How malls and entrepreneurs can win together?

by Ashvini on October 23, 2013 · 4 comments

in Business,My Personal Thoughts

Slowing economy and gloomy forecast has taken wind out of business from malls . It is reported that 90% of malls are running on losses.

In the heyday of economic times, it was not possible to get a square feet of mall space without paying astronomical rent. My first business started in a rented house which was high as well. I could never dream of space in a big mall. Big brands over there paid big rents and small entrepreneurs could never dream of setting up a shop there.

Sometimes though even bad news is not really so bad. During the times of good economy , malls sprang up at every nook and corner of the city. Whether they were profitable or not was another story. Investors just poured money in constructing malls and inviting vendors to occupy spaces. Rents went from bottom to the roof.

Situation changed in a last few years. Economy went down and malls started suffering. As of now they struggle to find people and brands to occupy their spaces. Entrepreneurs still have difficulty finding office space at cheap affordable rates.

Is it all that bad?

Malls still have a huge opportunity which they don’t see. By leasing mall space to entrepreneurs who often employ not more than five people and need space to conduct business activities, malls can readily fill up the vacant spaces.

A small area with a reasonable rent( or may be an agreement for share in future profits) is the best way to go forward. Entrepreneurs find it easy to setup shops in the time of gloom. Lower costs ensure that entrepreneur’s business survive long gestation periods.

For mall owners lower rent may not recover the investment initially but for long term it is one of the best strategy.

Benefits for mall owners

  • The same entrepreneurs who are small today will become medium to large size corporations in some years
  • Customer retention for malls will be very high . Small entrepreneurs will prefer to stay on or prefer to engage with owners who helped them succeed.
  • Utilization of mall space will be high. Shops need higher space while entrepreneurs can work in office of smaller areas.
  • Growth of entrepreneurs will result in the growth of mall business itself
  • If an entrepreneur breaks out ( achieves astonishing success), then malls achieve huge profits without any additional effort.

Benefits for entrepreneurs

  • Lower cost of business
  • Lesser pressure to survive
  • Higher gestation period ( of no profits)
  • Lower upfront cost ( for example to create and maintain an office)
  • Focus on business rather than facilities

It is frankly a win win for both. Mall owners need to see the economic gloom in this light and make best use of the prevalent situation.

 

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{ 4 comments }

Daria Steigman October 29, 2013 at 12:58 am

Hi Ashvini,

In the U.S., the trend has been to squeeze every last foot of mall space for profit. That’s led to renting of kiosks, both the big brand variety (mainly mobile phones) and also more entrepreneurial businesses (mostly selling things no one wants). I know someone who rented a mall kiosk for the Xmas holiday season and that was very pricey.

What you’re suggesting is smart and makes a lot of sense. It reminds me of the strategy of my bank, which was the first bank to establish free business checking accounts. Obviously, as your transactions grow and you grow your business, you ‘graduate’ to paid accounts. Meanwhile, there customer service was so good that I moved my personal accounts there too.

vicky sadhu October 23, 2013 at 9:11 pm

So, they are also like Flipkart.com…”kabhi na kabhi to profit ho ga he”. On one hand they killing all Baniya shops, still seeking for profit. Defiantly, customer going to win, but what about young entrepreneurs.

vicky sadhu October 23, 2013 at 7:41 pm

Good read, all facts, but still i am wondering why still many MALLS are opening? in my city, (small town, vadodara) still more then 30+ malls are going to open. And all the malls are still suffering maintenance cost.

Ashvini Kumar Saxena October 23, 2013 at 8:10 pm

Hi Vicky,
Good to see you here :).
I believe the momentum of good times is still carrying on. Sometimes it takes a while before things start sinking in. The economy is not doing good but I guess people are still not seeing the future. It is a time to invest wisely and not in haste. I guess established malls have learned the lesson now its turn of the others to learn it ;)

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