Articles

Why Should A Landlord Subsidise Your Commercial Suicide?

So according to the angle being pushed by some right now, physical retail is mortally wounded and the blame should be laid to rest fairly and squarely on the shoulders of shopping centre landlords. It is morally wrong somehow that they should enforce the terms of the legal instruments that were signed by retailers with the help of their own independent legal advisers. The practice of these landlords has somehow contributed to the trading pressure on these retailers and they want the landlords to reduce their rents so that they can compete more aggressively.

Take that to mean discount more.

Australian retail is at an all time high in dollars spent at the till. Contrary to the headlines, many landlords are reporting year on year sales growth of more than plus five percent. The good properties – and lets face it, the term “Location. Location. Location.” was coined for a reason – are far from feeling vacancy pressure.

Many retailers are suffering competitive deflation, margin erosion and cost base blowouts.

But blaming landlords solely for these issues is hardly accurate (or fair) and simply approaching them with a naive plea for rental clemency is not going to achieve a positive outcome for your business in the short, medium or long term.

The simple facts are these. Retail is going through a watershed adjustment phase much of which is brought about by the revolution in technology and the resultant irreversible changes to distribution dynamics and pricing transparency. As a result, physical retail has to transform to not only meet the challenges represented by technology but to stay relevant to consumers.

The big social change that is creating much of the opportunity for physical retail revolves around the consumer desire for physically immersive and human experiences. In a world where emotional and physical stress is only going to get worse, the need for physical escape and intimate human connection is growing at the same rate to balance it. Experiential travel, spas, beauty treatment, health, yoga etcetera provide ample evidence of this social trend.

Which goes straight to the heart of why physical retail – while still strong – needs to capitalize on one of the greatest opportunity eras we have seen. This will take investment and landlords can help here. The business case retailers need to make to landlords revolves around how the retailer needs help to make the transition to a new model which is far more differentiated, unique, physically (Multi-sensory) experiential and magnetic.

Like consumers, landlords are sick and tired of seeing the discount card being the only card played. They do not get why they should effectively transfer their shareholders profits to you to prop up a discounting strategy which you won’t win with and which attracts more discount mentality consumers into their otherwise profitable assets. Think about the changes you really need to make and then approach them to support you through the transition. You may be surprised at the result.