FSP Retail Blog

FSP view on LDC Vacancy Rate headlines

Thu, 09 Sep 2010 16:38:00 +0100

The Local Data Company’s huge database of information on town centre occupiers has once again shown a disparity between the number of retailers taking space and the number of units available.

I asked Geoff Nicholson, FSP’s MD, to comment on their findings. Between appearing on Radio 5 to discuss Home Retail Group’s performance and dashing off to his next appointment he told me: “The polarisation of the UK physical retail market between a handful of prime locations and the rest is ever more clearly established. Work by FSP demonstrates that a non-food retailer with 75 optimally located stores will have 95% of the UK population within its Principal catchment area”.

The implications for occupancy costs, principally rents and rates, of the over-supply of retail property in many towns has not yet been formally recognised in the level of asking rents. Until landlord rental aspirations and the occupiers’ ability to pay rent are better aligned, the levels of shop vacancy are likely to continue to rise in many towns.

Targeting Occupiers

Wed, 08 Sep 2010 19:27:00 +0100

If a retail asset is to deliver the strongest possible growth in sustainable rents, it is important to have a tenant strategy which prioritises local opportunities and short lists the most suitable target occupiers to exploit key market gaps.

Tenant strategies are produced through rigorous investigation of local markets. Appropriate research is required to understand the value of existing shoppers, the value of potential shoppers, the scale, performance and positioning of existing provision and turnover gaps by merchandise category, price position or lifestyle niche. Benchmarking against similar locations can helpfully identify relative strengths and weaknesses in provision. However, critical differences between outlet and floor space provision or market potential and turnover mean that a supply and demand approach is the only reliable route to a robust tenant strategy.

Market Capacity - Young Fashion Segment

The chart above highlights how strategic opportunities can be assessed using a ‘market capacity’ approach. FSP has plotted turnover (estimated by audits) estimates against market demand (derived by combining NSLSP and lifestyle models) in order to identify towns where Young Fashion retailers such Cult, Urban Outfitters, Jane Norman, Lipsy, New Look, Topshop and River Island are over and under represented. In Bournemouth and Hull, for example, turnover is high relative to market potential, suggesting that Young Fashion retailers are over represented. FSP also estimate that average sales densities for Young Fashion retailers in these towns are 15% below national average. In contrast Young Fashion turnover in Oldham and Edinburgh is relatively low compared to market potential (and sales densities above average) suggesting under provision.

FSP repeats the ‘capacity’ approach above for all key merchandise categories and price position segments (e.g. Middle Upper, Lower Middle etc), identifying the most sustainable opportunities to develop the retail offer for a particular asset. Options are refined by combining shopper surveys and qualitative (e.g. focus groups and mini depth interviews) research with FSP’s knowledge of retailer performance and shopping centre strategy.

Having identified the target consumer, retail mix and ideal positioning for assets, it is then appropriate to identify the most suitable occupiers with which to realise the strategy. FSP shortlists target occupiers using three broad criteria:

Strategic Fit – Does the occupier meet the recommended merchandise, FISH segment and price position strategy? Will the occupier help establish the desired position for the asset correctly in the minds of target consumers?
Economic Fit - Is the occupier in good corporate health? Is the occupier actively expanding? Will the occupier produce viable levels of turnover? Can the occupier sustain the levels of current and future rents sought by the investor?
Portfolio Fit – Does the occupier trade in this type of location? Does the location and format fit current strategy? Is the market sufficiently large for the occupier? Are there sufficient volumes of the right customer groups for the occupier to trade well? Does the occupier have existing stores in the region? Will nearby stores (and potential cannibalisation) threaten viability? Are the right complimentary retailers present in the town? Will the presence of strong competitors threaten viability?

Many of the Strategic and Economic fit questions can be answered using the information provided on SnapShop. For Portfolio fit, the charts below illustrate how potential occupiers can be shortlisted by comparing the typical catchment size and shopper profile of trading locations with the asset location.

