Tuesday, 18 March 2008

Time for Government and Landlords to think!

The Finance Secretary in the US Administration has warned of grim times ahead in the US economy; Tesco has ordered cost cutting measures; Pre-Easter sales are being unfavourably compared year on year - there do seem to be a number of reasons for all retailers to be intensely aware of their costs.

For smaller retailers the largest costs tend to be staff and property - staffing in SMEs is generally at a higher level (number of staff against pound for pound spent in store) than in larger organisations so this might seem to be an easy step to take in reducing costs - except that in smaller units, a single member of staff is a significant percentage of the whole and can make the difference between making sales, having security, or even just trading for a whole week with adequate cover. Legislation now dictates the maximum number of hours to be worked as well as the minimum pay for that work; this doubles the pressure upon SMEs to limit the number of jobs available for the very people that Government is trying to protect - and it is a case that either the SMEs do impose these limits or else there will be no jobs at all in that sector, something that will do the least well paid members of society absolutely no good at all.

The issues relating to occupancy costs are legend and need not be rehearsed here, but an interesting observation has been reported by Jennifer Creevy in 'Retail Week' and commented upon in an editorial; she reported comments made by William Landale the CEO of Lombok, a furnishing retailer. He is reputed to have said "I hate Landlords"; and can't we all sympathise with Mr Landale for that heart-felt utterance? Of course, Mr Landale was probably not actually sticking pins into a doll version of any particular individual landlord when he was being quoted. Mr Landale was actually commenting that landlords seem to be oblivious to the trading environment of their tenants, and there not being any established mechanism for rents reflecting the levels of trade actually being achieved.

Retail Speak believes that this is a situation that has to be resolved - as the trading conditions deteriorate in this cycle, it would be sensible for agreement to be reached where rental agreements are linked to trade levels - it could offer a fair return for landlords, a more realistic base for the retailers to build their businesses from and level the playing field for the game between the larger and smaller players in what is currently an uneven place indeed.

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