Malls might soon stop treating certain brands as “exclusive.”
Several malls are planning to discontinue the ‘no-compete’ clause while signing a new brand, a move which will allow malls to house similar category brands. While apparel brands don’t ask for such terms, gaming zones, cinemas, electronics and department store chains often ask for exclusivity in the mall. For existing brands, malls are waiting for the renewal before asking them to discontinue the practice.
“The developers put heavy investments in a mall while a brand only spend on fit-outs. Malls should have the right to say no to the clause which in future can impact the revenue,” said director of a leading mall, which operators a dozen malls across the country, asking not to be named.
Last week, American toy and clothing retailer Toys ‘R’ Us had to shut its store in Hyderabad within 24-hour of opening as the mall had a no-compete clause with another toy brand. According to sources, Apple has also put a no-compete clause for its flagship India retail store in Delhi and Mumbai. It has asked the mall operators to not give space to certain brands near its store. While some of these brands compete directly, some are not even operational in India but if they come in future, they can’t have a store near Apple’s store. “We ask for no-compete clause and many a times malls agree to it. We are a departmental store and having a same format in the same mall will impact business of both the companies,” said Devarajan Iyer, CEO of fashion retailer Lifestyle International.
Mall operators said that instead of giving exclusivity, they request brand to perform better so that they don’t have to look for another brand in the similar category.
“We are also conscious of the fact that same category might impact the business of both but we don’t sign the clause. If we have given 50,000 sq ft to a gaming zone, there is no need to have another similar format but in some large malls, there might be a requirement for two gaming zones. It depends on malls and brands as well,” said Muhammad Ali, CEO, Forum Malls of Prestige group.
Some of the food chains which specialises in buffet also request for the clause as they operate during certain hours and having a similar format nearby will impact the business.
“We don’t offer no-compete clause as every category has different player and no one can force others. Brands often request for it but for a mall it’s not feasible to accept that request,” said Rajneesh Mahajan, CEO of Mumbai-based Inorbit Malls.