A portfolio ‘finger print’ for each retailer has been created by combining up to date location information from sources such as Local Data Company and corporate websites with catchment spending and shopper profile information from the National Survey of Local Shopping Patterns.

The chart on the left indicates that the available market size at the Asset location is smaller than typically chosen by occupiers such as Bershka or Offspring but would be suitable for Jane Norman or Raw. The correlation chart on the right shows that shoppers at the Asset location are similar to shoppers at locations where Offspring and Size? operate stores but very different to towns where Route One and Raw operate. This suggests that Offspring and Size? would be attractive for shoppers at the Asset location and likely to perform well (given unit and competitive considerations). Performance at Route One and Raw however, might well be below par, given a lack of their core customers.

The combination of Strategic, Economic and Portfolio assessment described above enables FSP to identify the most suitable absent occupiers for town centres and retail assets. Having established this initial base, FSP can then to support leasing activity with compelling market evidence to attract critical occupiers and detailed turnover and rent affordability estimates to support the economic assessment of individual lease deals.

For more information on these services please contact FSP consultants

To print a copy of this information, click here

Leasing Strategy ? Luxury or Essential?

Wed, 25 Aug 2010 17:15:00 +0100

Is a tenant mix strategy relevant to the current market? Strategy may be alright in boom times, when landlords can pick and choose whom they’ll take on. In tougher times, like the present, a tenant mix strategy looks like a luxury. Surely, in a downturn, you should take anyone who’ll get the lights on?

The first point is that the present situation is not a downturn, it is the new reality. Certainly this is the view of many experienced retail property operators. The internet is set to take an increasing proportion of sales. A share of 20% to 30% within the next 10 years is at the lower end of expectations. Overall retail sales growth is predicted to be very modest, reflecting factors such as the bracing economic environment and recovery from the credit bingeing in the run-up to 2008.

Second, the lack of a leasing strategy assumes no negative impact on stakeholders. In practice, both retailers, and more importantly shoppers, notice whether the tenant line-up is coherent. It is less hard work for consumers when the shops they want to use are grouped together. It is the basis for the historic zoning of cities and by extension, of shopping centres. Given that contented shoppers, who like their shopping location, spend up to twice as much as shoppers using the location purely out of necessity, winning their enthusiasm is valuable. Finding the right tenant line-up is fundamental to generating support from consumers.

Third, a tenant mix driven entirely by retailer self-interest is unlikely to be optimal for the landlord. Retailers are naturally concerned principally for their own welfare, not the whole tenant mix. The time horizons of retailers and property owners are very different. Retailers have to focus on the short term but property is a relatively long-term business. The best way to reduce occupier churn is to recruit those retailers that can best supply the identified requirements of the shoppers.

So, developing and implementing a coherent and relevant tenant mix strategy is essential. The task falls squarely on the shoulders of the asset manager. Leasing agents, due to the nature of the typical reward system, often support the agreed strategy but are required to deviate from it to earn fees. In the face of opportunities to let space to off-strategy retailers, the temptation is strong. It is at this point that a well-developed, evidence based strategy is essential. FSP has long experience of standing by the asset manager at this point. In the face of pressures to neglect the strategy entirely, it can be difficult to know how to flex it appropriately. It’s a challenge that is likely to become more frequent in the years ahead.

Sustainable Retail Investment ? Income Growth

Tue, 03 Aug 2010 13:28:00 +0100

Previous editions of Retail Pulse have dealt with identifying Corporate Risk (occupiers in poor financial health who may go into administration) and Trading Risk (occupiers who cannot afford to pay the passing rent). FSP studies identify that the combination of these issues typically puts about 35% of current rental income at risk in shopping centres adding to the threat to future income growth and asset values from historically high rates of vacancy.

