American clothing giant Gap is reducing several of its store sizes across malls. According to sources in the mall development business, when Gap started its recce to set up operations in India two years back, it was looking for stores measuring 15,000 sq ft or thereabouts but in several locations, it has settled for half the size.
For example, its suburban stores in Mumbai and Bengaluru are about 8,000 sq ft. Industry watchers say it is now in the process of negotiating even smaller formats, perhaps in the range of 5,000 sq ft.
Arvind Brands, which has signed a long-term franchisee agreement with Gap, said it did not wish to participate in the story.
Globally, Gap stores are sized between 10,000 and 15,000 sq ft. In fact, Gap is not the only brand that seems to have had a rethink on store specifications. According to reports, Swedish brand, H&M is also reducing the size of stores from about 25,000 sq ft to 15000 sq ft. Of course, the leases it has already signed will continue to be bigger formats but for newer space, it is open to smaller venues. Interestingly, in comparison, Zara has continued with its format of over 20,000 sq ft stores since it started operations, back in 2009.
Experts said not all locations are productive enough for large stores. “What might fly in Delhi’s Select City Walk, which is one of the most productive malls might not work in another mall, even if it is three kilometers away,” said Arvind Singhal, chairman of Technopak.
Even within malls that are top performing, availability seems to be an issue. The top 10 malls are more than 90% occupied, where brands even need to wait out almost a year, in some cases to get a spot. At the same time, large number of malls are more than 60% vacant. To squeeze into one of the most productive malls, it is better to aim higher trading density than larger store. “Each brand will strive to build optimum efficiency whilst not compromising on the brand offering,” said Mukesh Kumar, vice president at Infiniti Mall in Mumbai.
Although Gap is one among the leading four international apparel brands in the country along with Zara, H&M and Forever21 and malls are keen to host each one of these brands, there is pressure on performance, especially given that competition has become steep now. Recently, reports said that Zara’s growth in the country has slowed down as the brand has had to pull the plug on expansion owing to limited Grade A retail real estate.
Crunch in quality real estate space is the top reason that is stifling growth plans for brands. Overall mall vacancies are in the range of 20% according to industry estimates, but upcoming supply, even in highly productive locations like south and central Mumbai is negligible. Performance pressure has had other brands move into smaller establishments, for instance, Aldo vacated its ground floor flagship store in Phoenix Mills owned High Street Pheonix for a level one store in Palladium.
According to some industry watchers, though productivity is not just an algorithm of sales and rent. As much as there is brand awareness in India, international brands will need to invest to capture the market, said one person who did not wish to be named.