Independent retailers bring diversity to UK shopping centres, says law firm

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Wales: independents are going mainstream

Wales: independents are going mainstream

In the second in a trio of articles focused on opportunities in retail property, Deborah Wales, senior associate in the real estate team at UK law firm Dundas & Wilson, claims recession has spawned retail diversity in UK shopping centres

A Swedish fashion chain. A large chemist proclaims “here come the girls”. A department store promises it is never knowingly undersold. These familiar retail stalwarts are found in shopping centres the length and breadth of the UK. However, familiarity can breed contempt. The presence of these names has long been maligned by supporters of the traditional high street who point the finger of blame for dwindling occupancy rates towards developers of ‘clone malls’. Until now.

The retail giants are seemingly best equipped to weather the financial storm by absorbing rising costs and squeezing out the competition. Only the strongest can survive. Yet the recession has accelerated a more diverse tenant mix in large shopping centres. Owners faced with vacant units are agreeing deals with retailers normally associated with suburban high streets. Independents have gone mainstream.

The traditional model of anchor tenants being complemented by an array of popular high street brands is slowly being eroded by the inclusion of small, independent, sometimes local businesses. In one city-centre Scottish shopping centre, units have recently been taken by a bespoke cake maker, an express hairdresser, a beautician and an old-fashioned sweet shop. The same centre also hosts a farmers’ style market at weekends within the car park.

This diversification brings potential benefits for all involved – owners, shoppers, small businesses and even shopping centre retailers.

Smaller, independent retailers offer shopping centre owners a solution, whether short or long-term, to excessive voids and falling rental income.   

Household names have been scaling back expansion plans in fear of cannibalising their existing trade; and with another raft of UK wide retailers going to the wall in recent months, yet more shopping centre units are sitting in darkness. 

The trend for shorter, more flexible lease arrangements with comparatively low licence fees suits independent retailers. These deals are often inclusive of service charge, which was previously a major financial obstacle to independents making the leap from the high street to the shopping centre. 

In boom times owners would have dismissed these retailers on the basis of covenant strength but landlords are now taking risks on flexible deals with minimal upfront outlays. Smaller independent retailers can take short-term leases to offer consumers seasonal products or to hop on the latest bandwagon – remember the crazes for juice bars and cupcakes?  

Attracting customers into stores is one thing, but owners must create the right environment to persuade them to stay and spend their hard-earned cash. The report by retail guru Mary Portas identified high streets need to be “vibrant places that people choose to visit. They must be destinations”. Exactly the same can be said of shopping centres too. Having a jeweller who makes one-off pieces, a quirky opticians, or a traditional gift shop that offers sweets and crafts with that “homemade” feel can draw visitors from one centre to another.  

Diversifying the retailer profile within the centre enhances the shopping experience for consumers, which in turn increases footfall. Centres can market themselves more successfully as a one-stop shop, which was always a unique selling point of the high street. The modern shopping centre consumer can now pick up a new ensemble for a wedding and a one-of-a-kind gift for the bride and groom, treat themselves to a manicure and buy the weekly supermarket shopping – all under one roof.

Independent retailers can thrive in a shopping centre environment as their products are often impulse buys which are not necessarily dependent on price. Whilst championing the traditional high street, the self-styled Mary Portas has noted a move away from the ‘stack ’em high, sell ’em cheap’ mentality. Independents can capitalise on this by offering quality products with a personal touch which, combined with a greater focus on customer service, can justify the slightly higher price point of their products.

Large retailers can also benefit from the presence of independents via consumers who may previously have blamed shopping centres for the demise of the local high streets, or those looking to buy more local, fresh produce who previously would have gone elsewhere. Savvy shoppers are now using department stores as showrooms to browse products which they then research and buy online later. This trend means retailers need to work with shopping centre owners to capitalise on footfall and convert visitors to customers. Having a point of difference helps with this as independents can introduce a new shopper profile to a centre.  

Shopping centres are changing. In five years’ time, shoppers may find the local butcher and florist side by side with the department store and the Swedish clothing giant. In tough times footfall is key. Switched-on agents will need to have local names as well as big names in their little black books in order to maximise owners’ investments as independent retailers continue to take the leap from the high street to the shopping centre. Just don’t tell Mary.