Feeling hard done by?

Feeling hard done by? Count your blessings instead!

You probably think that your store rental is outrageously high, don’t you? You are probably right BUT consider this: the rentals retailers in South Africa are asked to pay look like bargains when compared to rentals landlords in other parts of the world charge. A report tracking rentals in other parts of the world makes scary reading.

Complaints by retailers about rentals being too high are well justified. In fact, hardly a day goes by without several well-established brands, especially brands in the retail and restaurant trades, throw in the towel. Many such closures are not the result of product obsolescence or loss of market share. Customer support is there but owners feel that carrying on no longer makes sense because their landlords take too large a slice out of their earnings.

These storekeepers’ plight is reflected in an annual report produced by Cushman & Wakefield, one of the largest commercial real estate services firms in the world with revenues of $6 billion. The firm operates in more than 70 countries including South Africa and has over 48,000 employees. The report is named Main Streets Across the World and is published since 1988. It makes fascinating reading.

We have extracted some mind-boggling rental figures – see table below. To put these figures into perspective, we also show resulting rentals for an average-sized OBC store (500 m2) in the last column.

 Typical store rentals at various centres around the world*
Location Av. monthly rental per m2 converted to R Monthly rental a typical OBC store would pay
 Cause Way Bay, Hongkong (most expensive world-wide)  32,180.00  16,090,000.00
 Upper Fifth Avenue, New York  26,997.00  13,498,710.00
 Pitt Street, Sydney  11,700.00  5,850,000.00
 Bourke Street Mall, Melbourne  5,851.00  2,925,000.00
 Queen Street Mall, Brisbane  3,761.00  1,880,625.00

 

Although it’s safe to say that this madness is unlikely to ever reach our shores, indications are that rentals won’t come down any time soon either. Given that retail is shifting from brick and mortar stores to e-commerce, this is somewhat surprising.

But whilst shopping centre owners are putting up a brave face and remain steadfast with their rental demands, many are well aware that for the malls to stay in business they need to do more to attract feet.

An article in the Business Times (Sunday Times, 25th November 2018) dealt with this extensively. According to the report, local store rentals remain firm but the marketing teams at the various shopping centres are working hard to create points of differentiation. They hope that this will attract shoppers to their centres and keep them there longer.

Some centres offer limited free parking, others redecorate their centres to make them look fresh and welcoming. Technology is utilised extensively. Using face recognition software, malls develop databases that recognise repeat visitors, track their purchasing patterns and offer customised information tailored to their preferences.

As explained in the article A breakthrough in stock control and CRM, we work hard to optimise the impact IT has on customer relations and stock management. This is an ongoing process which we keep on top of. However, we do not see e-commerce (customers placing orders via the internet expecting home deliveries) making inroads into the retail side of our business anytime soon.