Tough times mean retailers will be seeking out every last penny, while landlords need to maximise income. Hannah Prevett investigates how managers can handle conflicting interests
Retail merchandising units (RMUs) form an integral part of any shopping centre’s income. But as times get tougher, retailers are becoming increasingly sensitive about the proximity of RMUs to their premises, with a number of anchor stores enforcing exclusion zones. Commercialisation of malls with RMU programmes and income-generating events is a contentious issue within the industry – where should the line be drawn?
There is no doubt that RMUs are a money-spinner for landlords. The deepening recession is leaving many empty retail units in its wake and the temptation for landlords is to subsidise revenue with an RMU programme. Properly managed, such schemes can be beneficial to both landlords and tenants, says Eileen Connolly, head of retail marketing at DTZ. “The secret is finding a balance between experiences and services that will enhance the customer experience, but also generate appropriate income,” she remarks.
Certainly for Richard Kingston, vice president of leasing, EMEA, for Ivanhoe Cambridge, which owns Glasgow’s St Enoch Centre, RMUs are proving successful. “We rolled out a massive programme in Canada at all our shopping centres there and they generate many millions of pounds.” Kingston believes that as long as the schemes are managed successfully, there is no need for tenants to fret. “There is no reason why anybody should be too annoyed about them, provided they are located sensibly, they’re not too large and they don’t disrupt footfall flow.”
Likewise, Sian Nicholls, commercialisation manager at Savills, sees no reason for tenants to panic. “We’ve not really had any major issues with retailers suggesting that RMUs directly conflict with their trade,” she claims. “We make sure that every RMU that we place into our shopping centres is strategically placed to ensure it doesn’t conflict with the tenants’ sight lines and we wouldn’t put anything in any of our centres that would directly conflict with our retailers.”
One concern is that smaller retailers who have less bargaining power than the large anchor stores may find an RMU directly affecting their trade, but find their fears are not taken seriously by landlords. However, Nicholls says the opinions of all tenants are respected, regardless of their size. “In terms of tenants we obviously take on board all of their points of view. The main thing is that RMUs don’t directly conflict with any of the tenants, be it your small independents or your large retailers.”
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RMUs need careful management |
Despite Nicholl’s assurances, Connolly says that questionable location of RMUs is already taking place. “In recent months I have seen a shopping centre that put in a confectionery stall where there product could have been bought in
a number of retailers. Now to me that’s wrong,” she reports.
Careful product selection and subsequent management of RMUs is vital to ensure that tenants are happy, and that the mall traders are in keeping with the overall centre. Most companies chose to outsource this process to a third party company like Promotion Space or Retail Profile Europe, which will advise on operator and product selection. But for Kingston, retaining RMU management in house is definitely preferential. “We always hire somebody to manage RMUs internally because the management is very intensive; they cannot be located offsite,” he explains. “How often to you go to a mall and the trader is sitting there reading their newspaper? It doesn’t generate a very good image so you need the RMU manager to be able to go and tell them they can’t do that.”
Selecting the right traders is important in order to maintain the image of the mall, says Connolly. “While there may be the place for mall trading or RMUs, they should always strive to be aspirational. You can’t just assume you can rent a space and it’s going to be any better than a market stall. It needs to be properly managed by the centre manager and his or her team and its actually got to add something to the customer’s visit.” Customers who feel “hounded” by mall traders will find somewhere else to spend their hard-earned cash, says Connolly.
Kingston agrees that greedy owners who insist on turning a centre into “Marrakech” are likely to come off worse in the long term. “If you do too much [mall trading], you’ll get your tenants complaining they don’t like it and worse case scenario, the lettability of the shops may be impacted.”
