AURORA: What is the Dolmen Group’s story?
FAISAL NADEEM: The Dolmen Group was established in 1984 as a real estate land bank; basically buying and selling land. Eventually, we moved on to building and selling property – initially, residential projects.
A: In Karachi?
FN: Yes. The concept was the same; build apartments, sell, buy more land and so on. From there, we moved on to building shopping centres. We started with Dolmen Centre on Tariq Road, which we built in 1991 and we then sold it a few years later. After that, we built another one on Tariq Road in 2000, which we partially sold. Dolmen Mall Hyderi was built in 2008 and Dolmen Mall Clifton in 2011. Of course, over time, the model changed.
A: Changed in what way?
FN: We went into rentals rather than sales. Today, the Group has a development wing which looks at new projects and these include shopping malls, office towers and residential apartments. We have an entertainment wing which looks at outdoor and indoor entertainment under the name of Sindbad’s Wonderland and a management wing. One part of the company develops new projects and the other manages it. Eventually, we may consider managing external projects, working with developers who want to develop but are not equipped to manage a building. We are still developing our management capabilities as the scope is very big; people don’t realise how important management is, especially when it comes to malls and office blocks where a lot of the value of the property is derived from how well it is managed and maintained. We have been working on this since 2012 and we are now at the stage where it has become a strong, standalone entity, capable of looking after projects we don’t operate.
A: Is this concept viable in Pakistan?
FN: Our focus is especially on shopping malls where you have to maintain the environment, otherwise sales are affected. You need the right kind of operational control, maintenance, customer service and security. We believe this concept will be required in the long-term; as more shopping centres come up, the challenge will be how to maintain and enhance the value of the property. Whether the market is ready for this yet or not, we will have to see, but at our end we need to have this kind of management concept – and if the opportunity arises and we get the right sort of external project to manage, we may look into expanding there. But it has to be the right project; we would not look at a project that is not working. However, if we are involved at the development stage and the concept and location are good, we would look at it. We have to be careful not to harm our brand in any way.
A: For most people, the Dolmen brand is synonymous with malls and retail. How important is the retail side in terms of your portfolio development?
FN: Our primary focus is on the retail segment; this is what has made Dolmen the recognisable brand it is today. We have been in retail since 1991 and Dolmen has been the constant touchpoint between the customers who walk into the mall and the retailers who work there. Malls are much more interesting because we can influence how well retailers do. In an office building, we cannot influence how well a business is doing. We can provide a company with a work environment with good facilities and that is about it. With malls, we have 200 odd people whose businesses depend on how well we do – this is what makes this a dynamic business and the driving force behind the Dolmen brand. The malls are our topmost priority.
"We have 200 odd people whose businesses depend on how well we do – this is what makes this a dynamic business and the driving force behind the Dolmen brand."
A: In what way can you influence how well the retailers perform?
FN: A mall is like an engine, and if the engine is strong, all the other components will work better. In other words, if you provide the right environment that draws in the right footfall and the right sales, this will have a beneficial effect on the businesses operating there. If you put a retailer in a location which does not have a strong pull, then he will have to create his own pull; we look at it as our responsibility to make sure the right footfall comes into the mall.
A: How do you achieve this?
FN: When we started out, retailers were only interested in buying; renting was an alien concept to them. Yet, it was the view of our chairman, Nadeem Riaz, that it was essential to develop the rental market because that was the way brands would grow in the future. So initially we really had to convince retailers to come to the mall – in fact, we gave them the space for free just to get the ball rolling. Our focus was to develop the market. It was about getting the right brands and creating the environment. Even when we were giving the space rent-free, many retailers wanted to run away because they felt the idea was not working. Eventually, the concept started to take off and customers became used to the idea and retailers started to see the benefits.
A: How long did this process take?
FN: About four years. There was no concept of investing in retail; it was only about real estate. Shopkeepers bought a shop and when it increased in value, they sold it and bought something else. Once, we had a customer who wanted to buy five of the front-facing shops and was prepared to give us the money in advance. When we asked him what he intended to do with the shops, he said he would hang on to them until his children grew up and entered the business. Imagine a mall with five front- facing shops closed for years on end; that would have been the end of the mall! This is the reason why we insisted on the rental model; to make people keep their outlets open and work on them. This is how we started to develop. Also, for the cost of buying one outlet, retailers could open 10 to 15 outlets. Once they accepted this model, their focus shifted on developing their product line and customer service.
A: What were the challenges in securing the right footfall?
FN: In Pakistan, given the security concerns, the parking issues and the climate, a one-stop mall where all this is managed is very convenient. The challenge was to convince people to enter the mall because they thought everything inside would be more expensive compared to the shops outside. So the issue was to drive people inside and we did this by holding events and festivals. We started the Dolmen Shopping Festival in 1991 and we have continued with it ever since. It was created to encourage people to come into the mall and experience an environment where they could spend time with their families, enjoy the food court and the attractions Sindbad’s Wonderland offered. This eventually led to the ‘habit change’.
A: What were the dynamics that underpinned the organising of retail in urban Pakistan?
