Saturday 27 October 2012

US Retailers Innovative Approach To Rent Costs

US retailers aren’t sitting around waiting for things to recover. They are active not only in sourcing and marketing their products but in ways to minimize costs and maintain maximum flexibility. After all, we are in a new era whose direction is not yet clear.

Space reduction is evident in the new strategies of major Australian retailers because less space means less rent, means less overheads. In America, retailers are seeking discounts to the back quarter of their shops. If it is not prime retail space, indeed more likely to be storage, retailers argue it should be at a lesser rent. I wonder if I could argue with QVM management that the stall area occupied by my storage boxes should be at a lesser rent?

Another innovation is “forced relocations” where the tenant agrees to sign for a further 12 months on condition that a smaller, more suitable, location is found for the tenant during that time. There are many ways of adapting new space options including, moving outside the main mall, using “pop-up” stores, co-tenant sub leases, and brick-to-click kiosks.

Remaining profitable is the name of the game for all retailers. It is a serious challenge and we need to think outside the square if we want to survive. Flexible thinking by landlords and tenants would seem to be an essential ingredient.