Spanish Fashion retailer ZARA is looking to reduce mall rentals and update revenue-sharing terms.

A decade after the widely publicized entry into India, Spanish clothing retailer Zara has asked few malls to renegotiate rental terms where they have been running stores for years, this includes a decrease profit-sharing deals and either lower or complete waiver, on charges paid to the landlords by the tenants for common area maintenance (CAM).

Zara has been one of India’s biggest fast-fashion brands, and one of the wealthiest Spaniards owned the firm, which has been a tough challenge for home-grown departmental chains such as Shoppers Stop and Dubai-based Lifestyle, which was the “anchor-tenant” in tony shopping centres.

Most mall operators, with the largest fashion brand in the world, claim that, even after the competition has risen in the last seven years, Zara is still a strong player – and more foreign brands are coming and internet shopping is booming.

“Zara knows it helped every mall to generate footfalls and income that it was difficult to match or revamp by the competition,” said a top management executive at a New Delhi mall. “Zara knows that and is renegotiating better terms.”

In India, a Zara spokesperson refused to comment. Inditex Trent, a joint venture between India’s Tata Group and the global owner of Zara, Inditex SA, runs Zara stores in India. The company posted a 17% increase in revenue to Rs 1,438 crore in FY19, resulting in a net profit of Rs 71 crore.

Some mall executives have defended Zara’s latest move and said that Zara provides a better deal in shopping centres. The Spanish company has revenue-sharing agreements with most malls and landlords get around 7-8 per cent of Zara’s revenue, which is one of the lowest revenue-sharing rates in the industry.

“While contracts have been slightly skewed toward Zara, I would rather call it restructuring terms, rather than renegotiation,” said one of the top executive in a New Delhi mall with Zara as its anchor brand. “Zara says now that even the CAM they want to pay is related to its sales.”

Another mall executive said that Zara is now calling for a complete waiver of the CAM, which was already obtaining “subsidized CAM.”

The owner of the mall stated, “I do not think that Zara is wrong or does not justify the demand for better deals. It’s has come and it has performed, and only then it is asking to restructure the terms.

Zara has only opened 22 stores in India since its 2010 arrival, despite the fact that high-spending fashion consumers have been increased. In contrast, Sweden’s global competitor, Hennes & Mauritz (H&M), has doubly grown as many stores as four years ago since it came to India.