Advice for small business retailers on how to reduce retail tenancy occupancy cost

Since we own and run retail businesses where our POS software is in use we have access to a well of experience and knowledge on which we can draw to craft practical advice for our customer community. Here is advice on reducing occupancy costs that we shared recently. We share it here for the broader community to consider.

REDUCING RETAIL OCCUPANCY COST: ADVICE FOR SMALL BUSINESS RETAILERS.

The usual go-to place for any discussion about reducing occupancy costs is the landlord. Retailers tend to blame landlords for high occupancy costs.

The thing is, we all sign our leases. We all agree the terms of our leases. While leases from years ago can be problematic today, the challenges of our channel were obvious ten and more years ago.

Here is a list of things retailers could action to improve the occupancy cost situation where occupancy cost is the ratio of all lease related costs to revenue for products (and commission from any agency lines). You should also assess it as a ratio of GP.

There are many steps one can take to improve the occupancy cost situation:

  1. Negotiate with the landlord. We place this first as it is the usual go-to place for retailers. If you plan to seek a better deal, make sure you have a strong commercial case, a case backed by evidence. However, also know that a rent reduction does not provide long-term, growth like, benefit.
  2. Grow your overall GP%. Do this through broadening your product mix with a focus on sought-after higher than average GP% for your business items. It depends on the suppliers from whom you purchase and the extent of point of difference you leverage in what you sell.
  3. Increase foot traffic. Do this through ranging more diverse products and promoting your business outside the business. Success with this depends on the range of inventory you offer and how this is promoted outside the business. It depends on the reasons why you attract people to your business.
  4. Increase basket depth per transaction. Do this through shop floor engagement, sales counter product placement, key traffic freeway disruption and your business format.
  5. Increase GP for everyday items over which you have pricing control. Plain and simple – increases your prices. Success with this depends on thoughtful adjustment where you know it can be done without reducing unit sales volume.
  6. Broaden the appeal of your business. This idea picks up on some thoughts above but adds more. Here is what I mean – your business up to today attracts shoppers for a set range of reasons / purposes. Note those down. Now, contemplate adding sought-after considerably higher than average GP for your business products and / or services that are genuinely new for your business and that are not satisfied by a nearby business. Each new product / service reason, if successful, improves your occupancy cost situation.

These are items you can action right away, regardless of your occupancy cost situation. Items 2 through 6 and tasks that should be core business activities you pursue relentlessly.

The cost of retail space is Australia is higher than most countries in the world. It needs to reset. However, the level of reset necessary will not happen as long as people keep signing leases that are not viable.

Leave a Reply

Your email address will not be published. Required fields are marked *

Reload Image