Denis Sokolov's opinion column: What is exemplary retail and how to foster a culture of retail

Urban retail speaks about the culture of a country and its people no less than museums do. The diversity of retail formats reflects the vibrancy of life and the economy of cities. What business solutions in retail help develop these formats? Denis Sokolov explores this in his column, *The Language of Real Estate*. 

Denis Sokolov is a partner and managing director of Commonwealth Partnership Uzbekistan (CMWP), an international consulting company specializing in commercial real estate. He is also a member of the Royal Institution of Chartered Surveyors (RICS). In *The Language of Real Estate*, the expert shares insights into the structure and dynamics of the real estate market and offers forecasts for its development. The beauty of a modern city lies in the diversity of its architecture, nature, fashion, cars, and, of course, retail formats. Among the educated class, there is an unfounded belief that, unlike museums and theaters, shops and shopping are somehow less significant or undeserving of attention. Yet, trade has always been at the core of human culture. People embarked on journeys to establish trade connections and crafted legends about their expeditions. Ancient cities grew around marketplaces.

Fairs on central squares in some European cities still attract tourists today. Beyond fairs, modern travelers explore shopping malls, flea markets, quaint shops, and retail parks. Every brand targets its specific audience, but on a bustling high street or in a large shopping mall, anyone can find a place that resonates with them.

Two hundred years ago, poets and writers spent their time in taverns and bazaars, observing the manners and habits of their contemporaries. Today, shopping malls fulfill that same role. A visit to a mall is not just about shopping—it’s an opportunity to immerse oneself in an authentic environment, discover local fashion, observe the habits of the residents, and understand their unique behaviors.

According to analysts at Commonwealth Partnership, the average rental rate in Tashkent's shopping malls increased by 14% in US dollars in 2023. By the end of December 2023, renting a 100 sq. m space on the first floor cost about $40 per square meter per month. However, in modern malls worldwide, it is rare to find two tenants paying the same rental rate. The shopping mall format involves negotiating individual terms with each tenant. This tailored approach is at the core of the mall business model, distinguishing it from traditional markets.

The primary goal of a shopping mall is to attract the maximum flow of affluent customers. Visitors should be able to purchase any product, access any service, grab a bite to eat, and enjoy entertainment without leaving the mall. Achieving this requires a diverse range of products, prices, and brands.

Not all stores can pay the same rent because each type of business has different profitability and margins. In real estate, the paradox is that if a shopping mall is filled only with stores willing to pay high rental rates, it will end up hosting similar types of shops. This is the model behind traditional clothing markets, which struggle to offer customers a balanced product range, comfort, and service. For this reason, shopping malls worldwide are increasingly replacing markets.

To provide visitors with variety, shopping malls offer tailored rental terms to each store, depending on the type of business, its appeal to customers, and other factors. Globally, companies like Abercrombie & Fitch, Gap, American Eagle, Michael Kors, and others pay the highest rents to secure prime locations. At the same time, supermarkets and hypermarkets pay significantly lower rates. The logic is simple: the more customers a store can attract, the less it is willing to pay for rent.

The diversity of tenants is known as the **tenant mix**, and this mix is what differentiates one shopping mall from another. Behind every successful shopping mall is a team of professional specialists who focus on selecting the right tenants.

To encourage people to shop, prices must be kept as low as possible, which requires reducing costs, including rent. The price of any product we purchase in a store includes the cost of renting the space. A shopping mall does not just lease space; it sells retailers access to customers. Shopping malls do not always offer high-priced goods. Many retailers specialize in affordable products, such as FixPrice or the UK-based C&A.

International retail companies primarily aim to open stores in shopping malls where they can estimate foot traffic and assess potential revenues. Currently, Tashkent and Uzbekistan have a significant need for globally recognized brands that set the standard for quality, service, and after-sales support. Shopping malls serve as bridges for international cooperation.

The arrival of international players in the domestic market often raises concerns among government officials and local businesses. It's not uncommon to hear arguments that foreign retailers won’t benefit the country or city because they repatriate profits. However, in reality, the production cost of goods accounts for only 25–35% of their shelf price, while the retailer’s profit is about 10–15%. The remaining half represents what is spent locally on taxes, advertising, logistics, real estate, and wages.

The retail sector creates a significant number of jobs. In France, over 3 million people are employed in retail, accounting for 11% of the total workforce. In Uzbekistan, about 10% of the economically active population works in this sector, but efficiency is much lower. On average, a person working in retail in Uzbekistan sells goods worth $10,000 annually, while their counterpart in France sells nearly $200,000—20 times more.

This disparity is explained not only by differences in population income levels but also by the underdevelopment of retail technologies and formats in Uzbekistan—particularly the lack of variety. The country lacks retail parks with large-format stores, outlet centers, department stores like Galeries Lafayette, hypermarkets, and similar facilities.

Therefore, the primary task for the city—represented by businesses and economic regulators—is to improve retail efficiency and introduce quality and safety standards for products.

European tourists immediately notice gender disparities in Uzbekistan, which are also reflected in retail. In Europe, 60% of shoppers are women, so stores primarily cater to them by placing women’s sections in the most convenient and high-traffic areas, while men’s sections are often relegated to basements or second floors. In contrast, male shoppers noticeably dominate in Uzbekistan. This is just one of many fascinating observations available to the attentive traveler.

In the coming month, we anticipate the opening of the Tashkent City Mall, which incorporates modern approaches to tenant mix. This event is significant not only for local fashion enthusiasts but also for businesses. It will serve as a litmus test for how well the city can embrace modern retail formats and shopping as an integral element of urban culture.

Source: Gazeta.uz  
Photo: Evgeniy Sorochin / Gazeta.uz