Today, a similar story of rise and fall could well be playing out across India's major high streets, which have dominated the retail sector for several decades. Their names are all too familiar: Pondy Bazaar, Nungambakkam, Mylapore, Anna Salai and Commercial Street in Chennai. Brigade Road and Indira Nagar in Bangalore. Linking Road, Colaba Causeway and Breach Candy in Mumbai. Connaught Place, South Extension and Karol Bagh in Delhi, and Park Street in Kolkata.

With each of their annual turnovers anywhere between Rs 500 crore and Rs 2,500 crore, these bustling high streets determine the fortunes of several Indian enterprises. Take just one - apparel brand Arrow. Its business head, Janak Dave, says: "Seventy per cent of Arrow's sales come from just 15 high streets (outlets) in India."

But now, questions are being raised whether the hegemony of high streets over Indian retail can continue. Glitzy malls are coming up by the dozen all over the country. Delhi already has Ansal Plaza. Seven more are expected to come up in the satellite township of Gurgaon, Haryana, alone. Ditto for Mumbai, and every other Indian metro. With their snazzy interiors, an offering that is a mix of shopping, entertainment and leisure, and facilities like parking and childcare, the malls are beginning to pull traffic away from high streets.

Two years ago, when Ansal Plaza, Delhi's first mall, came up 2 km away from South Extension, most retailers wrote it off. Today, it is proving to be a formidable competitor to South Extension. Simran Singh, a Delhi-based retail consultant, says: "Today, the high street retailers are all feeling threatened (by the malls). They are wondering whether they should move to the malls." Of course, no one quite believes that shoppers will simply desert retailers in high streets en masse. Even after being in business for a decade, departmental stores like Shoppers' Stop, which are the anchor tenants for most malls and ostensibly the main draw, do not cater to more than 2% of a city's population.

Quiet changes, however, are already taking place in the way generations of Indians have shopped. Today, we are much more comfortable with the quality that brands connote than with a shopkeeper's word about the quality of a product. Besides, as cities grow outward and urban lifestyles become more hectic, more families now prefer to shop on weekends, preferably not too far away from home and away from the maddening crowds and even more madding parking attendants. Harminder Sahni, a principal at retail consultancy KSA Technopak, agrees: "The consumer is ready now for organised retail." It is no surprise that malls are becoming popular with city folk.

So, will malls wean away more and more shoppers from high streets? To what extent will that affect business on high streets? How will high street retailers adapt themselves to the new challenge? And will the high street as we have known it, continue to look the same?

A Peek Into History

Some of the answers lie in the way high streets evolved in India. With the exception of Colaba Causeway and Connaught Place, the high streets in India were not even intended to be that. "They were local markets, which somehow became high streets as one marketer after another was attracted by the catch-ment's profile," says Devangshu Dutta, founder of Creatnet Services and a retail industry expert. It's because of poor town planning that high streets formed by themselves, says Arvind Singhal, head of KSA Technopak. The unplanned growth resulted in unplanned marketplaces with an erratic mix of shops and the inevitable parking snarls.

Take South Extension. From a nest-like office above his shop, K.P. Malhotra has seen the market take its present shape. It began with little more than a few shops, all meeting the usual bouquet of suburban demands - dry-cleaning, small eateries, household provisions, tailoring, and so on. Back in 1967, Malhotra himself opened a superbazaar, selling household groceries, toys and medicines. That began to change in the 1970s, as people from adjoining suburbs - New Friends Colony, Defence Colony and Green Park - began flocking to South Extension to shop, even though they had their own community markets. The high street was forming.

According to Malhotra, the reason was simple. DLF, which was developing that part of Delhi, had constructed much larger shops (2,250 sq ft) than what the Delhi administration was making. This allowed the shopkeepers here to offer a bigger range. Moreover, the market was located on Ring Road, a prime thoroughfare. In tandem, these factors pulled in people who lived far beyond South Extension. And, seeing the numbers coming to the market, more and more retailers began setting up shop there. Jewellers and antique dealers came in, as did saree shops, shoe stores and garment outlets. In 1975, multibrand outlets were being set up. By 1988 or thereabouts, when the multinational brands began entering India, the first businesses in the market - the kirana shops, chemists and dry cleaners - were winding up. Their owners were realising there were better businesses - like multi-brand outlets (MBOs) - to be run. Malhotra himself forayed beyond household provisions into electrical goods, before eventually setting up an apparel MBO - Gopaljee.

