Retailers eye small towns as under-performing stores, e-comm competition weigh on biz: JLL

New Delhi: Rising rentals in shopping malls and stiff price competition from e-commerce players have made it difficult for retailers, pushing them to expand in smaller towns and adopt omni-channel strategy to run healthy businesses, according to property consultant JLL.

"Retailers are struggling at various fronts apart from rising rentals. :Under-performing, less efficient stores with huge inventory pile-up of merchandise, stiff price competition from dominant e-commerce players and poor inventory management are some of the challenges retailers are facing," said Shubhranshu Pani, MD - Retail Services, JLL India.

To deal with these challenges, he said, retailers are shifting to tier II and III markets, where the brand presence is minimal.

In these markets, real estate costs are 30-40 per cent lower than those in metros and tier 1 markets.

Besides this, Pani said "retailers are optimising store sizes, creating multiple touch-points for consumers along with having an omni-channel presence within the sphere." While releasing 'Urbanisation, Aspiration, Innovation - The New Paradigm of India Retail' study on Tuesday, the company said amidst rising rentals across malls, low occupancy rates and the onset of alternative retail formats such as e-commerce, retailers are now preferring better performing Grade A/prominent malls over others where the rental deals are purely on a revenue share basis.

The consultant said that leasing transactions are being renewed at steep premiums in malls where occupancy is around 90 per cent.

Many marquee malls have seen a three-fold jump in rentals.

"Premium brands are renewing their leases at almost twice the earlier rents. This has resulted in the tenure of mall leases being shortened, and thus, many brands are finding it difficult to survive under the burden, " the report said.

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