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‘Big brands’ saturate malls

Amidst high inflation, falling discretionary spending and a cautious investment climate, one thing has remained constant – new malls are sprouting up in prime Asian city centers and suburban areas.

A majority of these malls have already secured tenants for more than 50 per cent of rental space, with at least a year ahead of their opening.

But mall managers who have relied on a few ‘big brands’ to pull in sales traffic have risked replicating the similar retail experience, propagating a sense of monotony and ‘brand fatigue’.

“In this economic climate, retailers cannot afford to be mundane. They have to find new ways to capture the imagination of their captive audience and differentiate their offerings from the sea of monotonous malls stuffed with the same ‘big brands’,” said Lucy Van Den Heede, head of content of World Retail Congress Asia Pacific.

“As the world gets smaller, audiences are increasingly savvy. Consumers want to be surprised by bold thinking and new offerings. Creating a winning customer in-store experience that connects and resonates with customers is essential,” she suggested.

A report by Savils concludes that in a bid to deliver substantive returns, mall managers have pursued ‘big brands’ (global retailers) with competitive rents, sometimes in the region of low teens even in prime locations. This means that ‘big brands’ pay on average almost two-thirds lower than the market rate per square feet.

Mall managers have become more receptive to ‘big brands’. Their large-format stores have contributed significantly to commitment levels at malls as well as drawing complementary tenants and traffic to the project.

While rents have remained low to attract large stores, small and mid-sized retailers do not enjoy such discounts. Mall managers have created an artificial market which unfairly discriminates against small and mid-sized retailers.

As a result of high rentals and unequal rent treatment, ‘big brands’ have dominated the retail scene in Singapore. A number of global retailers such as H&M, Isetan and Uniqlo are expanding for the second and third time into new malls in Singapore.

According to the Savills report on the retail sector, ‘big brands’ received deep discounts, small mid-sized retailers who generally occupy smaller store units are subjected to rents at market rates.

Unequal rent treatments have led to an influx of ‘big brands’ while small and mid-sized retailers are priced out of competition in prime city centers and suburbans. Many have found new homes in converted industrial areas where rents are a third of those in prime locations.

The World Retail Congress Asia Pacific will be held in Singapore from March 19 – 21. Inside Retail Asia is a media partner of the event.


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