The rising cost of rents, rates, consumer apathy and the web. How will retailers keep pace?
It matters little how good your store design is, how good the products are, and how effective the marketing is, if sales don’t keep pace with increasing rates and ‘upwards only’ rent reviews.
At a recent retailer event, it was astonishing to hear how little variation there was from the view that while sales have more or less stalled, those whose job it is to house retailers in a manner that permits a profit to be made continue to ignore reality.
“UK retailers continue to operate overlarge portfolios, deal with customers who expect everything in an instant, and contend with shareholders over results that show little progression”
There is, of course, a reason for this. Shopping centres, for instance, are assets and investment flows when there is proof that rents are rising. Failure to demonstrate this makes things tricky.
Yet one retailer at the event pointed out that a store he operates in a shopping centre was taking less money per week than in 1987, and yet rents and rates of that era are a distant memory.
Standing out in the crowd
Today, the business of making a profit from physical stores is about contending with online retailers, combatting consumer apathy with winsome stores and products that can look good in these environments – as well as being different from what’s on offer elsewhere.
It’s a near impossible route to navigate and the outcome is that we are beginning to see the tap from which new stores flow slowing to a trickle.
So does all of this mean more refurbishments? Possibly, but revamps have a habit of costing almost as much as new stores, sometimes more because of what’s involved in stripping out what’s already there.
UK retailers continue to operate overlarge portfolios, deal with customers who expect everything in an instant, and contend with shareholders over results that show little progression.
Much of this blame can perhaps be put on Brexit, and it is certainly the case that things look a little rosier in countries like Germany that are not subject to quite the same degree of uncertainty.
But if there is one party that seems blind to all the economic pointers, it must be retail landlords on high streets and in shopping centres who believe that rents can be increased without reference to the real world.
This will have to change, and when retailers decide that enough is finally enough and stop renewing, it will.
And somebody please explain the logic of increasing rates to the point where the retailers from which revenues are being sought are, effectively, cremated.