Given the typical cost of filling empty units, it may take 5 years of average rental growth just to claw back the income lost during the recession. If asset managers want to out perform national indices and to lay the foundations for future capital growth, FSP believes shopping centres, like the UK economy will need to trade their way out of the current depressed situation.

Income growth may seem like a distant memory to some and an impossibility to others but even in a stagnant market, it is possible to increase sales (and sustainable rental income) by increasing market share. Retailers such as Primark, New Look and Tesco have achieved growth by consistently delivering great product, great value, and an environment where the customer is happy to make a purchase. FSP’s own research also shows that many shopping centres sit on a large reservoir of under performing shoppers, which if correctly engaged could boost performance and sustainable rents by as much as 20%.

Satisfied Shoppers - The Hidden Opportunity

The evidence comes from FSP’s annual research into the attitudes of over 50,000 shopping centre customers. Nearly half of respondents are Detractors which compared to Promoters make 39% fewer visits, have 36% shorter dwell times and spend 47% less in shopping centres. By simply shifting consumers from Detractors to Neutral, (let alone Promoters), it is possible to bring about a substantial improvement in customer loyalty, satisfaction and spend performance.

Delivering what consumers need is a simple concept which is religiously followed by many of the most successful property entrepreneurs. In today’s world of ‘standardised management’ however, the approach is still breathtakingly underused.

Spotting the opportunities which maximise investment and turn the theory into reality is FSP’s speciality. FSP for example, has advised an asset management team which over 4 years has successfully reduced rental risk at a key asset from 43% to 7% and delivered shopping centre rental improvement of 176%. Surprisingly perhaps, FSP did not require something approaching rocket science to achieve this result, just robust research (which asks the right questions), coupled with knowledge of the critical aspects of retailer performance, simple appraisal techniques, a healthy dose of common sense and time to allow leasing opportunities to unfold.

Research for Income Growth

FSP evaluates catchments, profiles shoppers, quantifies market gaps, identifies target occupiers, estimates turnover (and sustainable rents) and uses consumer research to identify customer needs. To many, these techniques are familiar and indeed there is a plethora of suppliers offering specialism in one or several of these areas. What is unique about FSP’s approach is the ability to recognise which particular aspects of research in different circumstances can be joined together to create a straightforward set of achievable recommendations. FSP operates without fuss or pretence within whatever teams of advisors and data suppliers the Client cares to choose, with the aim of maximising the effectiveness of research, developing profitable strategy, attracting new occupiers and achieving income growth.

In difficult times, there is a natural temptation to batten down the financial hatches and cut back on the ‘non essential’ elements of marketing and research. In FSP’s experience, this often leaves disjointed market intelligence which is greatly devalued compared to the relatively small savings of budget achieved. What is actually required in these challenging times is lean research which is highly focused on the key consumer and occupier issues which will drive short term asset growth. Income growth is now essential to preserve asset values and with so much untapped spending potential amongst consumers, there has never been a more important time to talk with FSP.

Finding the Silver Lining

Thu, 22 Jul 2010 12:51:00 +0100

Economic turmoil historically gives rise to costs and benefits. The costs tend to be more visible, immediate and to attract the principal attention. The benefits, more subtle and apparent only in the longer term, attract less comment.

Recently, a lot has been heard of the substantial losses of capital and jobs resulting from the financial crisis. Without minimising the significance of these costs, the purpose here is to consider one of the benefits that can already be discerned and is already being exploited by some of the more sophisticated portfolios.

Since 2008, landlords have almost universally become more involved with their tenants. Their understanding of the economics and financing of retail operations has risen significantly - the consequence of negotiations with retailers unwilling or unable to pay the existing or proposed rent. The result has been an increase of shorter leases, many on performance related rents.

