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Creating destinations and retailer opportunities

21.07.2015

To create leading destinations that showcase the very best of retail requires a strategic, insight-led approach. Landlords must employ dynamic tenant mix strategies to maximise dwell times and ensure shopping centres stay relevant for customers, whilst creating opportunities for smaller fashion retailers or established brands to test new catchment areas.

The vast majority of retailer relationships across typical regional mall portfolios rest on relatively long-term lease agreements – around 10 years in length – and often their presence is portfolio-wide as part of an individual retailer’s national, or even global, store strategy. This traditional model means re-tenanting is often complex, with landlords focused on optimising the tenant mix looking for more creative uses for vacant space on a short-term basis. This has led to the rise of commercialisation, which typically takes the form of temporary kiosks or retail merchandising units in previously unused mall space, providing an additional revenue stream for landlords and giving smaller businesses the opportunity to test their proposition with a captive audience. Commercialisation strategies are also used by established companies as a cost-effective way to assess their brand’s strength in new catchment markets.

As this additional revenue stream has grown in terms of its overall contribution to a shopping centre’s performance – in 2014 revenue from Hammerson’s commercialisation division increased 11% – commercialisation practices have become more sophisticated.

In the past, kiosks reflected the temporary nature of commercialisation, but nowadays much investment and effort is focused on the design element, using high-end materials to create innovative stands with accessible counters and engaging graphics. Cath Kidston at WestQuay is a great example of this. In 2013, the company took a three-month pop-up kiosk to test the brand’s popularity in the South West catchment area. The kiosk was well branded, reflecting Cath Kidston’s kitsch and distinctive style, and built to give the impression of a permanent unit. The customer response was phenomenal; in the first week alone the pop-up hit its target after just three days of trading. Several months later, Cath Kidston signed a long-term lease for a permanent retail unit and remains a hot favourite with customers at WestQuay.

With landlords providing onsite specialist teams offering strategic advice ranging from marketing and product merchandising to operations and financial forecasting, smaller retailers are increasingly turning to this lower-cost route to develop new concepts. Boca 10, a Scottish start-up designing retro football T-shirts, first dipped its toe in the water with a short-term lease at Silverburn, Glasgow, in 2011. With expert advice and guidance from Silverburn’s commercialisation team, the business gained retailing skills and experience, enabling it to renew its lease on an annual basis with Silverburn and expand beyond the centre.

For landlords there is clearly some risk involved in assigning space to unknown brands, but showcasing innovative concepts is all part of providing the most engaging experience for customers and driving footfall for occupiers. Landlords must therefore rely on dedicated commercialisation specialists, skilled in identifying businesses which, whilst not of appropriate scale to occupy traditional units, are nevertheless providing a product or service that enhances customer experience and choice. For smaller retailers, commercialisation offers a cost effective route to market. They can test concepts and refine or adapt their proposition to suit consumer tastes without the pressure of a long-term lease, and whilst benefitting from the experienced guidance of onsite specialist teams. With the right mix, shoppers are inspired to come and discover something new more frequently, and fledgling businesses have the opportunity to showcase the next big thing in retail.