Gateway to retail peace.

Posted On Wednesday, 11 December 2002 10:01 Published by
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Old Mutual Properties (OMP) has contracted a retail specialist in what must be seen as a bid to help defuse tensions that have simmered,
Old Mutual Properties (OMP) has contracted a retail specialist in what must be seen as a bid to help defuse tensions that have simmered, and occasionally erupted, at Durban's giant R1.4bn Gateway shopping and entertainment centre since the complex first opened its doors just over a year ago.

Barry Nesbitt of the re:solutions (which stands for regard solutions) a Camps Bay-based consultancy which specialises in devising comprehensive retailing strategies for its clients, however, stresses that his function, in terms of his contract with OMP, is not to resolve the impasse with certain tenants but to offer a retailing and merchandising service to those tenants that may wish to take advantage of his expertise.

His appointment follows in the wake of a long and bitter running battle between the landlord and a minority group of about 60 small tenants (disagreements with just 16 remain unresolved according to OMP) who believe they are being short changed by the landlord because Gateway refuses to consider rental concessions even though the centre hasn't, in their view, lived up to expectations.

The dissident Gateway Tenants' Forum consequently indulged in measures such as demonstrations and rental strikes to try and force the landlord to adjust lease conditions. For it's part OMP has, to date, responded by amongst other things seeking court orders to evict ringleaders for non-payment.

The first signs that OMP might be looking at a new and innovative approach to resolving the problem came with an article by MD Ian Watt in the latest issue of 'Property Profile,' OMP's in-house magazine which deals with property development issues and projects.

In the article Watt says: 'Clearly, landlords and retailers must apply themselves to the real issues causing difficulties. Moreover, landlords must establish vehicles that allow them to support those small traders that merit assistance.'

The move has been welcomed by the forum's legal representative and property lawyer Reid Corin who says: 'This is pretty outrageous stuff coming from a tough landlord. However, Ian has put his money where his mouth is by bringing in re:solutions to investigate how retailers can succeed at Gateway.

'My biggest concern though is who determines which tenants merit assistance and which don't. And what one does with the tenants who don't qualify? Not easy questions to deal with. I see the appointment of re:solutions as having great potential and has my full support for as long as its interests are aimed at achieving a win-win situation for all concerned,' says Corin.

He adds that another positive sign is the fact that the Gateway Tenants' Forum is receiving recognition from both the landlord and re:solutions and is being drawn into this consultative process. 'This augurs well for the landlord/tenant relationship and the centre,' he says.

OMP, for its part, maintains that it has always recognised the forum.

Though Watt is currently abroad and unavailable for comment, he explains some of his thinking in the Profile article in which he recognises the recent emergence of smaller tenants as a distinguishing feature in some major shopping centres.

Two examples are Cavendish Square and the V&A Waterfront in Cape Town. At Cavendish Square two department stores were replaced by smaller retailers as they progressively lost ground in the Eighties and Nineties. The V&A challenged convention by developing around smaller tenants catering to specific needs rather than depending extensively on majors.

Gateway, he says, marks an even more radical shift from the norm, opting to devote more than 40% of its space to entertainment - separating it completely from some of the sterile centres of the past. There are majors at Gateway, but not as dominant as in other centres.

Smaller traders, he adds, make up a substantial part of Gateway tenants and in some cases their experience (and that of their counterparts at other new centres) highlights a chasm between them and the big nationals.

'Research indicates 80% of new businesses in the small and medium enterprise sector fail within the first three years. The survival rate after 10 years is just 4%.

'This underscores a need created by change in both our economy and the retail property sector. That need is for a relationship that produces a win-win situation for landlord and retailer, and in particular smaller traders.'

Watt goes on to explain that larger tenants are generally experienced lease negotiators and understand the inevitability of needing a settling-in period in the early years of new centres. Small traders, however, not only lack the back up resources of the majors, but some are first-timers, inexperienced at opening stores and, perhaps, unable to imagine their new idea in retail failing.

'They find it difficult to cope with the initial settling-in period. Their expectations are often so rosy that they may take more space than needed and their projections don't sufficiently accommodate the impact of dips in the economy or of higher interest rates.'

He adds that when the going gets tough the retailers seek support from the landlord. But the landlord must, in making a decision, consider a host of issues relating to the tenant's difficulties and whether there are practical solutions.

'The real challenge is to grow the turnover generated by the store to a point where the retailer is successful.'

Establishing new retail businesses, he adds, takes time, patience and plenty of hard work. Opening a new store is only the first step. Developing merchandising skills is another. It's also vital to ensure there's sufficient capital to adequately stock the store with appropriate merchandise.

'Why do shoppers visit one store and not another ? The landlord's role is to bring the customers to the centre; the retailers have to get them to spend in their outlets. One should never lose sight of the fact that customers vote with their feet and are prepared to go elsewhere if the retailer doesn't treat them correctly or doesn't have what they want,' says Watt.

Clearly, he adds, landlords and tenants must apply themselves to the real issues causing difficulties. Moreover, landlords must establish vehicles that allow them to support those small traders that merit assistance.

Clearly, in the case of Gateway re:solutions is designed to do just that. Nesbitt will devote one week a month to providing free advice to any Gateway tenants who may wish to take advantage of his expertise. 'My first task is to perform a complete evaluation about Gateway's retail offerings and how they could be enhanced.

'Having walked through the centre - which I believe to be compelling and visionary and bound to succeed once it matures - as a customer, one gap I've identified some that traders don't offer the desired service levels and focused merchndised assortment,' says Nesbitt.

To this end, he adds, specialists selling/service training company is being brought down from Johannesburg to run a course for about 30 Gateway retailers.

Clearly, ultimately, however, though he says he's not a mediator, Nesbitt's real function will be to help all concerned to focus their energy on how they co-operate and succeed in the future, as a community of common interest, rather than look back at their past differences.

Publisher: Moneyweb
Source: Moneyweb

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