Is this the death knell for the traditional food court?
John Coyne, chief executive, BCSC
Today more than ever the success of a shopping centre is measured on its ability to provide a complete day out for its shoppers. In order to achieve this, many centres are expanding their food offer to give consumers an experience they simply cannot get online.
However, when considering a centre’s food and beverage offer, landlords have to contend with the challenge of rapidly evolving consumer tastes, trends and fads in the market. These days everyone is a ‘foodie’ and consumers are no longer satisfied with the limitations of a traditional food court offer.
Increased brand consciousness among consumers fuels landlords’ desires to get the top retail brands into their centres, but landlords now need to apply this to F&B in order to deliver a complementary tenant mix.
The importance of tenant synergy between the retail and F&B brands on offer is not to be underestimated, with F&B prelets now as important as the traditional A1 lettings in promoting a new scheme.
The benefits in growing a leisure offer are numerous and the increase in leisure provision in retail operations is having a profound effect on the way landlords use their assets. Often F&B operators are able to take difficult spaces or units and create very attractive and successful areas.
Opportunities arise for turning previously unrentable space into lucrative dining areas by opening up outside areas that create streetscapes and piazzas for outdoor seating.
Landlords should be looking to harness new trends, designs and emerging cuisines like never before to enhance customer experiences. This will give shoppers reason to visit time and time again.
The ‘webification’ of the high street
Joe Ballard, director of business consulting,
Hybris and SAP Customer Engagement and Commerce
The high street is changing. Shops are no longer simple transactional environments and many brands are looking at new ways to bring online engagement tactics into the physical store.
In the early days of e-commerce it was not uncommon for online stores to try to replicate in-store shopping. Today, the future of omnichannel commerce will be shaped by the reverse process – webification.
Webification is a growing trend which sees e-commerce functionality increasingly integrated with physical stores. The ease and convenience of online shopping has led to sky-high consumer expectations, making it necessary for retailers to bring the online functionality customers love to the shop floor.
Consider how easy it is to review an online store’s entire inventory – and how difficult it is to do that in store. The simple act of arming assistants with a tablet computer allows retailers to provide the shopper with the experience found online, where entire product ranges can be seen and searched for quickly.
Improving the in-store payments process is also central to the webification of stores. Using the same shop floor tablets, brands can even take the radical step of making the traditional cash desk obsolete. By enabling wireless mobile transactions, new systems allow the same fast, convenient payments that online retailers have been offering for some time with ‘one-click’ checkout options.
The mass adoption of smartphones and low-cost tracking tools are providing retailers with great opportunities to market within the webified store. Geo-location technology allows retailers to analyse and react to customer behaviour in real time. Retailers can then use this data to offer contextually aware personalised offers and promotions that customers are actually interested in – all while they are still shopping in store.
A good example of a retailer which has successfully implemented in-store webification is The Entertainer. The independent toy retailer has improved customer enquiry resolution and conversion with shop floor tablet devices, and developed a platform to deliver 30-minute click-and-collect services – which saw sales through click and collect grow by more than 80% over Christmas 2014.
As customers continue to demand convenience, speed and a personalised service, it is vital that retailers meet these expectations – or risk falling behind their online competitors.
Counting cranes in Croydon
Andrew Bauer,
chair of Croydon BID
“It’s like Berlin, if you open your eyes to it,” commented a hipster at this year’s tattoo convention in Croydon.
Though referring to the town’s burgeoning cultural offer, transpose that statement into the context of the town’s current and future pipeline of 31 developments and it is very prescient.
Like Germany’s capital city in the 1990s , a game of “count the cranes” on the local skyline is an appropriate measurement of a town that is reinventing itself from concrete jungle to urban chic.
The town that only six years ago a Sunday Telegraph article forecast as being the British Detroit, has rediscovered a zest for development that will see £5.3bn invested over the coming years, including a £1bn redevelopment of the Whitgift shopping centre by Hammerson and Westfield.
As a long-term director of Croydon BID, I make the undoubtedly biased assertion that the BID was, and is, a fundamental cornerstone of Croydon’s turnaround.
When all looked bleak in 2008 as the recession stymied local investment, and when the 2011 riots compounded negative perceptions, the BID adopted a four-part recovery plan in partnership with the local authority.
Concentrating on making the town safer, cleaner, more attractive and accessible, the BID underpinned the local authority’s evolving masterplan for the town’s regeneration.
If substantive inward investment was to be achieved, Croydon’s undeserved reputation as a town beset by anti-social behaviour had to be eradicated as a primary priority.
