malls – Pertinent Observations

Available only on flipkart

This mornings mint has a full page advertisement on the front page announcing the launch of the moto x phone in India. The ad mentions that the phone is available in India exclusively on flipkart the online retailer. The question is if this is a good idea.

While it is true that online retail offers the best costs and prices – thanks largely in part to the massive savings on real estate and inventory costs, I’m not sure if we are still thee at a stage where retail can be online only. In fact people like to touch and feel the stuff that they’re buying. Especially when it comes to big ticket purchases such as a phone. Without giving people the opportunity to do so – shops won’t carry the dummy model unless they’re also selling it, at a good margin – I’m not sure how many will want to make the jump and buy.

On a related note I saw a report last week, again in mint, talking about pushback from offline retailers and malls to the online retail phenomenon. This brings into focus how retail will evolve going forward since people now have a low cost (low inventory, zero real estate) option for making their purchases. We’re already seeing some “progress” in that direction where people go to malls and high streets to browse and get a touch and feel and then buy online where the prices are lower.

This points to one direction in which retail might evolve – soon stores in malls and high streets might be set up with the primary purpose of building the brand and letting customers get a touch and feel. Any sales from these stores for the brands will only be a bonus – the primary purpose being to let people know what is out there and to let them touch and feel and experience it.

If this were tO happen we can expect malls and high streets to move to more brand stores and less multi brand stores – unless the latter can somehow either match the cost and price structure of online or get paid for purely providing the experience to the customers.

Either ways we can expect the overall demand for retail real estate space to come down in the next few years. If there are any malls or retail real estate firms which are listed its time to short them. Or by hedging against them by going long on online retail.

Inventory

You know inventory represents a huge cost when online retailers such as Flipkart which don’t have to invest in keeping inventory at storefronts in expensive malls and high streets offer massive discounts, of the tune of 30 to 40% at times.

You know that inventory represents a huge cost, and shop space is precious, when you go shopping in summer trying to find a nice sweater and find that no half-decent store is even selling sweaters!

Oh, and I think you can judge the standard of a clothing retailer by the quality of their trial rooms.

Expat Living

When you live in a city other than the one you’re comfortable living in, and if you have a lot of disposable income, you try to live like an expat. By that, I mean you will try and use your disposable income in order to insulate yourself from the parts of the city that you’re uncomfortable with. You basically try to take the city out of your lifestyle, and try and live in a way that wouldn’t be different from the way you’d live in any other city.

So for example, two years back I had to relocate to Gurgaon since my well-paying job took me there. And I knew that water supply, electricity supply, security and public transport were major issues there. So the first thing I did when I got there was to find myself a comfortable apartment with assured water supply and “100% power backup”, with round-the-clock security. I also transported my car to Gurgaon to hedge against the bad transport system there. All shopping was done in malls, so I could avoid the heat and dust, and the unreliability of the traditional markets there. As long as I wasn’t driving on those roads in my air-conditioned car, I could have been living just about anywhere else. I had tried my best to take Gurgaon out of my life.

You find people like this wherever you go, except perhaps Bombay (where the cost of living is so high that very few people have “disposable” income), but is perhaps more pronounced in Gurgaon where there are few natives with disposable income so most of the people you’ll meet turn out to be fellow-expats. So essentially a lot of your income goes in just hedging yourself against the city.

Like in Bangalore, you’ll find that “expats” always want to take a “Meru cab” wherever they’ve to go, while us native folks prefer to take the humble auto. I don’t blame the expats – they are yet to learn the skills required in finding an auto here that will take you where you want at a “fair” price, so instead of choosing to learn the system, they get around it by using their disposable income. “Expats” usually shop in malls, try and travel only to those places where they can easily take and park their cars, live in the outskirts where they can get big houses with “amenities” like the one I had in Gurgaon, send their kids to “international schools”, and the like.

So this tendency to live like an expat shows up the cost differential between living in your “own” city, and living in another where you would rather prefer to buy your way around the parts you don’t like rather than trying to blend into the city. And this tendency to live like an expat means that expats will always be expats, which is an accusation (not unjustifiably) thrown at the Koramangala types.

