Bye-bye, mom and pop.

Posted On Thursday, 17 October 2002 10:01 Published by
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Embattled small traders get a hearing as landlords explore ways to keep businesses alive.
By Ian Fife

The representatives of the small and mom-and-pop traders at Gateway, Old Mutual Properties' (OMP) giant shopping centre in Umhlanga, KwaZulu Natal, feel they are making a breakthrough in their battle to survive.

OMP MD Ian Watt indicated at a meeting last week that he understood the need to share power between landlords and tenants. So says Marcel Joubert, a small trader who is assisting negotiations between Watt and about 60 retailers at Gateway.

It could be a turning point in an unhappy saga of small businesses failing in new shopping centres. They are the victims of four trends: the oversizing of centres, the effect of which is too few customers to carry their shops; landlords charging high rents to make up for the discounts they give the large chains; agent oversell; and their own inexperience as first-timers.

At Century City's 380-store Canal Walk in Cape Town, about 60 retailers have closed since the centre opened two years ago. Recently, the sheriff delivered 40 summonses in one day, says Barry Parker of Seattle Coffee Co.

Joubert, who heads the successful Platinum group (it includes the Jenny Button, Hilton Weiner and Aca Joe boutique chains), has a newfound sense of optimism on behalf of his fellow small traders.

'Ironically,' he says, 'it is the top men in shopping centres, some of whom have been engaged in the worst conflicts with small tenants, who have become the most visionary.'

One of these is Canal Walk GM Mickey Radowsky, described by Reid Corinn, a lawyer acting for many small traders, as the most pragmatic centre manager he knows.

At this week's shopping-centre council meeting, Radowsky and Watt will be among the landlords expected to place the training of retailers at the top of their agenda. They are also expected to create a retailers' organisation to represent small traders' interests.

A shopping centre today should be, in Joubert's opinion, like a large version of Young Designers Emporium (YDE), a successful small trader which provides space for clothing designers and promotes them.

Joubert adds that at the meeting last week, Watt and Corinn agreed to explore the possibility of calling in a retail expert to help struggling small traders boost their performances at Gateway.

Watt stops short of words such as 'partnership' or 'breakthrough'. Instead, he provides an alternative to Joubert's YDE analogy: a department store whose owner has a more prescriptive role.

But Watt agrees that small retailers make one centre different from another. So landlords want them to be successful, particularly in newer developments such as Gateway, where there are more small tenants.

'Small traders often have only one or two stores, so they have little against which to benchmark their performance,' adds Watt. 'But the landlord does have this information and can help the small trader understand what he must achieve.'

But small traders, say Joubert and Seattle Coffee Co's Parker, are mostly the victims of a 'verkramp, kragdadige, mean, bullying approach' to landlord/tenant relationships by on-site centre management.

These small and mom-and-pop traders have also been crushed underfoot by bureaucracy. It burdens them with 100-page leases and three-month rental deposits, and it squeezes out of them as much rent as possible.

'The small tenant ends up with property costs of more than 15% of his turnover and, therefore, can't survive,' says Parker.

Worse, perhaps, are the letting agents who sign up naive, first-time traders on a dream of what a new centre will deliver .

'Watt was surprised by the stories we had to tell about agent behaviour,' says Joubert. 'Luckily, the more experienced traders among us have learnt to discount what the agents say. When they tell us that Gucci or Boss will open next door, we prepare ourselves for some other surprise showing.'

Perhaps the biggest problem is that SA's traditional, regional retailers have all but disappeared over the past 20 years as the retail industry has come to rely on the nationals to provide its income. Businessmen or bureaucrats have replaced them, and many have taken early retirement and put their pensions into franchises or mom-and-pop businesses. Many have failed, often losing their life savings, through no fault of the landlord but because of a lack of understanding of and experience in retailing.

Many moderately successful mom-and-pops have not kept up with the more frenzied demands of the business. Both Maguire Jewellers and Franfreluche, a women's boutique, are closing down at OMP's Cavendish Square in Claremont, Cape Town, after nearly 30 years of trading. Their lawyers say section 25 of the constitution gives them property rights in Cavendish. But what is most telling is that after all those years in one of SA's most successful shopping centres, neither retailer has the money to take the case to court.

Small traders are now expected to perform like their bigger counterparts. The coffee shop with the crocheted tablecloth and homemade cheesecake must give way to the Seattle or the Mugg & Bean, which have the right formula for packing 'em in and operate long hours.

But the smarter small traders could prove to be a double-edged sword for landlords. Flexible because of their size and aware of their pulling-power, they could start testing alternative sites to shopping malls, such as suburban high streets. They could even build their own small centres. More change could be coming than landlords expect.

Financial Mail

Publisher: Financial Mail
Source: Financial Mail

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