels including some premium Hotel chains advertising in the media. What caught my attention recently  was an ad (displayed above), by ITC Hotels, one of India’s largest companies in the hospitality space for their Cappuccino Restaurant at the erstwhile Park Sheraton (in Chennai) . They have advertised buffet options with prices! Do those patrons who visit these places really care for the price? I mean – everyone does. But then, do people care what the final bill is gonna be when they visit star rated hotels and restaurants? I really doubt. Restaurant incomes are an important source of revenue for Hotels. They contribute anywhere between 7-25% of total sales depending on how well these restaurants are positioned and popularised. Some of the restaurants in these hotels are even Michelin-rated – a rating by the Vehicle Tyres powerhouse Michelin which grades eating joints across the world and shares in a report that is published annually.

Suggested Reading: Franchising

Stand-alone restaurants are doing their best too, to woo potential customers. They advertise in leading newspapers regularly to attract attention and over a period of time become destinations. In some cases, they are located within hotels and Malls and in many cases they are located on High Streets. User reviews in sites and apps such as Trip Advisor, Zomato, Burrp! etc. help them gain more traction. Chains like McDonalds, Pizza Hut, Subway and Café Coffee Day advertise across the media regularly to pull customers to their outlets and many of them even offer complimentary WiFi as a hook to retain them.

Suggested Reading: Does Free Wifi help?

With inflation leading to peak rates of food items, it is becoming impossible to middle class families to venture out eating outside. But the upper-middle class seems to be slightly more insulated, fuelling the needs of these restaurants. While premium hotels and restaurants promise great food (quality) and a wonderful ambience, consistency is key. To retain existing customers and to attract newer ones. If you are planning a visit to a nearby restaurant this weekend, flip through the pages of newspapers or mobile apps and you may be in for a surprise at a hotel nearby you! Happy Dining…

Suggested Reading: Food Inflation

30 April, 2013

The Third Place just got costlier!

 

Eatery 1

On Monday, 29th April 2013, The Tamil Nadu Hotels Association (TNHA) observed a one-day strike to protest against the Central Government’s decision to impose Service Tax on their businesses. Speaking to the media, TNHA President M. Venkadasubbu said, “The TNHA had taken the lead to organise similar associations in all states in this regard and a federation, the Federation of Hotel Associations, had also been formed for the first time in the country.The announcement of Service Tax was made by India’s Union Finance Minister Mr. P Chidambaram in the Union budget and had already come into effect, beginning this month… (April 2013). The Service Tax of 12.36 per cent levied out of the 40 per cent of the sales proceeds is illegal and a big burden on consumers who are already forced to bear the brunt of price escalation due to inflation. While the hotels and restaurants were already paying VAT ranging from 2 to 14 per cent, the new Service Tax levied by the Central government would amount to double taxation,” he said. ‘This problem of double taxation was discussed at a meeting organised by the Federation of Hotel Associations (comprising office bearers and representatives of hotel associations from all states) in Mumbai last week and a unanimous decision was taken to launch a nationwide bandh if the Central government did not roll back the Service Tax.’

Eating out has become extremely expensive over the past decade. I remember, when I was in Graduate School, with pocket money of less than Rs. 300/- per month, we could meet most of our out-of-home expenses including filling fuel for our bikes. Not so these days. The purpose of having a meal outside home, The Third Place as it is called is not just eating. It’s all about building camaraderie and relationship/bonding with family and friends. Ray Oldenberg defined the third place as an alternative to Home and Workplace in his research paper in 1991. Oldenburg calls one's "first place" the home and those that one lives with. The "second place" is the workplace — where people may actually spend most of their time. Third places, then, are "anchors" of community life and facilitate and foster broader, more creative interaction.There were already numerous such spaces all over the world. Cafes, Restaurants and other Eating Spots are among the most sought after third-places. In India, cafes and eateries have burgeoned all over the country in the past few years. CafĂ© Coffee Day, India’s largest cafĂ© chain has over 1,400 cafes across the country. Starbucks, Costa, Coffee Bean and Tea Leaf, Gloria Jeans, Mocha and many other such international and domestic cafĂ© chains have their outlets spread across major cities, providing an opportunity to people to hang around and discuss everything under the sun – from personal banters to professional meetings to matrimonial discussions, one can find all of those out there. Apart from Coffee Shops, there are over half a million eateries of various shapes and sizes across the country which provide Food & Beverage options. For nuclear families, eating out is one of the biggest entertainment these days, what with very little time to spend with the family!

