Fairness in Retail Rents
Having audited in retail at the front end of my career, it was clear that almost any retailer faces the same challenges:
- Offering what the consumer wants vs. carrrying too much inventory (space, obsolesence risk, and then also cost of capital;
- Pricing on the seasonality curve, particularly in the fashion space;
- Protecting your oligopoly in the mall;
- Staffing Issues;
- Shoplifting - now alomost eliminated.
As the headline suggests, I am writing about the risk that a business fails simply because it cannot cover its rent. One of my clients had over 300 stores (at three price points) in over 100 malls nationwide in Canada. There were only a handful of mall-owners. Each store had a monthly base rent, and paid a percentage of the top line. Sustainablilty semi-assured through this win:win arrangement. I do not gain a sense that variable rents are levied in retail in Germany, or in gastronomy, and have seen certain restaurants fail simply on rent, not on the volume of their business. Comments are welcomed.
More on the oligopoly in my next post.