FN: It was a combination of factors. Once the retailers accepted the idea of renting rather than buying space, they started to concentrate on developing their brands. They began to see the opportunities; they had the footfall, everything was set up – so for them, it was a question of harnessing these opportunities. At the same time, there was a new generation of retailers prepared to take risks and build up their production and manufacturing capabilities. Initially, retail was about going to Thailand, picking up stocks, selling them here, and going back for more. Today, there is a lot of local manufacturing; retailers understand the concepts of professional inventory management, marketing, customer service and operations. Shops don’t close on Sundays or at lunchtime anymore. As professionalism developed in retail, the environment changed and it became an attractive industry, not only for investors, but also for people to work in. Seven years ago, if you asked anyone if they wanted to work in retail, they would have said that they don’t want to be shopkeepers. Today, retail organisations are employing thousands of people, with the focus on finance, manufacturing, inventory, back-end operations and supply chain. It has become a huge industry. The availability of real estate has given retail a big boost. Since 2010, retail has been about expansion, a nationwide presence and building strong organisations.
"As professionalism developed in retail, the environment changed and it became an attractive industry, not only for investors, but also for people to work in."
A: How hard was it to convince people to work in retail?
FN: When we started to recruit for Dolmen Centre, people thought working for a mall was only about security and housekeeping; we really had to go out and convince senior people from different industries to join us.
A: Which sectors were you looking at?
FN: We were looking for people to work on mall development and management, so from industries such as FMCGs, banks, hospitality, and then, from different disciplines and functions. Initially, it was a challenge because people could not understand what was involved. In fact, it was easier to rent a retail outlet than to convince senior professionals to join. Eventually, we recruited some very good people and we built young teams under them. Now that the mall is fully functional and people understand what is required, people apply on a regular basis; they understand that it is a career. Retailers faced similar problems. Initially, they did not have the right support and the owners had to manage everything themselves. It took a lot of effort to find the right people within other industries.
A: What has been the role of advertising agencies in promoting retail brands?
FN: Agencies are not yet really tuned in to handle retail brands, so a lot of this is managed internally and the agencies are used mainly for coordination.
A: Why are they not attuned to retail?
FN: Their focus is mainly on TV or print, because that is where the money is. When it comes to developing a marketing strategy, they lack a retail mindset and it takes a lot of effort for them to produce something that retailers want. In the longer term, retailers will either have to create in-house agencies or train an agency to manage retail. It is a challenge and something which will affect growth in the long-term.
A: How did you manage to convince Hyperstar and Debenhams to open in Dolmen Mall Clifton?
FN: From the start, our vision was to have a big hypermarket and a big department store. It was built into the design before either of them had any plans to come to Pakistan. In 2005, when our chairman wrote to Carrefour to invite them to Pakistan, their reply was that they did not have any plans at the moment; however, they agreed to send a team to explore whether there was an opportunity, and when they came, they saw the market and the opportunity. It took another five years of negotiations and finalisation before they moved into the mall. Same thing with Debenhams; the space for a multi-level department store had been built into the design because our chairman was confident that an international franchise would eventually come in, and the fact is that any international brand – be it Carrefour, Debenhams, Mango, Mothercare, Next, etc – that has visited this market has eventually signed up. They don’t understand the market until they visit it. There was a lot of help from the British Deputy High Commission; they worked closely with us and that is how a lot of these brands came to the mall.
"We want to be a national brand; we have the expertise and the capability. However, it is a question of doing things correctly."
A: Are you planning to build another mall in Karachi?
FN: We are planning to and we are looking at locations. There is potential in the market, but you can’t just copy-paste the same model from one area to another. The key is to understand what the location provides, what the requirements for the location are, and then create something around it. The size of a mall and the brands that do well is different for every location. The type of management is different as well. The footfall, the food court and the entertainment requirements – everything changes according to the location. So, when we look at further development, we have to make sure that it caters to the requirements of a particular location.
A: What about expansion outside Karachi?
FN: We want to be a national brand; we have the expertise and the capability. However, it is a question of doing things correctly; it would be easy to jump up and say we have done three malls, so how hard it can be? As I said earlier, we have to make sure we choose the right location and the right tenant mix; this is the only way to create a correctly functioning mall. Generally, we have been very conservative in terms of our developments; our focus has been on doing less, but doing things correctly. We do not want to rush in, develop and hope it works. We want to make sure we develop something that creates an impact. Our main focus is the retailer. Today, we could just call up a retailer with a space and they will take it, because they have faith in the brand and that trust is very important to us because it is a very big investment for them.
A: Is the Government playing its role in terms of encouraging the retail industry?
FN: The Government, the regulators, in fact, the whole industry has to evolve beyond treating retailers as dukandaars. We are beyond this stage. Worldwide, it has always been the second biggest employer in terms of the economy and it will be the same case here. Retail is now an organised sector, comparable to any manufacturing or agricultural sector, and it has to be treated accordingly. A retail association was recently formed and they are looking to work with the Government to make sure that it understands the business and the factors which drive growth. A lot of retail is local; everything is developed and sold locally; the employers and workers are local. Regulations should be made more flexible. Yes, the Government should get their share of taxes, but the process should be easier. Retailers complain that the process is very bureaucratic and they have to spend a lot of time ensuring they meet all the regulations, rather than focusing on developing the business. The Government needs to work with retailers to understand the concept better, create a framework that benefits both and enables the long-term growth of the industry.
Faisal Nadeem was in conversation with Mariam Ali Baig.
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