Temporary retailers are becoming increasingly common on the high street as landlords struggle to fill their units. Charlotte Hardie goes in search of these often enigmatic operators
For years it was the iconic head office of luxury retailer Burberry. Now it is piled high with Mike Ashley’s JJB clearance stock… Temporary stores are the vagabonds of the retail world, where empty units can be filled in a matter of days and vacated just as quickly.
And while life is looking distinctly grey in most of the retail world, the sun is shining on these temporary tenants and they are seizing the opportunity to make their hay by the lorry load.
Experian forecasts that more than one in seven UK retail sites – about 135,000 stores – will be unoccupied by the end of this year. For landlords faced with the choice of receiving no rent for a unit and having to pay empty property rates too, a temporary contract is far better than nothing.
So who are the people behind these transitory stores and how do they operate? Firstly, there is a distinction to make between the independent, one-off, often unnamed stores, whose operators can cause significant headaches for landlords – more on them later – and those run by seasoned players who operate several units at once and play by the established rules.
But even these seasoned players can be an elusive bunch. Among them is Surprise Surprise owner Yash Pal Malhotra, whose fashion stores regularly crop up on London’s Oxford Street. He doesn’t want to talk about his business.
Tracking down Hyper Hyper managing director Baboo Sehgal is no mean feat either. After finally getting his number, though, he happily discusses the finer details of life as a temporary retailer. Through his business V Store UK, he regularly opens stores all over London. Hyper Hyper is his most recent venture, having set up shop on the ground floor of the former Zavvi store on Oxford Street.
“We’re the retail gypsies,” he says, cheerfully. “We come, we go, we don’t have loyal customers.” For that reason, many of these stores will only ever open up in prime locations. “Secondary locations are of no interest to me,” says Sehgal.
And yet the rental deals he is able to secure – even on Oxford Street – are nothing short of astonishing. He says: “If I was to get, say, a 10,000 sq ft permanent shop I might pay as much as £1m in rent a year.” But with temporary leases, which can be anywhere from a few months to a year and a half or more, he says “we will not pay more than 10 per cent, it doesn’t matter where we are”. Given that these stores do not pay business rates either, their costs are minimal.
Crucially, though, securing such deals would not be possible unless these temporary operators were reliable, Erol Ezen, partner at property agency Thomas Davidson, says: “Temporary lets on Oxford Street tend to go to a small number of operators because they’re trusted.” Their reputations may be far from glamorous, but the experienced ones are shrewd operators. Sehgal says: “We work with the landlord. We don’t pay whatever they ask for, but we’re reliable. We have experience.”
Landlords may occasionally be tempted to plump for other independent temporary players that are willing to pay slightly more rent. But what looks good on paper can turn out to be a nightmare.
David Salamons, commercial property and corporate specialist at Cubism Law, says solicitors are often not involved in leasing agreements because the contracts are generally uncomplicated. They involve obtaining a simple license to occupy the premises or a short-term lease that involves no security of tenure. However, he adds: “Sometimes, some of the independents can physically refuse to move.”
Landlords’ haste to fill units can also cause problems. Salamons explains that in some cases where solicitors have been consulted, “the problem we often get is that they’ve already let the guys into the store, which is very precarious if you want to get them out”.
In contrast, those businesses that are well practised in the world of temporary retailing know that they need to keep everyone on side. Sehgal says that if the landlord wants them out in a week, they will do just that, no questions asked.
Bill Nettelfield is property director of temporary retailer Calendar Club, which last Christmas set up more than 250 stores for three months – half in pop-up kiosks and half in stores. Being an impeccable tenant is, he says, vital to success. “We don’t hide anything. Landlords know where they stand – we’ll be in by this date and out by that date.” “We want the landlords to say thank you and invite us back.” Every year Calendar Club gives each shopping centre an evaluation form to fill in so it is aware of where it could improve.
What’s on the inside counts
Generally, and unsurprisingly, temporary stores are often far from slick in terms of their interior. But, as Sehgal says, it is important they are presentable. “We don’t pay full money to the landlord but we spend money on the shop. We want to keep the place clean. With many temporary stores, the customers just don’t want to go in there.”
On closer inspection in Hyper Hyper, it’s difficult to know where the money has been spent but in fairness, it’s not bad. Yes, it does look makeshift – there are cobbled-together fitting rooms, tatty bits of pink carpet that could benefit from vacuuming and more than a few remnants of its former occupier, including a sign pointing to Zavvi’s Disney area on the first floor. Considering the speed at which temporary stores appear this is no surprise and Hyper Hyper is, nevertheless, far better than most of the anonymous outfits that crop up for a short period on the UK’s high streets.
Surprise Surprise fares better than average, too. Its store closest to Oxford Street tube station only sells tourist merchandise. This too is fairly well ordered and thought has gone into how the product is merchandised.
