Until recently, India had resisted the global advance of mass-market materialism and its most visible symbol, the American mall. The chain stores that anchor malls everywhere first appeared at the beginning of the 20th century in the United States and took 50 years to gain a 20 percent share of the market. Then they started taking off around the world. It took just the last 10 years for chain stores to seize an equally large foothold in Malaysia and Thailand (chart). India stood out as an island in this widening sea of malls, protected by red tape and a Gandhian tendency to shun the pursuit and display of wealth.
Today there are only three malls in India, and they offer a distinct twist on the usual retail palace. Shoppers are more likely to encounter swamis, saffron and homegrown labels like Weekender and Gabana than the familiar parade of global brands. But all that could change fast, as India lowers barriers against foreign labels in order to satisfy its commitments to the World Trade Organization. In a giant step this week, India will drop quotas on 714 imports, from freezers and color TVs to Scotch whisky. If developers are right, this could be the moment mall mania finally seizes India.
Just about every major Indian builder or industrialist is looking at malls. Plans are in the works for as many as 50 new malls over the next three years. Real-estate specialists Jones Lang LaSalle estimate 6 million square feet of mall space will open in major Indian urban areas. Even Mumbai, with stratospheric real-estate prices second only to Tokyo’s, is expecting 2 million square feet in 12 malls and a sudden influx of Western brands. Mall developer Pradeep Seth predicts “a flood of foreign goods” after April 1.
Import quotas aren’t the only barriers falling. Archaic urban zoning laws had divided cities into tiny plots, often subject to heated title disputes, which made it difficult for developers to buy a piece of land big enough for a mall. Now cities are relaxing the laws, and exorbitant real-estate prices are coming down. High-end incomes are rising 10 percent annually, and now top $2,800. In Mumbai, failing downtown textile mills are freeing up prime sites. Delhi’s fast-growing satellite cities have plenty of spare land–and nine malls in development. Susil Dungarwal, head of the retailing division for residential and commercial builder the Hiranandani Group, predicts a competitive “bloodbath” as developers fight for control of an industry still dominated by mom-and-pop stores. “Indian retailing isn’t even at the birth stage,” he says. “It’s still being conceived.”
Malls are in. In the movie hit “Chori, Chori, Chupke Chupke” (“Quietly, Quietly, You Steal My Heart”), dreamy newlyweds rendezvous outside Ansal Plaza, Delhi’s only mall. The film is a consumerist fantasy of German luxury cars and Swiss honeymoons, and to Indian audiences the postmodern concrete and glass of Ansal Plaza is just another piece in the puzzle.
India started opening to foreign imports and investors in 1991, but it was only toward the end of the decade that foreign brands such as Nike, Reebok, Levi’s and Lee first appeared in stores. The government aims to bring import duties, which now average 35 percent, down to international norms of about 20 percent by 2004. Yet glaring exceptions remain. Scotch whisky is taxed at 222 percent, protecting local distillers of Indian-Made Foreign Liquor, a blend of fermented molasses, artificial color and flavoring that bears only a passing resemblance to whisky.
Rules like that give retail a local flavor. Small shops enjoy state-controlled rents, and are often handed down for generations. Extended families provide cheap labor that allows them to get by on thin margins–though not by choice. The government still controls prices for most basic goods, too. The result is that 98 percent of India’s 12 million stores are independent, and barely scratch out a living while providing a high level of service. “That’s how they’ve survived so long in India,” says Sue Evans, a management consultant at AT Kearney, a global investment consulting firm. “They offer home delivery.”
In India, it will be unusually tough for developers to take on these little guys. The new and planned malls are typically less than half the size of their Southeast Asian counterparts, and are constrained by the shortage of land and brands. Instead of the usual lineup of Prada and Versace, Crossroads features top Indian designers such as JJ Valaya and Rohit Bal. In the city of Chennai (formerly Madras), Spencer Plaza offers ethnic stores selling local handicrafts and curios. Spencer vice president Venkat Kalyan Raman believes malls are “bound to turn out different here, though I don’t know how. Take McDonald’s Big Mac–it’s the same the world over. But instead we’ve a Maharaja Mac.” That’s a Big Mac made with lamb, not beef, out of respect for Hindu reverence of the cow.
No, India will resist Americanization. That’s obvious at Osho World, a store in Ansal Plaza. Four followers of the late Bhagwan Shree Rajneesh sit in the “silence zone” at the rear of this outlet for the teachings of their guru, a.k.a. Osho. Devotees and visitors perch cross-legged on saffron cushions, eyes closed, listening to tapes of Osho’s voice wash over them for an hour each evening. Puzzled passersby pause for a double take through the window and beyond the meditation in progress sign. A few stores down a video wall pumps out MTV. Strange scene, even by Indian standards. “Here we’re reaching a different, higher class of people,” says Swami Chaitanya Keerti. “We call this meditation in the marketplace.”