Landlords generally believe the benefits have accrued entirely to retailers, with nothing for themselves. A different perspective is that landlords now have opportunities to use their new knowledge of retailing. For example, turnover information has many applications to assist better management of the portfolio. It can be used to benchmark performance and to improve centre marketing and management. It enables the landlord to identify additional opportunities for the retailer elsewhere in the portfolio and indeed to work more closely with the retailer to improve performance and profitability. In a competitive market place, each shopping location needs to establish its competitive advantage; to stand out from its rivals by better meeting the needs of the ultimate customer, the shopper. Thorough understanding of the retailer’s shopper profile enables the creation of a better fit between tenant mix and shopper profile.

In the midst of a challenging trading environment, it is often difficult to believe that the market will eventually change – but it will. When better times return, the detailed understanding of retailer performance may seem less relevant. The truth is that this knowledge will provide you with the necessary differential advantage, making your centre distinctive and better fitted to shopper requirements.

Exploiting these new insights requires skills and ways of working that may be non-traditional and unfamiliar to landlords. However, a number of FSP clients have improved both the amount and security of their rental income through using the information newly available to them. The return on their investment is showing a handsome return. Why not get FSP to show you how you can benefit too?

Sustainable Investment ? Trading Risk

Wed, 07 Jul 2010 16:42:00 +0100

With schemes in the hands of administrators, debt driven ‘fire sales’, the high cost of filling voids, continuing deterioration in the financial health of occupiers and worries about the future of the UK economy, beleaguered investors can be forgiven for feeling unenthusiastic about retail property.

Given the right knowledge however, it is still very possible to acquire assets with growth potential and to create conditions which will stimulate sustainable income growth. This Product Focus is the second in a series of three, covering Corporate Risk, Trading Risk and Income Growth. The series is intended to illustrate how appropriate pre acquisition research and good asset management can have a positive influence on income growth and potential exit yields.

If Corporate Risk is the risk to specific shops which arises through the overall financial performance of the retail chain, Trading Risk (sometimes known as Unit Risk) is the risk which arises through the performance of individual outlets within a specific asset. This most commonly occurs where the trading performance of a particular store is such that the level of rent which can be sustained by its turnover is less than the passing rent on the unit.

While some healthy multiples may be able to support this situation for a number of years (either in the hope that the situation improves or because it is important to maintain market presence), Trading Risk becomes particularly important when Corporate Risk is high. The spate of pre pack administrations between 2008 and 2010 saw huge numbers of unprofitable stores closed, with towns such as Blackpool, Coventry and Bradford becoming top targets for the accountant’s axe.

Whilst these closures may have felt inevitable, it is possible for asset managers to understand the specific trading risk within assets and minimise potential for store closures by taking steps to ensure that sustainable rents are on balance higher than passing rents. For potential investors, knowing the scale of trading risk and understanding how much growth is required to improve turnover to sustainable levels should be an essential element of pre acquisition due diligence.

Understanding Trading Risk

The key to understanding Trading Risk at an asset is understanding turnover. A small number of locations collect occupier turnover statistics however, for those less information rich, the most common approach is to undertake an audit to estimate selling floor space and turnover. From detailed analysis of individual occupier’s accounts, FSP project typical rent to sales ratios and these are used to estimate the sustainable rent for each unit in the asset. When compared with passing rents, the degree of variation in the sustainable rent indicates whether a retailer is ‘vulnerable’, ‘viable’ or ‘thriving’ in terms of Trading Risk. Results are then plotted on a scheme plan to visually indicate the location of specific units and potential problem malls.

The diagram below from a project in the Republic of Ireland illustrates how assessments of each individual unit in a tenancy schedule can be aggregated to indicate the proportion of total scheme rental income subject to Trading Risk. In FSP’s experience, typically about one third of shopping centre rental income is currently Vulnerable (i.e. sustainable rents are 25% below passing rents) suggesting that the particular scheme might expect increasing vacancy difficulties in the near future. However, the analysis also shows that a 12% increase in turnover would be sufficient to return the scheme to a more ‘average’ level of risk.

