What are the implications of high town centre vacancy rates on the retail sector?

On 17th September I was interviewed by BBC 3 Counties Radio (The JVS Consumer Show) about the impact of high town centre vacancy rates on retail. I was then approached by International Supermarket News on the same topic, so the article that follows is the output…

Vacancy Rates in UK town centres are at a record high

Vacancy rates in some of the town centres across the UK are still at a record high and the impact is far reaching – landlords, retailers and consumers all affected. When a town centre has high vacancy rates, above 20%, consumers stay away. The aesthetic creates a bad impression – the implication is that there is a lack of choice and that the town becomes perceived as a less desirable area. Of course this creates a downward spiral as more and more consumers stay away,  the shops which were doing well begin to under perform, and eventually may also close.

What has caused retailers to migrate away from town centre premises?

With the downturn many retailer chose not to commit to extensions to their leases in towns where they didn’t have strong trading, avoiding the risk of a shop becoming loss making. Leases historically have been lengthy commitments, often 3yrs minimum, and in spite of interest rates falling, upward only rent reviews have been the norm!

Business Rates are now payable even on vacant properties…

Changes to business rates on vacant property have encouraged many landlords to offer short term leases and some local councils are helping retailers to test the water in an area with “pop up shops” – to really see if they can commit longer term to an area.

But it is slow progress.

What should a new start up retailer think about when looking at property?

A new start up retailer, or a smaller chain looking to expand, really needs to think hard about what property to commit to. Some things to think about include:

  • Areas with low vacancy rates will cost you more, but there is a reason for this! Chances are the footfall is much higher and so it may well be worth the investment. Have a look at what sales per square foot you can achieve and what your margins are. Consider all of your costs and if you can afford the rent it may actually be a lower risk option…
  • Conversely areas with higher vacancy rates may offer inducements to get new business into the area, hoping to reinvigorate the town centre – if you negotiate hard you may get a very good deal and a short commitment period, meaning you can give it a try with minimal risk. If it goes well you will be getting a better return per square foot, if it doesn’t at least you can pull out with limited damage on a shorter term lease.

And there is no right or wrong answer – just be aware of the pros and cons and how you can take advantage of the pros or mitigate the cons…

What should ANY retailer, regardless of size, be considering when looking at new premises?

In all cases when looking at new retail locations the key and most important consideration is if what you will be offering to that local market matches what that local market wants. Here are some ideas, of course, this is by no means an exhaustive list, and, if you are committing to a lengthy lease a fully costed business plan would be a good idea!

  • Will the offer be right?
  • Can you provide adequate range and choice?
  • Can you offer the product at the right price point?
  • Is there much competition (actually some competition helps! An area with 1 shoe shop won’t be “the place to go for shoes”, an area with 5 shoe shops means whatever you want with that kind of choice you’ll surely find something! – so local competition is good, so long as you can carve your niche and the market is not saturated!)
  • Also, If you can’t compete on price can you compete on service?
  • Can you collaborate with other local retailers to offer linked offers and promotions?
  • Will the premises be able to provide you with adequate presentation space and storage space?
  • Are there any obvious barriers to footfall?
  • And, what can you do to create a great deal of “noise” about your arrival? – Social media, local press, launch parties, special opening offers and local internet marketing can all help…

What future is there then for our town centres?

In summary, new blood to a town centre can turn its fortunes around and bring the consumers back but it will be a long and slow process. I can’t put a positive spin on it, but then, as they say, Rome wasn’t built in a day!

Landlords and local councils know this and will actively support it with the aim to accelerate progress. From the consumers’ perspective town centre shopping is usually based on 2 customer missions – convenience or entertainment e.g. – Passing by / popping out on a lunch break / just need a few bits so won’t trek to the supermarket vs. a day out browsing, experiencing the shops and maybe buying on impulse / enjoyment not on “needs”.

Ultimately of course, if you can’t market and present your store in such a way as to satisfy these customer missions then the out of towns will still take their share of wallet…

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About Clare Bailey

Clare Bailey, The Retail Champion (formerly Clare Rayner), is one of the most well-known and respected retail experts in the UK. With unrivalled knowledge in retail, high streets and consumer matters, she offers unbiased, independent content – whether engaged as a professional speaker, for broadcast media, or for a written feature. Clare is a business woman, entrepreneur and founder of several small businesses. Having been born into a family of successful business owners, it was inevitable that she’d eventually jump off the corporate treadmill and step out on her own! Today her brand portfolio includes The Retail Champion, The Retail Conference, the Future High Street Summit and the Support for Independent Retail campaign. In addition, she is co-founder of Mobaro Retail UK and a non-exec director of Beed Virtual Assistant Services. Having started her career as a fast-track store management trainee for McDonalds, she went on to work with leading retailers such as M&S, Dixons and Argos. She moved swiftly into management roles before being headhunted into senior consulting roles with global software giant SAP, and international management consulting brand, Accenture. Her corporate background in senior retail, consulting and technology roles, coupled with her experience of creating and running her own business, has enabled her to be equally capable whether consulting to global brands or micro businesses. This unique blend has not only positioned her as a leading expert in all things retail, but has enabled her to add meaningful commentary and insight to the debate around the future of the high street, and, how technology is driving fundamental change in the way consumers, and businesses, interact. Clare has become an influential voice in her field, which has resulted in her becoming a regular media contributor and sought-after conference speaker. Often seen on Good Morning Britain, BBC Breakfast, Sky News, and Chanel 5 (to name a few), Clare speaks on a myriad of retail, high street and consumer issues – but is particular adept when it comes to explaining the context behind retail trading results, newly released data, and government stats, in a palatable and informative manner. In addition to broadcast and conference speaking, Clare is the proud author of two best-selling business books published by Kogan Page - The Retail Champion: 10 Steps to Retail Success, published July 2012 and How to Sell to Retail: The Secrets of Getting Your Product to Market, published February 2013. She has provided contributions to various academic texts, including Retail Marketing Management (published by Pearson). With an engaging, conversational yet informative style, Clare writes for press and content agencies, providing features, articles, blogs and opinion pieces as well as contributions to white papers and reports. However, when the situation demands a more serious style, Clare can deliver - In 2016 she wrote an extensive report for a major insurance and risk law firm, as a retail expert witness, to support a public liability suit. She found that project particularly enjoyable as it played well to her strengths – assimilating large amounts of data and information, identifying the key points and articulating that in an understandable manner. When not on TV or speaking at conferences, Clare’s “day job” sees her supporting consumer-facing businesses through her consultancy services. When asked to describe what she most loves about retail consulting it is typically the opportunity to “dig deep”, getting “under the bonnet”, in order to leverage the business data to uncover the insights that lead to “lightbulb moments”. She also loves working on business change programmes that centre on improving the processes and systems to increase profitability by supporting more rapid, better informed decision making, improving the customer experience, or simply by become more efficient and streamlined. In this respect she considers herself a “business engineer” with a brain that works like a relational database! Due to her years of experience, her logical, objective approach, her quick, rational thinking, she is known for being able to cut through complexity, seeing right through to the crux of issues, finding creative solutions that others may have overlooked. As if all that wasn’t enough, Clare is a working mum, juggling a home life in rural Lincolnshire with her partner, their 5 kids, 4 cats, and geriatric Labrador! For all enquiries, contact Clare directly on 01727 238890 or email champion@retailchampion.co.uk.
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One Response to What are the implications of high town centre vacancy rates on the retail sector?

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