As more new brands continue to enter the market, the fight for real estate on the high street is getting desperate. For two years now, apparel brand Provogue has been scouting for space for an exclusive outlet in South Extension, without any luck. Provogue's senior vice-president, Vishal Mirchandani, has assiduously chased every lead and come tantalisingly close to finalising a deal on four occasions. But each time, the talks broke down. These markets are very gossipy, he complains. Each of the four times he had finalised the deal with the shop owner, someone or the other found out what the terms were and offered the shop owner a sweeter deal that kept Provogue out.

But, ever since Ansal Plaza came up in late 1999, it has created a scare among the retailers in South Ex. Ask Malhotra, who also heads the Traders' Association of South Extension (Part II), and he will tell you that the mega mall has not affected sales. But that's partly because he also helps companies find property on the street. But, towards the end of the conversation, he said: "The market is crowded only on the weekends. It was not like this earlier. We used to get our bread and butter from this market. All we get these days is bread."

Of course, South Ex is fighting back. Parking facilities are being improved. Shopkeepers are also coming together to conduct their sales at the same time. But that clearly is not enough. South Extension (Part II) lacks an eatery like McDonald's or Pizza Hut. Malhotra and his team have been trying to get an eatery into the market for a long time now, but to no avail. McDonald's was interested, but it baulked at the high rentals. In a market where rentals are about Rs 250 per sq ft, it was unwilling to go above Rs 100.
Forging a common strategy among a disparate bunch of shop owners is not easy either, even for an old-timer like Malhotra. Most shop owners tend to act in their own self-interest. And they are not willing to settle for the lower rentals that McDonald's offers, even if it is in the interest of the entire market. With all the shop owners pulling in different directions, getting the retail mix right on high streets is another huge problem. Or is it?

Skewed Economics

Consider Linking Road, Mumbai. When the first Shoppers' Stop came up in Andheri, many felt that this high street in Bandra was doomed. But that proved to be greatly exaggerated - the street continues to flourish. In the years after the Shoppers' Stop came up, the street has not died. If anything, it has expanded considerably. What has happened, though, is that the composition of the shops on the street has changed significantly. One, most of the multi-brand outlets have downed their shutters. Two, lots of exclusive (single brand) outlets have been set up. Three, the kiranas, chemists and dry cleaners left the street for the smaller streets running parallel to it. Again, because their owners realised that there were more profitable businesses to be run.

From his ColorPlus outlet, store manager Harshad Thakker has seen the market change. In 1993, he recalls, shirt brand Arrow set up the first exclusive showroom on the stretch. Then came Weekender, Benetton, Nike, Woodland, Adidas and ColorPlus. During that period, real estate prices were very low (Rs 200 per sq ft), which increased, reaching a peak of Rs 400 in 1995-96. The high street extended to the north after Titan, Arrow and Bata came in, followed by a Satguru's, Tresorie and Nike. To the south, a cluster began developing around Blues Bizaar. Opposite that, a Lacoste outlet came up. Followed by a Lee. The other thing Linking Road is known for is footwear. All the big names are here - Woodland, Nike, Reebok, Adidas, Bata. MBOs like Metro, Regal, Lord's, Scandal, Citywalk and MB have been here since 1997.

In other words, instead of widening the retail mix, Linking Road homed in on two main categories: apparel and shoes. You will not find bookshops or music shops on Linking Road. It is only now that household furnishing shops have started coming up.
Intrigued? Much of this is linked to the hard economics of high street retailing and the returns that each retailer expects. With current real estate costs on Linking Road at Rs 250-350 per sq ft, the only businesses with sufficient margins were apparel and food.

Take the market in M block in New Delhi's Greater Kailash Part I. Here, every month, two outlets on an average succumb to the high rentals. Malhotra told Businessworld that a 3 ft by 3 ft shop in South Ex had been sold to a paanwallah for Rs 57 lakh!