There have been many occasions where strong performing stores have been closed as a result of failures elsewhere in a chain and it is therefore important that assets are considered in terms of both Trading Risk and Corporate Risk. FSP uses a Viability Matrix to show the combined impact of Corporate and Trading Risk on scheme rental income. On the Viability Matrix below, Corporate Risk is shown along the vertical axis and Trading (or Unit) Risk is shown along the horizontal axis, with the ideal balance of rental income (indicated by the Percentage figures) being located in the bottom right hand corner of the matrix. Asset Management activity can then be focussed upon the those occupiers who account for the 23% of rental income who fall within the Head above Water & Vulnerable, Healthy & Vulnerable and Very Worrying & Viable cells.

The combined assessment of Trading and Corporate Risk is a tested and successful approach which locates retail risk within assets and establishes the scale of improvements required to successfully ameliorate unsustainable occupiers. Deployment of the methodology has achieved notable success including the reduction of rental risk from 43% to 7% at one prime asset, the migration of sustainable rents from 20% below passing rents to 10% above and a 76% growth in rental income over 4 years.

The final Product Focus in this series will discuss the main techniques used to identify opportunities and achieve this Income Growth. More information can be provided through FSP’s consultants

Retail Data, Research and Consultancy

Thu, 17 Jun 2010 14:04:00 +0100

In business, the only reason to spend money is to increase profit. The expenditure is either to reduce costs or to improve revenues. The most successful FSP work yields returns that are many multiples of its cost. Internal FSP analysis shows a clear and direct link between client returns and the depth of FSP involvement, the strength of the client relationship.

There is a distinction between data, research and consultancy. The difference can be illustrated by analogy. Data can be compared with the soil, research with the seeds that grow from the soil and consultancy with nurturing the seedlings from germination into healthy plants. Consultancy is therefore a service that cannot be done in isolation. The provision of a service immediately creates relationship. Continuing the analogy, both in specifying the seeds to be planted and in creating the environment within which the seedlings can grow, there needs to be liaison with the landowner or his manager.

Running a business is a team effort. New members need a time of induction and familiarisation. Why should it be different for external service suppliers? Since few of us have experience of working with a gardener, perhaps another analogy would be helpful. Most people prefer to have their hair cut and styled by a specific person with whom they have an on-going relationship.

As I write these words, a colleague is holding her monthly drop-in “surgery” in the offices of a client. As part of the service, FSP makes time available to answer questions and contribute ideas on topics raised by members of the client team. It’s a great way to build relationship to the mutual benefit of both parties. It allows the FSP input to be more fully explored and more widely applied when there is a strong and on-going relationship. It is no coincidence that the FSP work for this client is worked harder and has thus yielded returns that are amongst the highest.

Sustainable Investment - Corporate Risk

Wed, 09 Jun 2010 14:38:00 +0100

Given the right knowledge however, it is still very possible to acquire assets with growth potential and to create conditions which will stimulate sustainable income growth. This Product Focus is the first of a series of three, covering Corporate Risk, Trading Risk and Income Growth. These will illustrate how appropriate pre acquisition research and good asset management can have a positive influence on income growth and potential exit yields.

Path to Failure

Corporate Risk is the risk to specific shops which arises through the overall financial performance of the retail chain. The spate of administrations between 2008 and 2010 saw a number of good performing local stores closed as a result of corporate failures such as Woolworths, Bay Trading, Barratts and Faith. However, as the chart above demonstrates, the financial trajectory of the majority of larger organisations is known and analysis can therefore be quickly undertaken by FSP to assess the threat of corporate risk to rental income for any retail asset.

Positive Stories

Although corporate failures have produced many headlines, the retail industry is not all doom and gloom. As well as those flat or downward financial health trajectories shown for Barratts, Faith etc., a significant number of retailers are healthy or have an upward trend. These include LK Bennett, Iceland and Urban Outfitters, shown by the above chart. Clearly, understanding where the balance falls between those stronger and weaker retailers is an essential step in assessing the financial position of individual assets. A key part of FSP’s service is therefore to quickly link corporate health to passing rents in order to pinpoint potential income risks.

