Retail occupancy costs are on the rise and try as retailers might to negotiate them down, in this property marketplace it is challenging to achieve the level of reduction or management that you may want.
This is why it is valuable to leverage your POS software to help you better deal with an increase in rent, an increase in occupancy costs.
In our Tower Systems POS software and in the training, advice and support that we produce our small business retailer customers, we help deal with the matter of retail occupancy cost.
We do this by helping the retailers buy better, turn inventory faster, drive more value from each shopper visit and manage business overheads, such as labour costs, more efficiently for the business.
Combined, following the advice and using the support that we offer, retailers can position themselves better for rising occupancy costs.
The occupancy cost of a business is the combination of all costs associated with leasing retail space. It includes the actual lease cost plus all outgoings plus GST. GST is included because of how the occupancy cost calculation us used, as a percentage of revenue, including GST.
Occupancy cost is typically the top one or two operating costs for an average local retail business outside of inventory cost. Labour being the other top cost.
Recommended Occupancy cost benchmark: between 9% and 11% of revenue where revenue is product revenue. This can vary by business type.
Explanation. The 9% to 11% suggested band is based on the margin we see as common in local retail businesses businesses.
Location and situation are a big factor in this benchmark. For example, a large shopping centre business will have a higher cost than a high street situation. However, the 9% to 11% band is recommended.
It is vital to the health of any retail business to manage the lowest possible occupancy cost. It is for this reason we recommend a low and viable base rent and a fair annual increase.
So, managing the business to pursue efficiency in inventory, space and labour usage is key. This is where our Tower Systems POS software can and does help thanks to the business training and the practical retail business support that we provide.