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With the proposed new tax, food bills are expected to go up significantly to consumers. For example, on a bill of say, Rs. 1,000/- for a family of four, the Value Added Tax ranges from 2-14%, so lets assume its on an average of 8%. So, the bill goes up to Rs. 1,080/-. The service tax of 12.36% is applicable on 40% of the Sales, so that works out to Rs. 49.44, rounded off to Rs. 50/-. Hence the total bill to consumer now is Rs. 1,130/- just because this family chose to eat in an air-conditioned restaurant…where such a tax is applicable. The definition is quite clear – whether serving F&B in an air-conditioned area is a sale or a service. As per the recent amendment in the Law, its both. While food is cooked and sold, it is also served (by waiters) and hence considered a service. Also, the a/c facility is meant for seating and consumption, thereby making it amply clear that it is indeed a service. While this rule will bring about encouraging revenues to the Government, those that are meant to suffer are the middle-class consumers. For students and youngsters, visiting their favourite coffee shop or a fast food joint would get more expensive, thereby creating a dent on their pocket money. However, for the affluent and well to do, the proposed hike may not mean much, given that their spending power is relatively higher. In most cases, such individuals / families don’t even check the bill – probably pay (usually by a credit card) and sign-off.

While inflation and cost of consumption have gone up significantly, the income rates haven’t gone up proportionately. This has left the middle-class with fewer options for recreation. And Eating joints may not be the most preferred Third-Places anymore! For F&B Retailers, it means reduced number of visitors. And business too.

06 March, 2013

Consumer Spend – a loot at Airports

Recently, the Chief Minister of Tamil Nadu launched a populist move in Chennai to commemorate her birthday – a Government funded canteen that serves one idly (rice patty) for Re 1 (1 USD is Rs. 53 approx.) Yes, you read that right, One Rupee for a Idly. The move is aimed to cater to the needs of those under the poverty line and the poor, the working class such as drivers of autos, taxis, trucks and so on. This was a way Amma (mother) as she is fondly known as, appeased the vote bank. It is not sure how much this scheme is going to cause to the State. Ofcourse, these so called welfare measures are out of the state’s coffers – tax payers money. It so happened that the very next day since this scheme was launched, I was travelling through the Chennai Airport which is managed by Airports Authority of India, a government body which also operates the Airport in Kolkata. These two airports faced stiff opposition by the unions when the Ministry of Aviation privatized the other major airports in India in 2005 located at Delhi, Mumbai, Bangalore and Hyderabad. These six airports contribute to over 70% or more of the total air travellers in the country which is estimated at 110 million pax per year. While the Kolkata Airport has been recently renovated at a cost of Rs. 3,000 Crores, the Chennai Airport has been renovated for aorund the same cost and was inaugurated recently although the terminal buildings havent been opened up to the public due to lack of passenger amenities, a move that the Commercial Department of AAI conveniently seemed to have forgotten while planning the terminal building.

