Article from the October/November 2013 issue of Yopur Business Magazine.
For retailers the choice of location is crucial toward ensuring long-term success. Retailer Tracy Fawell of Laundry Dynamics and Anthony Holme, CEO of LeaseAfrica, an online leasing agency, share their perspectives.
In retail, perhaps more so than any other sector, location is crucial. A bustling site with good foot traffic, a visible store, complimentary tenant mix, and affordable rental increase your chances of success. A poor choice of location does just the opposite.
SMEs, however, may find the perfect location difficult to obtain due to the prohibitively high rentals associated with setting up shop in larger shopping centres driven by large players and premium retail brands. Such bigger brands, which tend to dominate in these flagship malls, have more bargaining power for lower rentals than independents and smaller franchises.
Tracey Fawell of Laundry Dynamics has found that smaller neighbourhood centres and developments, which feature mainly convenience stores, are more suitable for her brand. To locate the right space, she has developed strong relationships with a range of landlords to ensure they contact her when space becomes available. “I also keep my eyes open for new developments that would suit our brand and find that new franchisees often come to me with sites in mind where they would like to open up.”
The internet is also an important site-finding tool. But, according to Anthony Holme, CEO and co-founder of LeaseAfrica, the challenge for SMEs has been the lack of transparency online. “Prospective tenants have to engage with multiple companies and service providers, each of whom only offer properties in a narrow slice of the market, a process which can make the search for a property very time-consuming,” he adds.
For this reason, Holme and his partners have developed an online hub that makes all vacancies in the market available at a glance. The platform, www.leaseafrica.co.za, was born out of tenant frustration and is backed by a solid customer service offering where would-be tenants are assisted throughout the process, from finding the space to signing the lease and moving into a shop or office.
Never stop asking for info
According to Fawell, your search for information does not end once you have earmarked a potential site. You should, for instance, approach your landlord and request foot traffic information. This will help you understand the traffic flow in the centre.
“A Laundry Dynamics store requires easy access to parking and high visibility. Beyond this I also look for a good tenant mix to draw customers in and to increase the chances of good trading levels for all,” she adds.
Other things to find out include what the trading hours are, what penalties are payable if you don’t trade during these hours and what the housekeeping rules are. Do your best to get an understanding of how the centre operates before signing anything, advises Fawell. To find out the centre strategy going forward, ask if there is going to be any refurbishment, floor changes, new tenants, etc.
Every site has its own challenges, and for this reason, Fawell advises developing a good understanding of and working relationship with your landlord. “Your landlord and management team can either make or break the centre,” she points out.
“It’s their responsibility to select quality tenants, ensure that centre is well-kept and that it offers a secure shopping experience. It’s your job to set the standards in your own store and make sure that you have a quality offering,” she concludes.
Holme is of the opinion that retailers should identify the financial commitment that the business is able to make right from the start, as this will narrow the search and ensure that businesses don’t run into problems down the line.
“Factors to consider include the monthly rental due, the deposit, operational and utility costs – who pays what should be detailed in your lease – escalation rates i.e. by how much your rental, operational and utility costs will increase each year for the duration of the lease agreement, and what it will cost to tailor the premises to your needs. Find out too if there is a rent-free period in the lease agreement. This would usually be a few months at the start of the contract,” he advises.
Fawell urges retailers to make sure they understand all terms and conditions in their lease agreements. In her own case, she makes sure that she is available to her franchisees at this juncture to ensure that the site they sign up for is the springboard for a successful business.
“If less experienced businesses are not sure about what they are signing for, they should seek help from an experienced professional before they leap into a rental agreement which could potentially cost them dearly, and whittle away profits,” she warns.
Test the waters
For retailers who want to test the waters, a pop-up store may be the answer. Pop-ups occupy temporary spaces – often in major retail centres – from just one day to a few months offering various products or services. This format allows retailers to evaluate the appropriateness of a location or to test new products cheaply.
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