Calendar Club, meanwhile, prides itself on making its outlets look like permanent stores. Nettelfield says: “Sometimes you go past a vacated temporary store and it looks a mess. The vast majority are very tacky. We had to fight against what a temporary store looks like.”
Calendar Club has eight territory managers and when a store is snapped up one of these managers creates a plan for the required fixtures. If need be it can create specific signs or light boxes within a matter of hours. Nettelfield says: “If a landlord came to me on a Monday, we could have the store open by Wednesday.”
A question often asked about temporary stores is where they source their stock. Of course, this varies, but temporary stores can be a useful way for wholesale or manufacturing businesses to shift stock.
Birmingham-based wholesaler Discount Radio and Watch, which imports everything from gifts to electricals and lighting, negotiated short-term leases for temporary shops last Christmas, trading under the name Gimme Gizmo. Aimed at the lower end of the market, it sold everything from radio-controlled hovercrafts to vibrating ducks. For businesses like this that sell a lot of seasonal or gift products, opening such stores can be the perfect way to lift sales.
Sehgal, meanwhile, obtains much of his wares from wholesalers and manufacturers that are unable to shift their products – and the present economic climate is proving advantageous. “Today, there are lots of clothing companies that are holding stock. We work with those companies, either bringing them into our shops and doing the merchandising for them, or buying their stock a little bit cheaper,” he says.
Again, the strength of V Store UK’s business is dependent on forging strong relationships with suppliers. “We’ve got labels and brands that like to work with us,” says Sehgal. “We’re dealing with the right people.”
Importantly, though, just because these stores only appear for a matter of months, doesn’t mean they are less at risk of being hauled up for design infringements in the products they sell. Last year Surprise Surprise found itself at the centre of a legal wrangle with luxury shoe retailer Jimmy Choo over the design rights of its “Ramona” handbag. The High Court found Surprise Surprise had sold a reproduction of the bag at its Oxford Street store. However, Surprise Surprise claimed that as a buyer and not a manufacturer, it was an innocent infringer.
So what does the future hold for temporary retailers? The initial few weeks’ trade in its new site on Oxford Street have been good for Hyper Hyper and Sehgal plans to open more in the capital. Nettelfield says that Calendar Club also plans to increase its number of stores, although it does not have a target in mind. Given the challenging trading conditions and surge in empty units, these temporary operators are well placed to take full advantage.
Moreover, mainstream retailers are increasingly investigating short-term leases. Some, such as toy retailer Hawkin’s Bazaar and gadget retailer Red5, already open temporary stores each year in addition to their permanent leases because it suits their surge in trade around Christmas.
Red5 founder Jonathan Elvidge says: “When we take on a temporary lease we’re trying to get a feel of how well it would trade so that when it comes up we can look to continue it on a permanent basis. We can say to landlords: ‘We can afford to pay this amount and then if it trades well, sign up to a five-year deal.’” At a time when retailers are so tentative about expansion and when landlords are increasingly desperate to get the rent rolling in, there is no reason why this approach could not be adopted by far more businesses.
Temporary operators may not be the ideal letting solution from a landlord’s perspective, but at the moment many have little option but to welcome them with open arms. For those who can prove their worth, the transitory life looks like a good one.
V Store UK
Mukesh Kumar – known as Baboo – Sehgal, is the man behind Hyper Hyper, which last month opened in the former Zavvi store on Oxford Street. Trading under the name V Store UK, Sehgal has been in the temporary stores business for about seven years. His temporary ventures have all tended to have different names. His latest, I Love Brands, will open any day now in the former Laura Ashley flagship opposite Selfridges, selling only designer goods including Moschino and Calvin Klein. Sehgal also has a permanent lease for his Walk store, a footwear retailer on Oxford Street.
Every year, the Exeter-based company sets up temporary shops in both empty units and pop-up kiosks. Business is booming. Latest figures filed at Companies House show that for the year ending January 31, 2008, the retailer made a pre-tax profit of £2.3m, up 44 per cent on the previous year.
It was founded in 1998 by Gary Beck and Hendrik Vollers and last Christmas it traded from 257 locations across the UK and Ireland.
As soon as it is offered a retail space it can fit-out a shop within
Unearthing information about Surprise Surprise (pictured) is not easy. It has a variable number of stores at any one time, mostly devoted to men’s and women’s fashion, but one store near Oxford Street sells tourist paraphernalia. A staff member says it trades under the name Towerstone, and accounts filed at Companies House show that a Mr YP Malhotra is the man in charge, residing from his office on an industrial estate in Hendon, London. After leaving several messages, a voice says that Yash Pal Malhotra “will not be interested in talking to you”.
Gadget retailer Gimme Gizmo is the retail arm of wholesale importer Discount Radio and Watch (DRW). Last Christmas it opened temporary stores for the first time in locations including Sunderland, Manchester and Derby. Last November business development manager John Allen said: “It’s the first time we’ve done this and it’s working out well. We will use them as a test to see how well trading out of these units does for us.” DRW was unavailable for comment on prospects for this year.