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Mall owners bring pay per day plan for retailers

By SiliconIndia | Tuesday, 15 December 2009, 02:10 Hrs | 3 Comments

Mall owners bring pay per day plan for retailers

Mumbai: While Indian retailers are still trying to take the steps which could help them in cutting costs to expand the businesses, mall owners, who are essential for the organized retail sector, are bringing a new method - rent on a daily basis.

Atul Ruia, who owns Phoenix Mills Market City mall, has already implemented the system at a few of its locations, while others such as Inorbit and Nirmal Lifestyle, are too considering it as an pioneering options for their forthcoming malls. Currently, the fixed rental or revenue scheme is practiced everywhere with minimum guarantee money, depending on the brand, product and location of the space. Atul Ruia, Managing Director, Phoenix Market City said, "We are receiving quite positive response and have planned to implement it (the daily rental model) across the country. It is a viable option in an industry that is just recovering from a period of uncertainty."

Currently, India's retail market is roughly estimated at

20,000 crore. It was among the first sectors in India to be affected by the crisis as consumers postponed purchases. On the note of that many retailers and mall owners started looking at various options including revenue sharing and a minimum guarantee amount.

Under the new method, the retailers will have a joint account with the mall owners and the at the end of the each day, the share of mall owner is debited to his account. In the earlier method, the revenue sharing model - percentage rents were payable annually, quarterly, monthly, or upon achieving breakpoint sales.

"We believe any innovative method that could streamline the system and synergy between the owner and the retailer is welcome. We are looking at implementing first at our Hyderabad mall," says Inorbit CEO Kishore Bhatija.

Like Phoenix, other mall owners are also planning to implement new models. Inorbit, which is having mall in Hyderabad, has seen 66 percent occupancy on the revenue sharing model, while the remaining would be on daily basis.

Don't Miss ( 1-5 of 20 )

1: seems to be a brilliant idea for the mall owners to offset the rent default risk. The question is "Why would any retailer accept this?".

Got a long way to succeed.

Posted by:Prashant Pandurangan - 16 Dec, 2009