Future Group to avoid opening stores in areas with mall oversupply

The Kishore Biyani-led Future Group would avoid opening stores in areas which were seeing an oversupply of retail properties, a top executive from the group said.

According to realty consultants, SG Road in Ahmedabad and LBS Marg in Mumbai have seen a sharp spurt in malls, leading to an oversupply of properties. MG Road in Gurgaon has 10 malls operational within a one-kilometre radius, with three of them without any tenants.

“We are looking for areas which are seeing good growth in residential complexes and good business prospectus in the future,’’ the executive said.

According to estimates, at least 750 malls are being built in the country and retailers in cities such as Mumbai, Delhi, Chennai see cannibalisation due to presence of retailers who offer the same goods and services.

“We are trying to find out where are tomorrow’s stores. We want to be there before everybody else. Nine out of 10 such calls have proved us right,’’ Rajan Malhotra, president, strategy, said on the sidelines of the Shopping Centre Forum on Wednesday.

Retailers such as Aditya Birla Retail, Future Group, Reliance Retail and Spencer’s Retail have either closed down or shifted hundreds of stores in the past to check losses. Retailers such as Birla Retail have announced that they want to make stores profitable in the first year of operations.

Says Purnendu Kumar, associate vice-president at business consultancy Technopak Advisors: “Earlier retailers used to book spaces as soon as a mall was launched. Today they are much more prudent and study whether opening a store there makes sense,’’ Kumar says.

Future Group has over 10 million square feet of retail space and adds 2.5 million sq ft to 3 million sq ft of space every year. Future Group is opening 40-45 Big Bazaar stores in the current year.

“Either you fight or allow cannibalisation to affect you,’’ Malhotra said. Future Group recently took over South Africa-based Shoprite Holdings’ store in Mulund area of Mumbai and renamed it FoodRite. “Earlier we used to compete with them in Mulund, but today we own both the stores,’’ he said.

Malhotra said though the group has presence in almost all the states, it is looking at opening in eastern states such as Bihar, West Bengal, Assam and so on.

“But you should be cautious about how many stores you can open in Tier-II towns in the country as 65 per cent of the demand comes from urban centres,’’ he added.

Nearly 60 per cent of Future group’s stores are in the top eight cities of the country.

“Nothing remains a destination store. All of them become catchment stores in the future’’, he said.