When I returned to Bangalore from Gurgaon about two years back, the thing that struck me was about how comfortable I suddenly was. So many of the worries that had been worries in Gurgaon ceased to be worries now. I was comfortable enough with the system to not bother about any of those. And as I ran across my road and jumped on to a moving bus to take me to the city centre, I realizeed I was back, where I belonged.

The Loot

So I executed the book binge yesterday. In two phases – first at the “main” Landmark at the Forum and then at the “other” Landmark at Swagath Garuda Mall. Technically the binge is incomplete since I still have another Rs.600 to spend but it’s unlikely I’ll be spending that off soon, so for all practical purposes we can take the binge to be complete.

While book-shopping yesterday I was thinking about the various Landmark stores I’ve been to, and how the Landmark at the Forum is the worst of them all, with the one at Spencer’s Plaza in Madras (which I last visited seven years back) coming second. The problem with these two stores is that they are in otherwise popular malls. What this does is that it attracts casual browsers to just check out the mall and makes the browsing experience more painful for the serious browsers.

On the other hand, the Landmark stores in Nungambakkam, Gurgaon (Grand Mall) and Garuda Swagath Mall are either standalone or situated in malls which are otherwise not too popular. And precisely for this reason, the crowd at these stores is significantly superior. You get your space to browse without being asked to make way for passerby, you can actually sit down going through a book and deciding whether to buy it. The store staff, who are much less hassled, are far more courteous and helpful. And if you happen to pick up a conversation with another browser, it is likely to be much better than at the more popular malls.

This presents an interesting problem for the bookshop-owners regarding location. Do they put the bookshop in a popular mall and thus maximize footfalls? Or do they locate their shops in lesser malls or on high streets hoping to attract better “quality” of footfalls which might actually result in better sales? Keeping the shop in a popular mall attracts more casual browsers and if book purchase is an impulse decision, then it is likely to pay off for the store (even there you need to keep in mind that crowded checkout counters can cause the casual browser to drop the book back in the shelf). On the other hand, if they think book buying is a more informed, laborious decision, then they should be locating themselves in places where they won’t get random crowd.

Of course I’m only talking about the browse-and-buy model here and not covering shops such as the erstwhile Premier Bookshop – which rely on customers who know exactly what they want and just ask for it. And of course, for a shop to locate itself in a slightly obscure location it needs to have the “pull” (of a brand name or something) in order to attract customers.

Coming to the loot:

The Naked Ape, Desmond Morris
The Great Railway Bazaar, Paul Theroux
The Emerging Mind, VS Ramachandran
The Flight of the Creative Class, Richard Florida
Panic, Michael Lewis
A Splendid Exchange (How Trade Shaped the World), Willian Bernstein
Gang Leader For A Day, Sudhir Venkatesh
The Bowler’s Holding the Batsman’s Willey (humorous sporting quotes collection), Geoff Tibballs
Musicophilia, Oliver Sachs
The Oxford Book of Modern Science Writing, Edited by Richard Dawkins
When Genius Failed (LTCM), Roger Lowenstein
Ramayana, a modern rendition, Ramesh Menon
The Rise and fall of the third chimpanzee, Jared Diamond
Bhairavi, the global impact of indian music, Peter Lavezzoli
The Real Price of Everything (collection of 6 economics classics – fundaes by adam smith, david ricardo, etc.), Edited by Michael Lewis
Predictably Irrational, Dan Ariely
The Universal History of Numbers (Part 1 and 2), George Ifrah (didn’t buy part 3 since it seemed full of CS fundaes)
A Maidan View, Mihir Bose
The States of Indian Cricket, Ramachandra Guha
The Bhagavad Gita, Royal Science of God-Realization, Paramahamsa Yogananda
Autobiography of a Yogi (Kannada translation), Paramahamsa Yogananda (mom and aunt asked for it)

People, thanks for your recommendations. And once I’m done reading these books, I might be open to lending them (provided I trust you to return them, of course).