Opinion

Turnover rents: Sales per customer instead of sales per square meter?

The retail market is in perhaps the most interesting phase since the emergence of the internet and online trading. Technological change has made great leaps in recent years and changed consumer behavior significantly.

BY JÖRG F. BITZER

Technology enables the customers of today rapidly to obtain masses of information, choose a product according to selection criteria such as price, and then buy it online. Omni-channeling was devised in response. Retailers want (and need to) address customers at every possible point of contact. Consumers can decide for themselves where and when they want to buy. Whether they seek advice in a stationary store and then buy online or vice versa should make no difference to retailers. The combination of these two sales channels is essential for traders to survive in the existing competitive environment.

As part of this development, a trend has arisen whereby customers provide a shopping list via mobile device in advance and then, on the same day, pick up the goods in-store. This offer is especially popular in the grocery industry. This market has great potential. At the same time, many changes await in this arena. No provider has yet discovered the “golden distribution formula” for groceries. Rents will take on a very important role in this development. When a store develops in extreme cases into a pure pick-up corner, turnover rents will become difficult to calculate. The actual floor area will be increasingly unimportant for customers in this segment, while the store room will maintain its importance.

A key question will be the source of revenues. Generated revenues are difficult to assign. It is often impossible to determine which contact point was decisive for a purchase. Did the customer surf the internet and then go into a store to buy, or did he purchase online because the store didn’t have his size in stock? Omni-channel makes this determination difficult. For retailers, it is ultimately irrelevant where the money comes from, but it is important in order to identify and develop potential. For landlords who want/need to earn turnover rents, this issue is crucial, however.

This discussion was also broached this year as part of the ICSC Europe Conference in London. Both shopping center operators and individual retailers need to find a combination of traditional, stationary options and online options. A new formula for rent calculation will have to emerge through this “bricks-and-clicks” approach.

According to its current report “Shopping Center: America’s First and Foremost Marketplace,” the ICSC is essentially optimistic about retail. Many previously purely online retailers are now searching for ways into retail outlets because the probability that customers will actually buy is is higher in-store than online. Approximately 94% of all retail sales still occur – unchanged – in the “bricks-and-mortar” trade.

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