Nilesh Bhargava (name changed) is a small retailer in a Bypass mall. He has not paid rent since October because he has just not earned enough to fork out Rs 60,000-odd per month for his 300 square feet outlet.

The bailout for Bhargava and a growing number of mall retailers could lie in fixed monthly rentals being replaced by revenue-sharing. A mismatch between “exorbitant rentals” and “dwindling business” is fuelling the clamour among retailers for a shift to the alternative system to stay afloat in malls.

The chorus for rent rationalisation is hitting home, with the management of South City Mall already rolling back rentals by 10 to 25 per cent following a petition by a group of around 20 shop-owners.

“We have reduced rents for our vanilla retailers (smaller, non-anchor stores) for a temporary period to help them tide over these troubled times,” Sanjeev Mehra, the vice-president (mall operations) of South City Mall, told Metro.

It all started with some badly bleeding stores at the Mani Square mall not paying rents and coming together to force the management to consider a system of sharing sales revenue.

Rentals, in the Rs 80-90 (per sq ft per month) range when Forum opened six years ago, are touching Rs 350 for some outlets now, and this is “grossly irrational”, concur retailers. “In today’s market scenario, anything above Rs 125 should be deemed unreasonable,” feels Madhusudan Binani, a city franchisee of prominent brands.

Rentals going through the roof have little synergy with market dynamics, stresses Kamal Jain, a city-based franchisee of brands like Adidas, Benetton and Nike. “Given the low energy in retail business now, mall-owners should just do away with monthly rentals; revenue sharing is the only way forward,” he adds.

Mall-owners must be ready to share the investment risk, not just the spoils, agrees Abhijit Das, the managing director of international property consultants Jones Lang LaSalle Meghraj (Calcutta). “If the developer is so sure of the strength of his asset, he should be more flexible with rents,” he points out.

Mall managements are wary of a large-scale switch from monthly rentals. “We have entered into a revenue-sharing model with some big national/international retailers, and it works fine, since they all have a very transparent transaction system. There might be a problem with small, unorganised retailers; we are working on a number of discounting models for them,” says Subesh Ray of Mani Square.

City Centre, which has a revenue-share arrangement along with a minimum guarantee clause with some outlets like KFC and Pizza Hut, is also not keen to replicate the model en masse. “It’s much more difficult to do it with smaller players. But if market forces demand a correction in rental rates, it will automatically happen,” says Pramod Dwivedi of the Salt Lake mall.

Given the winter woes at malls, chances of organised retail trade crossing the Rs 230,000-crore mark by 2010, as predicted by the Images India Retail Report — with Calcutta accounting for seven to eight per cent — look remote.

“Co-operate, not compete,” Kishore Biyani, the founder and CEO of Future Group, said at a recent retail summit in Mumbai. “Collaboration with stakeholders is key to profitable business and growth hereon.”

The mall-store handholding must begin now, believe Calcutta retailers, desperate to deal with a footfall crisis that has forced many brands like Adidas and Pantaloons to go into “sale” mode prematurely.