Retail is deep into an unprecedented period of change. But, where does that leave its professional advisers?
Are those who seek to advise the sector able to keep up and add value?
It is a relevant concern.
As a lawyer, I have acted on a raft of new retail schemes across Scotland in recent years. I have had the privilege of hearing first-hand the challenges and experiences of BRC members, and heard the debates at the key retail conferences.
In what follows, I will consider some of the key concerns and changes in retail over recent years and where professional advisers should look to provide the support, guidance and specialist knowledge that their retail clients really need as they navigate the current landscape.
Retail resilience
Commercial terms agreed on retail space at the outset can have long lasting implications. The heavy burden that property obligations create for retail businesses is only too apparent when looking at the numerous CVA cases over recent years. Powerful retailers have not been slow to take the initiative and demand that there is a fresh balance struck when negotiating lease terms.
For many years food court operators and tenants in retail outlet malls have been accustomed to rents that feature a turnover element. These provide for a base rent that is topped up by rent calculated on turnover achieved at the unit in question. Linking rent payable to the performance of a store appears attractive (although turnover and profit do not necessarily align). Some of the larger retailers are taking this principle and making it central to their leasing strategy. Contractual provisions determining the rent to be paid are therefore becoming ever more complex. Hence an experienced specialist adviser is a necessity.
Mixed uses
Retail locations increasingly need to address the needs of a shifting audience across the span of 24 hours. Can retail space adapt to serve commuters, residents, office workers and leisure seekers across the course of a day?
There is also a need for bricks and mortar retail locations to be flexible and adaptable for the longer term. That can mean having alternative uses in mind from the very start.
Mixing up uses can mean that planning consents become crucial. In retail parks, for example, planning officers need to balance the desire for fresh development against the need to preserve town centres. That can lead to planning consents being granted subject to conditions that tightly control the uses to which retail park units can be put. Complications ensue for retail occupiers and their landlords.
Having specialist planning consultants, property agents and lawyers engaged to steer you through the mine field of comparison goods, convenience goods and planning agreements can be invaluable.
Sustainability
The essential green agenda. It dominates customer thinking and retail leaders predict that this will continue to be a central concern in 2020.
Reducing packaging, improving recycling and being part of the circular economy is all part of the action plan. But customers need to see it to be believe it. Retail design teams therefore need to consider how to accommodate ‘sustainability’ and make it visible within a store fit out. A simple example might be the coffee chains that now provide extensive recycling receptacles and prominent discount messaging for those with re-usable cups.
While press releases announcing a retailer’s latest commitment to removing plastic packaging generates immediate goodwill, an embarrassing weak link in the supply chain could undo all of that. Think of the horse meat scandal at the beginning of the last decade. Retailers need to hold suppliers and business partners to similar green standards. Your advisers can assist with the contracts needed to underpin such arrangements and help mitigate the fallout if something should go wrong.
Experiential retailing
In short, shops need something to temp customers away from online retailing. With footfall continuing to disappoint stores need to offer an experience, content and interaction that just cannot be replicated online.
Nespresso secures brand interaction as its offers a coffee, Hotel Chocolat delivers indulgence via in-store restaurants and Boots provides a human connection with on-the-spot advice. Advisers need to understand what physical retailing now needs to achieve in order to distinguish itself in a time-poor society.
A simple example – even a retailer of hiking equipment now needs an in-store café. It creates a destination for shoppers, increases dwell time and opens up opportunities to interact. What about use restrictions, planning requirements, extraction rights, external seating licences? All covered?
Customer focus
Every retailer wants to delight their customers and make every element of the customer experience better. Does the service you receive from your professional advisers reflect the values and principles of your retail businesses? Working with retail clients should be about forging a team dynamic, being creative and thriving under challenge.
Retail has always been a sector of constant change. The need to anticipate shifts in consumer behaviour has meant that the most nimble retailers have been the most successful. In a time of unprecedented structural reinvention, even the great and good of retail have been left exhausted by the pace and scale of evolution in the sector. Retailers have analysed, reflected, experimented, re-stocked and re-invented. Were their professional advisers also paying attention?
GRAEME BRADSHAW
graeme.bradshaw@burnesspaull.com
0141 273 6976
To find out more about Burness Paul LLP and the services they provide to the retail industry, click here.
This article was originally published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.