Crossroad's Retailing Lessons

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Themes: Retailing
Period : 1999-2000
Organization : Crossroads, Piramal Enterprises
Pub Date : 2001
Countries : India
Industry : Consumer Goods & Services

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Case Code : BSTR005
Case Length : 6 Pages
Price: Rs. 200;

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At The Crossroads Contd...

The management had put a notice at the entrance stating that one had to produce a credit card, cellphone, visiting card, or a student ID card to gain entry. Or they had to pay Rs.60 as entry fee, refundable against purchases at any time. Said Chadha, "We argued against it, but the management sided with more premium tenants like J.J. Valaya." Many people turned back, insulted that they had to prove that they had a credit card or a cell phone.

Adding fuel to the fire, the media also started lambasting the mall. Within days, traffic fell drastically by more than 70%. A couple of months later, the management hurriedly lifted the ban, but traffic still continued to fall. It stabilized around 6000-8000 a day, which affected business at some of the outlets. To deal with this situation, Crossroads initially relied on using anchor tenants like McDonald's and Pantaloons to attract crowds.

The management reasoned that the shoppers at these outlets would then disperse to the other outlets of the mall, but this plan did not workout as expected. The premium tenants seemed to be happy to see that the crowd was manageable.

Initially, in the case of Pallazzio, the conversions were mere 10-15%⁵ when 3000-4000 people visited the store a day, the conversions were. Many of these visitors were window-shoppers, and had discouraged the regular clientele of these outlets. After the restricted entry, though the walk-ins fell to 5000-6000 a week, conversions rapidly increased to 45-50%.

However, traffic-dependant outlets like bookshops and music stores were highly disappointed with the new development. For instance, Fountainhead needed at least 1000 walk-ins every day, with daily sales of about one lakh, to cover its monthly expense of Rs.8 lakh. But, there were days when just 100 people walked-in. Monthly sales fell to 12-15 lakh. Hurriedly, Fountainhead opted out of Crossroads. Many of the other tenants also started demanding lower rentals from the prevailing Rs.250 per sq.ft.

Falling traffic was not the only reason for Fountainhead opting out. There were also problems with the mall's layout. Books offered very little margins, unlike jewelry or electronic goods. Also, they were mostly impulse-buys and hence needed more traffic. The greatest disadvantage for the store was that it was on the fourth floor. Said an ex-store manager, "When I saw our shop was on the fourth floor, I knew it would be hard-going."

People hardly went up till the fourth floor just to browse through. The store would have been a little better off at the entrance or on the first floor. However, analysts felt that as there were too many entrances and exits, the flow of traffic was difficult to regulate. People could walk-in from any entrance and leave from any exit.

The only two tenants who were not complaining were McDonald's and Pantaloons. McDonald's sold around 8000 meals a day, which made it one of the most successful outlets in Mumbai. The success of these outlets could not be completely attributed to the mall. Originally, it was expected that the onus for drawing traffic would lie with the mall management. But, soon after inception, the relationship between mall management and the tenants soured.

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5] Out of 3000-4000 people visiting the store, only 10-15% ended up purchasing something.