Stronger Assets?

FSP has matched Corporate Health to key occupiers in order to illustrate the current position for major retail asset classes. The chart shows the financial health of the top 100 occupiers (by number of outlets), present in major shopping centres, retail parks and factory outlets. For all three classes, the proportion of Very Worrying retailers is below FSP’s retailer average while the proportion of Healthy retailers is above average. Although the balance will be different according to the particular tenant line up in individual schemes (which must therefore be carefully scrutinised), this indicates that there is less risk and stronger income growth prospects in these asset classes than elsewhere on the high street.

Although this is a relatively sunny picture, about one third of retailers currently fall into the Head Above Water category and higher concentrations can be seen for the three asset classes than for FSP’s database of monitored retailers. It is therefore very important to understand direction of travel and assess the Trading Risk of specific stores. For example, amongst Retail Parks, Head Above Water occupiers tend to be traditional bulky goods occupiers whilst Healthier occupiers tend to serve the more profitable fashion, personal goods and grocery markets.

Where turnover supports a lower Sustainable Rent than Passing Rent, unprofitable stores may become targets for future closure, particularly where urgent corporate restructuring is required to alleviate Head Above Water health. To reduce this ‘Trading Risk’, turnover growth is essential and FSP will develop the concept of combining Corporate and Trading Risk with Asset Strategy in a following Focus review.

The classification of individual retailers by Corporate Risk is available through FSP’s SnapShop on-line directory or through FSP consultancy projects. For more information, please contact us

And Finally...Dying for a good pizza

Thu, 20 May 2010 12:47:00 +0100

It’s true that everyone is feeling the pinch at the moment – costs are being cut left right and centre and new money-saving initiatives are being investigated. Let’s hope, however, that times never get this bad for our UK restaurants…

Italian prosecutors believe that pizza in the southern city of Naples may be baked in ovens lit with wood from coffins dug up in the local cemetery!

Traditionally, pizza should be cooked in a stone oven with an oak-wood fire, which can understandably be expensive to fuel.

Investigators are setting their sights on the thousands of small, lower-end pizza shops and bakeries in the city, and suspect a gang may have set up a market for coffin wood.

Andrea Santoro, president of Naples' cemetery commission, has little doubt about gangs digging up coffins, stating, "It's no wonder these things are happening given the state of the cemeteries ... There are graves uncovered, thefts and vandalism."

No one has yet been arrested, and its unlikely any gang members will come forward to talk…the fact is, those involved will probably take their secrets to the grave…!

FISH

Wed, 12 May 2010 15:59:00 +0100

Fashion typically accounts for over 60% of shopping centre floorspace and 70% of rental income. Achieving an appropriate mix of fashion retailers to engage and delight shoppers is clearly central to creating valuable retail assets. Detailed fashion market analysis however, can be confused by overly general lifestyle classifications and is often ignored in favour of easier but less relevant merchandise mix and price position analysis.

In response to this challenge, FSP has undertaken detailed research into fashion purchasing behaviour and developed an attitudinal segmentation system. The research identifies two sets of relevant perceptions or attitudes:

the consumer’s own ‘thinking age’: i.e. how young or old do I feel?
the image the consumers wishes to project with the merchandise they are seeking to buy: i.e. stylish or safe?

FSP has used this research to develop the FISH segmentation. FISH uniquely classifies fashion retailers according to the purchasing attitudes of their customers rather than their chronological age, lifestyle or income. FISH combines five self perception groups (Young, Assured, Family, Classic and Old) with four merchandise perception groups (Fashionable, Individual, Safe and Homely) to create 11 specific market segments for individual fashion retailers. For example, River Island is classified as Young Fashionable, Next is classified as Assured Individual, Marks & Spencer is classified as Family Safe and Hobbs is classified as Classic Individual.

