Why Brands Like GAP Will Spur Quality Real Estate In India

When the Taliban fell, Afghan men flocked to barber shops to have their beards shaved off. To Afghan men and women, liberation meant televisions, American movies, postcards of Bollywood stars, colorful burqas, and cigarettes. An American hairdresser in Kabul noticed that her services were in greater demand than the services of doctors, nurses and social workers who accompanied her. Indians are no different. Venture Capitalist Mahesh Murthy once pointed out that when there were 1000 Nokia handsets in India for every Apple phone, Indians visited Apple website twice as much. Beauty matters more to us than we would like to admit.

Beauty and pleasure are our deepest, most profound needs. It is understandable why GAP that has stores in 50 countries across the world, did not enter Indian markets until very recently. Evidently, there is an acute shortage of quality real estate in India, but what keeps retailers like GAP away is also the ambience of commercial real estate in India. In 'Designing To Sell', Barr and Broudy assert that “the benchmark of success in store design is how effectively the environment and the merchandise are integrated. The measurement of such success starts at the front door and ends at the bottom line.”

When setting shop, retailers such as GAP emphasize on integrated marketing. While projecting a consistent style and brand message, every retail detail matters and that's where dull, tasteless malls don't qualify. This is not to say that every commercial development in India is shorn of any aesthetic planning. However, the comprehensive offerings of global retail destinations, such as malls in Dubai or London, outshine Indian shopping malls. Culture matters as much to shopping malls as bricks and mortar, but Indian markets are not globalized enough to allow diversity in the marketplace.

Another relevant example to quote here would be Starbucks. Barring its outlets in Mumbai and Delhi, there are not many Starbucks outlets in India. The coffee chain is not willing to open stores in localities that do not justify the scale of investment that is required. A major reason is that property in India is very expensive. Starbucks offers consumers a multi-sensory aesthetic experience. Every sensory signal a Starbucks outlet sends, matters. Contrary to popular belief, quality, ambience and design of shopping malls and retail outlets perhaps matter more to Indians. In India, young adults and teenagers who frequent coffee shops tend to have a conversation over coffee while consumers in countries where Starbucks is popular are more in sync with takeaway culture. This imposes greater costs on Starbucks by lowering the returns per leased retail space.

Cultural liberalism and gender gap also influences the quality of real estate in ways people usually do not notice. For instance, more than half a century ago when Chiasso wanted to lease space for selling museum quality objects for home, they found it difficult to find quality real estate! This had an indirect connection with its women customers. As Chiasso appeals primarily to female customers, the brand had to wait till the time female decision makers grew in society and so did their purchasing power. Similarly, when female decision makers become more common in India, the diversity and quality of retail space in India will improve, led by brands that cater to their needs and aspirations. As their business will get more women consumers, they would be more willing to demand quality real estate that ensures great ambiance and will also be willing to pay for it.

But, things are changing, as they should. Retailers think that there are nearly two dozen shopping malls of exceptional quality in India. On June 3, Global fashion retailer Hennes & Mauritz (H&M) announced that it will open its first store in India soon. Soon, global brands are more likely to compete for space in Indian shopping malls. GAP, for instance, had to partner with Arvind Lifestyle to lease space in Select City Walk in Delhi. Select City Walk, an upmarket mall in Delhi, would be central to GAP's marketing and sales strategy, if one were to believe historian James J. Farrell. Farrell emphasizes in `One Nation Under Goods': "Retail designers also have to consider how customers move through the stores, designing traffic patterns that maximize the amount of merchandise seen, and minimize the difficulty of establishing a relationship with the merchandise. They utilize consumer psychology and behavior in their designs."

In the United States, it took a generation for the floors of shopping malls to progress from concrete to tile to marble. Developed countries have had a similar trajectory. India's apparel retail market, which is valued at 41 billion $, is likely to be worth $ 60 billion by 2020. Over years, greater foreign investment would refine the tastes of Indian developers and consumers, it is expected.