I AM

Value + Values = Good Business Sense

Tuesday 22 September 2009

Today’s consumers are a nervous and jittery lot. Battered on the one hand with job insecurity, and on the other by the taxation need to bail out a financial system that gambled our pensions and lost.

Businesses that respond to this new trading environment will do well in the forthcoming months and years and emerge stronger than ever before, but changing bad habits is never easy.

The existing architecture of shopping centre operations is old-fashioned and flabby, designed at a time when money was easy and the zeitgeist was quantity not quality. Keeping operations efficient, and marketing efforts effective, wasn’t really an issue as we enjoyed the boom times that were fueled by cheap credit.

But now “savage cuts” and “progressive austerity” are the political headlines as we run up to the election, turning the agenda from a lavish desire to spend into a desperate need to save. And as it is for shoppers, so it follows for retailers and their routes to market.

So what does this mean?

It means that the shopping centre – as a route to market of its own – must react quicker. But the unaligned interests from which it is formed make it a static and unresponsive channel compared to its peers in out of town and on the internet. Worryingly for the shopping centre industry, the trends show that customers will increasingly spend their time and money where it is more convenient and better value to do so.

Now is the time to overhaul their system of operation.

Every struggling sub-regional or local shopping centre occupies a geographical sweet-spot in the middle of communities giving it a fantastic platform from which to re-engage with the people they were designed to serve. Aligning its values with those of the community will increase a shopping centre’s brand value and bring it’s employees, owners and occupiers together around a common cause that I believe will re-energise hearts and minds through empowerment and put smiles back on faces at the front-line.

Then, working together, shopping centre owners and occupiers can begin the streamlining and collaborative process that will identify where operational savings can be found and return these to an increasingly spendthrift shopper as rewards or incentives.

Making the shopping centre channel more competitive is I AM’s objective, and it will do this in part by helping to heal the wounds between owners and occupiers who have more to gain than they realise by finding a common bond, quickly. Good value and shared values – well communicated – will create successful shopping centre destinations that are full of life and energy. After all, it’s a fact that successful shopping centre investments are underpinned by successful retailers.

Good business sense = value + values. Time to modernise our operating system before it’s too late.

Please feel free to comment. Thank-you.

Mike.

Value + Values = Good Business Sense

New Generation

Thursday 10 September 2009

Last night I attended a very informative debate hosted by Lawrance Graham Solicitors, and the British Council of Shopping Centre’s “New Generation” committee – under 35’s essentially.

Eminent speakers included Mike Sales from Henderson Global Investors; Paddy Knapman from Cushmans, and Jeremy Collins of John Lewis who is also this years BCSC President.

Two things really stood out for me. Firstly the shopping centre industry is searching for a new way to drive performance out of shopping centres and the topics of the night conveyed the degree of change that’s happening right now in the market: turnover rents, community creation, and the relevance of traditional valuation methods at a time when the model needs to be more retail than property.

Secondly though, the fact that the ONLY retailer in the room was John Lewis.

Successful shopping centres are underpinned by successful retailers. Both are investors in this “channel” (one in the bricks and mortar, the other in the stock, shop-fit and staff) and both need a return to sustain their business interests.

This truth is surely the basis upon which a new alignment of interests should be built. Sustainable rents are the lifeblood to both, and turnover is surely the valve that keeps the heart pumping.

Recognition of this fact would soon lead to joint marketing initiatives and more joined up operational solutions that keep costs low and footfall high. And sharing information on impact of marketing efforts would help both to understand what works and what doesn’t. More effective marketing, and more efficient operations, will make shopping centres perform better since the customer will see the difference in service levels and in his pocket.

Too much energy, time and money is spent in defending the adversarial status quo – best summed up by Paddy’s boxing photo of Ricky Hatton (landlord) taking one right on the nose from Pacquiao (tenant). Cash and ego was the prize that night. For our industry, the prize is the customer and the two heavyweights in the ring are the owners and the occupiers. For me it’s more like a brawl over a girl in a pub car-park (I’m from up north where such behaviour is common place) but the clever bloke is not the one fighting, he’s the one who’s chatted the bird up and is waltzing out the door with her draped over him. Cue the supermarkets.

The New Generation Committee could be an interesting and refreshing tonic to our industry – I’m hoping that ‘age’ isn’t the test for engaging with these young pretenders, I’m hoping it’s ‘thinking’.

Mr Collins – keep up the good work, but let’s rebalance the BCSC by getting the retailers to join the debate too. They have more to gain than they have to lose.

Feel free to comment.

Mike.

Hey you two over there – stop fighting!

Thursday 3 September 2009

Re-balance the owner+occupier relationship

I AM believes that successful retail assets are underpinned by successful retailers, and that it is important to get the balance right between affordable and unaffordable rents and overheads.

Sustainable income depends on the need for flexible pricing mechanisms that react to changes in customer behaviour. The need to demonstrate “good value” to retailers is essential and is defined by their perception of what “good value” is to them.

Retailer feedback is therefore clearly essential as it generates the contact which enables collaboration to occur and trust to thrive. Information from Landlord and tenants is very powerful for both when converted into actionable insight and so creating the right circumstances for such information flows to exist is critical. Trust flows through transparency.

Insite Asset Management’s Marketing ensures that the shopping centre brand is aligned with customer pricing perceptions and so helps owners adapt to local conditions and costs. By analysing customer shopping patterns (in association with retailers) the pricing of rental and other charges can be identified and increased or decreased depending on affordability. This more flexible pricing policy will allow for greater variety of shops and move away from the traditional zoned rental model that fails to differentiate between uses. But it only works where retailers recognise the need for mutuality and where they cooperate fully in providing (sensitive) business information that can help their business, and the landlords, to prosper.

And all the while that landlords and tenants scrap over 20th century service charge procedures and upward only rent review clauses, someone else runs off with their jackets and wallets.

So, time to stop fighting, start sharing and find a bit of peace. Time to modernise in other words.

Mike.

Shopping Centres and Goodwill Hunting

Tuesday 1 September 2009

Brands are worth something

I am convinced that soon I will be able to find a way to put an economic value on the brand of a shopping centre – something to add to the bricks and mortar red-book valuation maybe (is it just me or does this valuation method seem a little bit 20th Century now?).

Most of the industry’s problems stem from the fact that shopping centres don’t connect with people any more. They’ve lost their meaning, their imagination, and their purpose in life. More agile competitors have skipped round their stationery hulks and galloped off with their goodies. Their brands are no longer as valuable as they used to be.

At least the recession has given us the necessary wake-up call to act positively. For me personally, re-building a faded brand is one of the most exciting opportunities going since it provides a chance to take something that’s being wasted and revamp it into something new and exciting.

And when I have sussed out exactly what that does to that shopping centre’s value it will be possible to justify an investment because I will be able to calculate ROI. Heaven!

Insite Asset Management is all about making shopping centres perform. We “breathe new life into shopping centres” because we care about life. And life is an asset. (Or if you are a numbers man “Goodwill” is an asset).

If you are a supplier to the industry, who shares our vision, or an owner who wants better performance out of your centre, then give me shout please – we can go goodwill hunting together.

Mike Riddell.