Zara to renegotiate rental deals with mall owners

Despite its success in India lately, Zara is looking at renegotiating its rental agreements with some of the malls.

The Spanish retail giant might ask for reduction in revenue-share deals and either lower or total waiver of common area maintenance (CAM) charges.

Despite competition and slowing economy, Zara has maintained strong sales and has in fact raised its number of stores to 22 across the country.

The rise of e-commerce and entry of other foreign brands in India has not deterred its growth, according to some executives.

“Zara knows that it has helped all the malls by bringing in footfalls and revenue that competition has found difficult to match or overhaul,” said a top executive at a mall in New Delhi. “Zara realises this and is now renegotiating better terms,” the executive added.

Inditex Trent, a joint venture between Tata Group and Zara’s global owner Inditex SA, runs Zara stores in India. The venture saw its revenue rise 17 per cent to Rs. 1,438 crore in FY19, leading to a net profit of Rs. 71 crore.

Mall executives feel that Zara is a brand that has the right to renegotiate or ‘restructure’ its agreements with malls despite the fact that they are already in favour of the retailer.

It has a 7-8 per cent revenue-sharing agreement in some places, the lowest when it comes to the industry and it is asking to link CAM to its sales or completely waive it off.

“I don’t think Zara is at fault or not justifying its demand for better deals,” said the mall owner cited above. “It has come, it has performed, and only after that it is asking the terms be restructured.”