The following article was written by our Retail Director - Australia + New Zealand Kyle Swain and published in the National Retail Review on Tuesday, 15 October 2019.
The e-commerce boom has turned traditional ‘bricks and mortar’ retailing on its head. From ‘bricks and clicks’ in the late 90’s to the rise of Amazon, now the world’s largest retail marketplace, we have all changed the way we want to shop.
In the past decade, many traditional retailers have responded to the online ascendency by developing a ‘multi-channel’ approach where their bricks and mortar presence is complemented by an online channel. While others have chosen to ignore the changing habits of consumers at their peril.
The demise of a once dominant brand such as Kodak, is a well-document case study of failing to remain relevant and meet the changing needs of customers in an ever-evolving marketplace.
Today, retailers wanting to remain relevant are focussed on delivering an ‘omnichannel’ approach to retail. Often mistakenly used to describe any retail brand selling products from both a physical and online store, true omnichannel retailing requires a content and marketing strategy focussed on strengthening customer relationships and increasing operational efficiency.
Omnichannel leaders envision bricks and mortar stores of the future to be destinations that complement the brand’s digital channels by engaging their customers with a personalised experience that can’t be replicated online.
It’s exactly this strategy of offering a personalised experience that will see good bricks and mortar only retailers remain relevant and successful, but for the most part we will continue to see the convergence of retail channels: bricks and mortar retailers developing web stores; larger retailers developing omnichannel strategies; and as we’ve seen recently from Amazon, ‘pure play’ online stores now opening traditional shopfronts.
More than ever before, your property strategy will have a profound effect on the success of your business. Location choices and the commercial and operational terms you agree to in your leases must be made in the context of changing shopper expectations and shifting market forces.
A retail property strategy no longer deals just with bricks and mortar shopfronts. Instead there is a growing need for industrial / warehousing space that helps to meet ‘last mile’ delivery expectations and commercial office space from which to operate a business.
A tenant advisory firm like Lpc Cresa can provide insights and expertise across all three sectors – retail, industrial and commercial – that can help save significantly on occupancy costs and remove potential risks for a retail business.
For example, many retail leases include turnover rent clauses requiring additional rent to be paid if a store’s sales reach a certain amount on a per annum basis. Retail legislation defines what is included in the ‘gross sales’ calculation upon which turnover rent is paid, except in Victoria where you can negotiate what is to be excluded from that calculation.
For the most part, online transactions are excluded from this calculation, except where the goods are delivered or collected from the shop where the transaction took place. From a property strategy perspective, there may be some cases where it’s cost effective to establish a separate warehouse or logistics location to fulfil online orders.
There is no doubt that retail is a very dynamic environment and retailers need to be looking for every opportunity to improve efficiencies and save on costs while meeting their customers’ changing expectations.
We now have clients calling on our experts from each sector to provide a seamless tenant advisory team across their portfolio and property strategy to ensure it aligns with their overall retail strategy and achieves the best outcomes, rather than just a single tenant representative dealing with an isolated, one-off transaction in a single sector.