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I was taking an early morning flight, a long one that too to Ahmedabad via Mumbai, an arduous 5 hour journey. And I was flying Spicejet, India’s most preferred low-cost airline which doesn’t offer complimentary meals on board, rather “sells” Cashews and Sandwiches at exorbitant prices. So I chose to have a quick breakfast before the Security Check for which I had quite some time. I walked up to the nearest F&B Kiosk which was serving hot food items. I ordered a plate of idly consisting two pieces and a Vada. The damage was Rs. 100/-. Yes, you read that right. Most passengers like me had no option but to pay such steep prices at airports to quench their hunger and thirst. What was more surprising is that the staff do not issue bills for every item sold on their own. Rather, the consumer needs to insist one of they really need one. I demanded one. And bingo, the staff tore a piece of paper from the manual bill book which had pre-written “Breakfast” in many of the bills. A closer look and the TIN numbers which are mandatory were indeed printed. But VAT or Value Added Tax and other charges such as Service Charge, Service Tax, etc. were not explicitly mentioned in the bill. I couldn’t blame the staff because they were just doing their job. I quietly paid the bill and proceeded to the aircraft. Afterall, this is not an isolated case at Chennai Airport. Almost all airports managed by AAI have the same issues more or less.

So, why are airport food products so expensive? To begin with, it’s the way the places are leased out by AAI. They follow an age-old practice of an out-dated tender system wherein those who qualify should propose a base price for the said location. H1, which is the highest quote gets selected. The tender period is usually for 3-5 years and doesn’t specify the architectural look and feel of the outlet. And most often, there is no seating option that is provided. This is completely contrasted by the approach taken by private Airport operators such as GVK and GMR Groups which manage Mumbai & Bangalore and Delhi & Hyderabad Airports respectively. The chosen partners need to submit and discuss schematic drawings and layouts with the airports and thereafter finalized. The design is not just contemporary but also functional and convenient. During my tenure at Bangalore Airport (BIAL) in 2006, we launched a global tender for Retail and F&B which attracted top players in the world to compete on a level playing field. The selection process was touted as one of the most transparent and efficient processes by international media which tracks Travel Retail.

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AAI’s outdated tender system is the mother of all troubles. Coupled with it is its terrible space planning with outlets spread haywire here and there. Add to it, unqualified commercial guys who have no clue of global best practices and arbitrarily follow the H1 route to choose partners. It is quite obvious that they quote higher fees in the tender and therefore over charge customers. Branded players like CafĂ© Coffee Day, Subway, Pizza Hut, McDonalds, etc who also operate at airports follow a corporate pricing policy and provide bills with all statutory requirements. Due to high entry costs and related operating costs such as complimentary snacks and beverages to airport staff, most organized players do not even venture into this arena.

A popular Indian Aviation Entrepreneur who successfully started and shut a low-cost airline often used to quip that there is a private mafia now in the form of private airport operators. But then, the government operated airports are no better.

04 July, 2012

Malls and Anchors – the inseparable cousins!

A year after Borders Group collapsed, a survey by Colliers International shows that one-third of 205 bookstores shut down by the company are still vacant, according to the Wall Street Journal. Stores that replaced Borders in U.S. malls and shopping centers are leasing at rates an average of 30% lower than Borders paid. In at least one case, tenants demanded rent decreases to make up for Borders' absence. Bizarre, as it may sound, that’s the real power of anchor tenants. Anchors are those Retailers who attract the most number of shoppers walking into a mall. They could be of different formats such as Hypermarkets, Supermarkets, Specialty Retailers, Book Stores, Leisure Stores, Factory Outlets. Cinemas and Multiplexes and even Cafes and Restaurants.

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While planning and zoning a Mall, the developers provide a lot of importance to the placement of Anchors. As the name suggests, they literally hold the ship (the mall) on their shoulders. They usually have a road-facing presence, mostly on the ground and upper floors and on either sides of the Mall if the Mall has two entrances or more. Anchors are also the first to be signed up by the Mall Developers because it is easier to attract smaller tenants basis the power of footfall attraction of the Anchors.

Let us look at some of the most common Mall tenants;

Hypermarkets

Retailers such as Big Bazaar, Hypercity, Spar, etc. qualify under this category. Hypermarkets are usually located in the lower ground as this is an area that is otherwise difficult to lease. Hypers however have the ability to pull footfalls due to their pricing and promotion strategies. Due to their low cost of operation, Hypermarkets command a very low rental structure, which is usually expected to be maintained at 6-8% of their Turnover. Malls usually provide a separate entry / exit for Hypers if they are in the lower basement with large escalators and elevators and pathways for customers with trolleys to move comfortably and safely. To have established Hypers in the Mall is a sure shot way to ensure continued heavy footfalls through the week.