FSP Audits - Floor space Profile by FISH

	Young	Assured	Family	Classic/Old
Town Centres	14%	20%	51%	15%
Shopping Centres	24%	20%	46%	10%
Regional Malls	20%	31%	40%	10%

The mix of FISH categories varies widely across centres, according to role, location and customer profile. The table above shows that the largest group, Family fashion retailers, dominates fashion floor space in all three location types, town centres, shopping centres and regional malls. However, shopping centres and regional malls have a greater proportion of space devoted to Young and Assured fashion than town centres and this specialisation becomes more extreme for more metropolitan catchments.

Success for any retail asset depends on the provision of retailers in tune with shopper demand. FSP has therefore developed techniques using catchment and census data to assess and target local opportunities through FISH. For example, the line on the chart below illustrates that across the country there is a strong relationship between shopper demand and the provision of Young fashion outlets. However, there are towns such as Newcastle upon Tyne, Bromley and Lincoln that fall below the Predicted line. This indicates potential to attract more Young fashion retailers to these towns

FISH is unique to FSP and has been used over many years to identify untapped customer niches and plan sustainable and effective tenant strategies.
The classification of individual retailers' predominant customer group is available through FSP’s SnapShop on-line directory or FSP consultancy projects. For more information, please Contact Us.

Geoffs View - The Retailing Outlook

Thu, 22 Apr 2010 13:49:00 +0100

Unless landlords take the initiative, town centre retailing will die out within a generation in a large number of middle sized UK towns.

The migration of shopping away from town centres is accelerating. It is going to the more efficient and convenient supermarkets, to out-of-town retailing and to the internet. Without action, the UK will follow the United States into suburbanisation with largely lifeless town centres. To be vibrant and viable, town centres need to find a new role providing an enjoyable experience that cannot be matched on-line or by the grocers. In towns that fail to do so, retail rents will continue to decline.

Meanwhile, the grocers are expanding aggressively. Tesco plans to add 2.4m sq ft, 26 additional Tesco Extras and 181 Tesco Express. Asda hopes to add 3.75m sq ft of non-food space in 150 new Asda Living stores. Not much of this additional 6m sq ft will be in town centres.

The internet is getting more powerful. In the UK, according to FSP research, more than 50% of shoppers already make some use of the internet in their shopping. In the US, more than 40% of US retail sales are influenced by the internet. This is expected to reach 50% by next year.

A recent survey of comparative high street and internet prices emphasises the web’s cost advantage. On a basket of 10 fast-moving consumer goods, including an i-Pod, trainers, a watch, coffee maker and a TV set, the average cost in 11 town centres, that included Manchester, Nottingham, Sheffield, London and Bristol, was 31% higher than the lowest on-line price. Not a very balanced comparison but in price conscious times, the difference is striking.

Retailers meanwhile are under the pressure of an uncertain outlook for consumer expenditure. The common response has been to move towards a multi-channel offer, exemplified by John Lewis and Next. The Partnership has made the Commercial Director responsible for both store expansion and the multi-channel offer. Next has announced that its further expansion overseas will be solely via the internet, not through stores.

The current focus for most retailers is to cut operating costs. The opportunities to enhance gross margin through the globalisation of the supply chain are largely exhausted. Staff and occupancy costs are their two largest operational costs. With excellent customer service the key advantage over on-line retailers and grocers, training and retaining good shop staff is essential. It is therefore no surprise that the pressure to contain occupancy costs is immense. The shedding of uneconomic stores through pre-pack administrations and CVAs is an alternative way to reduce operating costs.

With retailers having no overwhelming need to trade from town centres, landlords and the local authority have the responsibility to maintain town centre vitality and vibrancy. A new environment calls for a new form of response and perhaps the BIDs vehicle will be sufficient. Let’s hope so.