The BID’s crime reduction partnership with the local authority, Metropolitan Police, retailers, licensed premises, transport providers and commercial interests, shared and continues to share
real-time crime intelligence.
We are probably four years from full realisation of the dream, but this focused partnership is our guarantee of future success.
Culture change supports rise of discount retailers
Adrian Horsburgh,
property director, Redefine International
Assessing the strength and potential rental performance of a shopping centre used to be all about seeing if there was a Marks & Spencer and then assessing which of the active discretionary spend retailers were absent.
While in some locations this still rings true, the economic downturn brought far-reaching changes to the retail landscape and for traditional retailers there emerged a greater need to trade as efficiently as possible from a floorplate, to maintain and drive profitability.
However, despite the challenging outlook, certain retailers – chiefly those in the discount category – have made hay in the new environment and emerged as a landlord’s prime target.
Ironically, companies selling goods at very low prices have become key to driving rents in many locations, with reformed consumer habits during the period providing the perfect breeding ground for the rise of discount retailers.
The runaway success of chains such as Primark, Lidl and Poundland has helped remove the stigma associated with value retailing, with consumers now proud to save money and such stores acting as massive draws to post-recession retail malls.
Discount retailing, particularly single price-point retailing, tends not to act as an anchor tenant. With an average basket spend of typically £5-£10, shoppers do not usually travel great distances to shop at a discounter and, consequently, the operators are able to trade from a greater density of units than a traditional retailer might, without cannibalising sales.
This market’s newfound popularity has not been overlooked by institutional investors either, as evidenced by TPG’s £150m acquisition of Poundworld in May, and the significantly oversubscribed flotation of Poundland in 2014, both illustrating the growth projections expected of the budget segment.
Landlords are responding by building new space in the UK and Europe which appeals to the new wave of retailers, on terms that are accretive on both an income and capital basis.
Agreeing lease terms: deal or no deal?
Neil Hockin, head of shopping centre leasing, Lunson Mitchenall
The relationship between landlord and retailer should be symbiotic. Both have a vested interest in the other’s business prospering. So why does this beautiful relationship start with an arm wrestle over lease terms?
The process of agreeing the initial lease terms can be painful. Sometimes agreeing the rent and incentive packages is the easiest part of the discussion. Negotiations go well beyond the basic principles of lease length and rent, often including issues such as alienation, service charge, repair obligations, reinstatement and even uninsured risks.
Increasingly, we are finding the length of time it takes to agree what should be straightforward lettings can put the deal itself at risk. If heads of terms and lease negotiations run into months, trading conditions may well change, or the landlord may receive better offers which can cause substantial renegotiations or even the withdrawal of one of the parties. There is no protection for the other party in this case and relationships can quickly sour.
There is often a disconnect between the business drivers and the parties, who are often trying to achieve very different results from the letting. Due to the adversarial nature of initial discussions, each often views the other as being the ‘bad guy’ and smoothing out these issues is a key part of the agent’s role.
Our job is not just to find the property or retailer but to manage expectations on both sides and to advise on detailed lease terms which can make or break a deal.
Understanding how to ensure a deal does not ‘break’ is how a good agent earns their fee.
In theory, with the market becoming more stabilised, negotiation should become easier. However, there will always be circumstances where one party has a stronger hand than the other and, in reality, no two negotiations are the same.
Are turnover rents no longer fit for purpose?
Nick Symons, MMX Retail
Turnover rents first became news in the UK when new international retailers like Gap and Disney entered the market nearly 20 years ago and found our archaic lease structures outmoded.
Turnover leases are designed to enable landlords and tenants to share the risks and rewards in a common goal – lifting footfall, turnover and profit.
Additionally, the relationship between landlord and retail tenant becomes far less adversarial. Landlords receive turnover data and proactively manage their centres, building closer tenant relationships.
Landlords want new names and retail concepts to keep their centres fresh, lively and interesting to shoppers but fixed-cost leases for new retailers are often too risky.
Turnover leases in these ‘multi-platform’ times have become more complicated. Landlords have become concerned about preserving income on click-and-collect in-store internet purchasing. Accepting returns, discounts, online savings all make turnover data more complicated to collect.
From a retailers’ perspective they seek to maximise turnover. Landlords and retailers have the same aim regardless of the lease structure, but the landlord has to attract the customer and retailer to their environment. Centres with WiFi, for instance, have to have confidence this will help turnover sales, not just online purchasing. Rather than focusing on risk, landlords with an innovative approach view turnover deals as a way to reap rent above their targets.
Turnover rents are not perfect but they need to be realigned. The system just needs an upgrade.