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Department Stores

Shoppers Stop, Lifestyle, Reliance Trends, Westside to name a few have been the Mall developers first choice to sign up in their premises. Inorbit Mall at Malad, a suburban area in Mumbai was one of the first malls to have two Department stores within. Needless to say, it attracts one of the highest footfalls for any Mall in India. Department Stores are good tenants, from a return per sft point of view to the Mall Developers. They peg their rentals at 10-15% of their Turnover and can hence pay a slight premium compared to Hypers. Also, they attract a superior set of customers which benefits the Mall overall. Premium customers also means more amenities, such as large car-parking areas, valet parking services, premium architecture, more elevators and escalators, etc.

Specialty Retailers

Brands such as Tommy Hilfiger, Aldo, Zara Calvin Klein, Mont Blanc, Apple, Electronic and Consumer Durables Retailers such as Croma and Ezone, home improvement retailers such as Home Stop, Home Town, Home Centre etc. are considered Specialty Retailers who stock premium merchandise. These Retailers are extremely choosy in terms of their choice of location, sometimes no more than 2 or 3 per city. Specialty Retailers pay premium charges for high-profile locations within the Mall, usually road-facing two-tier stores or atrium-facing outlets. Since they are available sparingly, customers flock to their stores and hence the brands maintain their exclusivity.

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Books and Leisure

Crossword, Odyssey, Landmark, to name a few are chains of books and leisure stores commonly found in Malls in India. They usually do not occupy the ground floors – mainly due to compelling rents. Instead, they prefer higher floors and have a strong pull of customers who are more of impulse shoppers. Their rent-to-sales ratio is no more than 20% and also operate with heavy staffing, mainly due to pilferage issues. E-Commerce has threatened the existence of many book stores and it’s a common sight these days to either see many of them empty even during peak hours and weekends or a few of them shutting their shutters for want of business.

Factory Outlets

Suburban Malls, usually located outside the city have tenants such as Mega Mart, Brand Factory, Loot, Coupon, etc. who are deep discounters. These stores sell merchandise that belong to the previous seasons and hence at a discount. India has over 500 million people under the age of 30, and hence there is a huge opportunity to sell to a third of customers in this bracket who are aspirational, yet price-sensitive customers. They pay not more than 12-15% of their sales as rent and hence maintain a lean-mean operation. Most of their stores are non-air-conditioned and staff strength is minimal.

Cafes, Restaurants and Foodcourts

CafĂ© Coffee Day, India’s leading cafĂ© chain with over 1,300 cafes across the country is among the trusted tenants to double up as anchors. Being a youth brand, it attracts the right target group for malls. Restaurant & Bar chains such as McDonalds, KFC, Geoffrey's, TGIF, Hard Rock CafĂ©, etc. are sure-shot crowd pullers mainly due to their limited presence in the cities. Also many boutique restaurants, usually high-end also are considered as anchors in some way. They are unique in their offering and are usually entrepreneur driven, which means superior service, great food and a superb ambience, consistently and all through the year. Cafes and Restaurants can stretch upto 25% of their Turnover as Rents, to gain maximum visibility.

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Multiplexes

The boom began around 2006 when the country’s first chain of cinemas PVR began rapid expansion in Delhi and surrounding National Capital Region (NCR) and later followed by the Northern, Western and Southern Markets. And then came others such as INOX, Big Cinemas, Fame Cinemas, Fun Cinemas and the most recent being the world’s largest exhibitor, Cinepolis. The movie screening business is considered to be one of the most lucrative ones in India, given the fact that India produces over 2,000 movies every year across several genres in over 15 languages. Although it is a high investment business, the returns are equally exciting.