Ain?t No Soylent Green

Wed, 21 Apr 2010 12:26:00 +0100

With celebrities like Jamie Oliver helping to increase the popularity of home cooking, the supermarkets have become quite adept at providing a wide range of herbs and spices for the UKs budding chefs. There are some ingredients, however, that would prove difficult for even the revered Heston Blumenthal to come by…freshly ground black people, for example!

Penguin Group Australia have allegedly had to fork out £12,000 to fix a typo in cookbook The Pasta Bible due to a recipe for spelt tagliatelle with sardines and prosciutto calling for ‘salt and freshly ground black people’!

The books are not being recalled, so expect to see a couple turning up on eBay any day now!

Future of town centres hinges on planning policy

Wed, 31 Mar 2010 16:23:00 +0100

Managing Director Geoff Nicholson comments in Retail Weeks' Letters To The Editor on an article from issue 12th March 2010. Link unavailable.

The recession was triggered by failure to control market trends, which are driven by often short-term investor interests, not by consideration of longer-term social benefits. So Catherine Tobiasinsky’s plea (RW, last week) that planning policy should not subvert market trends in breathtakingly short-sighted.
Yes, in-town retailing has been under pressure from out-of-town locations. But the economic and social costs of allowing town centres to die are incalculable. The Preston Tithebarn issue is nothing to do with its in-town location and everything to do with its potential impact on neighbouring towns.
It is the charge of the planning system to reconcile the demands of the market and social need. It makes sense, for the interests of society, to flavour in-town development. This is not to claim out-of-town schemes are never appropriate: the two are not mutually exclusive.
The bleak outlook for in-town retailing reflects the historic failures of planning policy. But to advocate its abolition is to remove all hope for a better future for town centres.

Geoff Nicholson
Managing Director
FSP Retail

Why not add your comments below?

Secondary Shopping Centres ? The elephant in the room

Fri, 26 Mar 2010 13:13:00 +0100

To the Royal Institution, founded in 1799, to witness the retail property industry discussing secondary shopping centres in a suitably historic setting. There was much to marvel at, not least that the group on whom shopping centres depend was entirely unrecognised. Shoppers, who ultimately pay the rent, were effectively ignored.

Ray Morgan, Chief Executive of Woking Borough Council, implored shopping centre developers to consult “the local community”. Since this appears to be code for talking to the local authority, this does not qualify as taking shopper views into account. Richard Akers, Chief Executive of Land Securities Retail, and BCSC President-Elect, was the sole exception. He acknowledged that as landlord, Land Securities carries out substantial consumer research which could be, but generally is not, shared with tenants.

The useful question to be answered is not, “Why does the property industry ignore consumers?” but rather “How can the property industry take consumer preferences and behaviour into account?” Viewed in isolation, research is expensive; viewed within the context of the decisions based on research results, the return on research investment can be multi-fold. Of course FSP has a vested interest but can show solid evidence that consumer research is justifiable, even necessary, in maximising ROI on many retail property assets.

What matters in considering the cost of research, as for most goods and services, is not the initial outlay but the cost per use. The FSP experience is that broadening the application of research results in a dramatic reduction to the cost per use. This requires an ability to take a strategic view – standing back far enough to comprehend that it is an elephant.

Fashion Police

Wed, 24 Mar 2010 18:10:00 +0100

Hugo Boss workers never fear, for Danny Glover has got your back.

The Lethal Weapon star has reportedly appealed to Hugo Boss AG to reverse its decision to shut down a suit plan in Ohio after taking a tour of the operation earlier that month. Glover also led a boycott of Hugo Boss formal wear at the Oscars this year, writing to every nominee asking them not to wear the label.

Unfortunately, though Glover’s attempts were no doubt appreciated, Hugo Boss has said the decision still stands.

Oh dear.

Glover: You’re too old for this…*

*Alternative endings include ‘Chuck Norris would’ve done it better’