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LAST MONTH : ATR : 01-09
Going The Extra Step
The recent tragic fire in a Shanghai apartment block has again highlighted China’s poor health and safety standards. Whilst the Central Government have recently announced for there to be a fire safety overhaul, is there a role for international retailers in accelerating improvements to Health and Safety throughout China’s retail malls?
The Art of Good Management
Constant dialogue should ensure that there are no surprises and that the landlord is always one step ahead.
Many landlords in China underestimate the importance of good shopping centre management and it’s implications for success. Whilst good management is important in all business so as to maintain control of a company and to ensure that a company’s ethics and integrity remain constant at all times, the same can be applied to shopping centre management.
Apart from the design, construction and leasing of a new shopping centre, there is a tremendous amount of hard work that goes into getting a shopping centre open and operational. The hard work should have begun at least six to nine months before opening with the set-up with all the operational systems and future marketing campaigns to ensure that once the scheme opens, it remains at the forefront of both the retailers and consumers minds. The earlier the shopping centre management can start work on the project the better as it can provide them with the opportunity to work closely with the leasing agents when securing tenants so as to ensure that all the terms included in the leases are appropriate for the scheme whilst also providing the managers with a better understanding of all the businesses so that they understand what the main drivers for each tenant are.
Many landlords believe that once the shopping centre is built and operational, their job is then done, and that they can then sit back and reap the benefits. However, with the majority of leases in China being relatively short (3 to 5 years), the work needed to maximise the development of a shopping centre should be continuous so as to keep it ahead of the ever increasing competition.
When looking for new opportunities with our clients, one of the first questions to be asked is, who manages it? All companies have a brand image to protect and in such a competitive market as China, it is vital that everything is done to ensure that the brand is not damaged. For many retailers, the actual store provides a continually changing brand advertisement, from which they can educate the consumer about the brand, their heritage as well as their latest campaign.
However good the location of a shopping centre, if a pleasant shopping environment is not being provided for the consumer, this will have a negative impact on the overall scheme as people want to be able to relax when shopping and obviously the environment is a key attribute to this.
There are a number of consultancies who have built up excellent shopping centre management businesses in other areas of the world and are drawing on their expertise to build a shopping centre management business in China. Obviously, this costs money and with many of the experienced Asian landlords operating the management of the centre through their own in-house team, many new landlords believe that this is a model that they should adopt as it will keep costs down and their staff can learn as they go along.
This is something which is very worrying to an established retailer. However good the terms agreed to secure the store at, if the scheme is not successful, then it is very likely that it is going to be trading at a loss. Whilst all retailers have a timeframe from when they expect to be making money, following the economic downturn, retailers are now far stricter and impatient as to how long they’re prepared for their store to operate at a loss.
Marketing is an enormous part of the shopping centre model. Whilst the anchor tenants will do their own store marketing, retail is all about creating a critical mass from which all retailers can succeed. Whilst it is common for there to be a promotion levy as part of the management fee, many inexperienced landlords do not see the need to employ a PR / marketing company, again looking to do it in-house so as to keep their costs low whilst maximising profit.
There are a number of new marketing techniques being formulated in other areas of the world. If these are adopted, they can certainly help differentiate the scheme from it’s neighbours, however with relatively high set-up costs, this puts off the majority of the non established landlords again ensuring that their project lacks the ‘killer punch’.
As well as being responsible for the operational side of the development, the shopping centre management company is also the ‘go-between’ between the landlord and tenants to ensure all Parties are happy and that everything possible is being undertaken or at least considered to make both the retailers and scheme succeed. Constant dialogue should ensure that there are no surprises and that the landlord is always one step ahead - if a retailer is struggling, the Shopping Centre Management should be working on a solution with the retailer whether that is through a rental reduction or finding an alternative tenant therefore maintaining a good reputation for the scheme and therefore a strong headline rental and low vacancy rate.