Somehow, despite the wonky economics, companies still want to be on the high streets. Notes Prakash Nedungadi, president, Madura Garments: "A lot of people see a high-street outlet as quasi-advertising - and take money out of their ad budgets to make the case for these." Especially new brands tend to look at a high street presence to boost visibility. But the crowd makes it harder for the established brands. Take Pepe. Shah laments how hard it is to find a high street store that can be viable. "Negotiations always involve lots of horse-trading with the owners. The ideal rent to sales ratio would be around 10%. But I doubt if anyone gets a rate like that on a high street."

A Paradox On High Streets

Till now, when a company walked out of a high street, three others were queuing up to replace it. That will change now. KSA Technopak's Singhal says: "While South Ex is four times as expensive. The turnover from these stores is not four times as high. It is probably twice as high. Earlier, companies had to be on the high street to get a good hit rate. Today, once the malls come up, it is likely that they will get that in the mall." Agrees Madura Garments' vice-president (marketing) Vasanth Kumar: "From our point of view, I can get three (shops) in malls for the price of one store on a high street."

Margins for an exclusive store are already under pressure. As the suburban malls enter the fray in Mumbai and Delhi, more customers will stop travelling long distances for high-street shopping. New customers will not come to the high street, says Madura Garments' Kumar. He adds: "They will go to the malls. The best the high street stores can do is retain their existing customers."
So where does that leave the shops that were opened on high streets?

The options are limited. Shoppers' Stop CEO B.S. Nagesh says a new marketplace forms when a mall comes up close to a high street. With the neighbouring shops offering categories that complement the mall, not compete with it. This could be a category like jewellery. Vasant Nangia, the founder of jewellery chain Oyzterbay, says his outlet on Linking Road has been doing much better business since the Shoppers' Stop came up on that street. He does not prefer a concessionaire stand inside the department store, as there is not enough space to showcase his entire range.

When the retailers start casting about for new businesses, they will find they live in paradoxical times. While the high street is under threat, the retailers themselves have much more freedom to choose what they want to sell.

A Question Of Real Estate
The possible scenarios look interesting. On Linking Road, high real estate costs allowed retailers of only two categories - apparel and footwear - to survive. But real estate prices there will fall as malls come up. So retailing other categories on the high street will become viable businesses once again.

Take Brigade Road in Bangalore, for instance. The city has a very small retail market. And now, three malls are coming up in the city. When they do, they will draw away business from the high street. Real estate prices on Brigade Road are already falling, says Anurag Munshi, associate director (research), Jones Lang Lasalle, a real estate company. He expects prices to settle down to the same level as the malls.

In Mumbai and Delhi, retail prices will not fall as soon as new malls come up. Even so, the prices are heading south. There are two reasons for that. Not only is the supply increasing, demand, too, is falling. Companies like Provogue are already planning to concentrate on malls from now on. "We have outlets in almost all the major high streets now," says Mirchandani. Madura Garments, too, is looking away from the high streets. Kumar plans to open his 2,000 sq ft exclusive outlets, Planet Fashion, in semi-commercial and residential areas. "We expect more business now to come out of the good residential areas," he says.

In this scenario, a lot will depend on how well-to-do the immediate suburbs are. Take South Ex. It is bang on a prime thoroughfare like Ring Road, so traffic will stay high. Moreover, its local catchment comprises the moneyed class. Malhotra says: "The beauty of this market is that no one here questions the price. The people who shop here have tonnes of money - businessmen with black money, bureaucrats with bribe money." On streets like this, it is viable for shopkeepers to follow Mohan's cue and enter niche categories. He cited swimwear and sports goods as two likely categories. As malls force rents on high streets to fall, it might become possible for niche category stores to become profitable again.

But that will not be possible everywhere. Every high street cannot hope to sell Cerutti and Armani and Gucci. All of them do not have a clientele that is affluent enough to support a premium brand. That is when all the players who left the high streets earlier - the kirana stores, the dry cleaners - will come back. KSA Technopak's Singhal says shop owners on high streets moved out their own businesses when they saw the kind of money they were foregoing by not renting out the spaces to exclusive outlets. As exclusive outlets scrambled for space on high streets, minimum guarantees, money the owner of the space would earn irrespective of the level of business, came about. Now, as the rates fall, the drugstores, bakeries and gift shops will probably come back . Even internationally, high streets have been through the same cycle. They have become more mass, with a tenant mix consisting of plenty of middle-of-the-line brands.

In other words, they will go mass. Just like Chandni Chowk.