Going back to the opening statement, sadly there is not a single retailer in India who commands the respect and power as the one that Borders does. Not yet. Developers and Retailers are always at logger heads due to high rentals charged and low / sometimes poor maintenance of the Malls. Mall Developers and Retailers are constantly in a love-hate relationship. Both need each other and cannot do without one another. Yet, there are very few successful stories of collaboration between the two, maybe countable with both hands. Thanks to the ongoing opening up of FDI in Retail and with more and more International Retailers coming in, this is one area that would only get better. And hopefully, I would get a chance to chronicle a few of them.

07 April, 2012

Music can convert more customers!

salon style

I asked him, “are there people in your store who have had a love-failure"??” and obviously he was confused. He called for his supervisor and I repeated my question. Both of them gave me a warm smile and declined that there wasn’t anything of that sort. So, why play such boring music of love-songs at a Hair Salon post noon?!? I quipped. He was quick to change the music and I told him that it wasn’t for me but for his employees too. This incident happened recently at a hair salon when I was out for my monthly activity. I have been a firm believer that “air play” or the music that you play at your retail store, irrespective of its format has an impact on the customers and their tendency to shop/consume more. And there is no standard laundry list of what kind of songs to be played across formats – these are learned over time and are specific to the history (of customer behaviour) and the geography (of the store’s location).

A salon must be playing peppy songs  most often. As it is, a hair cut or a similar activity is a reasonably boring one (and I specifically refer it only to men) while women seem to focus more on the job being done. The staff must be happy and cheerful all the time – after all, they promise to change the way one looks and this is an important thing that most Senior Managements at Retail companies give a miss. While they focus on clean and hygienic environments (which is a must in a salon), things such as mood-lighting and sound (read: music) is often ignored, though not intentionally. It could be different for various services within a Salon. For Ex., the music to be played while a hair-cut is being undertaken could be significantly different than when, say a body massage is being given. I was a month ago, outing at a Kerala Ayurvedic Massage centre, its more of a therapy than just a massage, I would say and to my surprise, there was no music! The whole place was smelling of essential oils, which seem to be suffocating at some stage. I did share my feedback with their front-office and they gave a lame reason – that the speaker wasn’t working. Hope these things get corrected.

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For my new born child, I was looking for a cradle and visited many stores that stocked “Baby Products” in Chennai. Not one was  playing music! They could easily be selling music CDs and DVDs for kids of various age – though these are low-margin, low-value items, they increase the basket size without much effort. Mom and Me, the baby products and maternity store operated by Mahindra Retail was playing a DVD on their LCD screen which was located 15 feet above the ground. One had to look up all the way to see what was going on. Ofcourse, it was better to play something than nothing, I felt.

Saravana Stores, a regional Retailer based out of Chennai which has one of the highest footfalls into their million square feet stores recently was playing “Jam” by Michael Jackson, while most of their customers wouldn’t have even known the pop icon. India’s largest Hypermarket Retailer Big Bazaar had sometime ago tied up with a Radio station with national presence but which plays regional songs. Makes sense. Retailers need to talk the same language as the customer and create the mood for consuming more. Cafes and eateries such as CafĂ© Coffee Day, Gloria Jeans, Pizza hut, etc. typically play the latest hits while a fine-dine restaurant plays mellow music, usually instrumental such as a piano or piped instrument. Pubs and Bars, as always play music that is so loud that patrons have to speak at the top of their voice to be heard. Grocery stores may choose to play local music but not something that is very jazzy! Department Stores and Malls too play soft music most often. The moments of truth, irrespective of the retailer’s origin or market remains the same.

The power of air play is huge. Few Retailers have realised and used it well. Hope to see many more use them smartly – afterall, good music can aid in higher conversions!

A short flight that I enjoyed…

On 4 Nov. ’24, I stepped down from my role as Executive Vice President, Minmini app. Touted as the world’s first hyperlocal social media pla...