An agency’s business plan – called Locum Ireland – uses hit squad tactics to help landlords, retailers and consumers

THE CHANGING economic environment in Ireland has presented significant challenges to landlords and retailers. In order to sustain quality and quantity in the retail market, it is vital that a spirit of partnership exists between both parties.

The current position has seen retailer cash flow squeezed, trading conditions deteriorate and consumers continue to save and curtail spending. Landlords now have to be proactive in their policies and dealings with retailers. The case of expecting the quarterly rent to hit the bank account is no longer the norm.

The changing landscape has seen a number of retail operators enter the arena, taking advantage of cheap space in shopping malls. These new players are prepared to trade aggressively. The Dublin M50 centres are the most sought after locations for these opportunists. Nevertheless there are worrying signs that the retail pool is starting to dry up and landlords must now work harder with their existing retailer base. Astute landlords are ensuring that their retail schemes remain occupied and vibrant.

The prevalence of short-term leases with “turnover-only” terms means that landlords and retailers are having to work closer together to maximize the spend within retail destinations. Landlords need to be hands-on and their teams need to understand that footfall has to be converted into sales so that, ultimately, sales can be converted into rent.

In the past, retail agents utilised the traditional ‘isochrones’ approach to calculating retail catchment areas, whereby population levels within a 15-minute, 30-minute or one-hour drive of a location were assessed in order to market retail schemes.

For example, a proposed retail centre in Athlone would previously have claimed a catchment area extending from Longford to Tullamore and encompassing Mullingar. However, we now know that Mullingar shoppers would rarely shop in Athlone. Thus, the traditional isochrones approach is no longer relevant.

As the recession bites, Colliers has devised a new business approach called “Locum Ireland”. While there is no “magic dust” available to fix distressed retail assets, Locum goes some way towards making it easier for all parties – landlords, retailers and ultimately consumers – to achieve their retail objectives. Locum devises “destination strategies” for the repositioning of shopping schemes, town centres, tourism attractions etc and breathes new life into them. The retail programme is a three-stage process.

Stage one realigns the catchment for a particular centre and determines the amount of disposable income (actual shoppers) available. The approach is relatively straightforward in that it identifies the competing schemes within the catchment area and their position within the catchment hierarchy – either comparison (fashion) or convenience (food). In addition, it identifies key employers, demographics, schools, clubs and societies – which are the lifeblood of a shopping scheme.

Locum will also carry out a Swot (strengths, weaknesses, opportunities, threats) analysis which will determine the most appropriate market position for the retail scheme.

Stage two involves the marketing proposition. It has become evident during the recession that the type of marketing tool that works best is one in which the consumer is targeted as close to the point of sale as possible.

One tactic that has been successful for Locum Ireland has involved the use of “hit-squads” distributing vouchers to consumers at key road junctions near centres under our management. It is simply not good enough to place indiscriminate ads in the paper or on radio.

The modern approach to marketing also requires the utilisation of retail scheme websites and tools such as Twitter and Facebook, and the targeting of consumers with electronic vouchers.

In simple terms, every euro matters and every retail scheme is chasing the same euro within their catchment. It is up to the owner and retailers to make their scheme the preferred choice for consumers in their area.

Stage three of the process sets out to make service charges very, very competitive. It is clear that charges of less than €80.73 per sq m (€7.50 per sq ft) are now the norm for modern enclosed shopping centres. There is an even greater trend towards turnover based lettings to retailers. These include rent, rates and service charges as part of the deal, normally on a short three to five-year term.

While rental income is king, those landlords that compromise on standards do so at their peril. The cost reduction process must be carefully managed, as consumers still expect an enjoyable retail ambience and experience

Successful retail centres need to be run like businesses, not pieces of real estate. Market positioning and business objectives must be clearly worked out. The retail destination must then have a marketing strategy specifically designed to suit current economic conditions and an ever more competitive environment.

Such strategies will only work if they are based on a realistic financial model based on partnership between the joint interests in the business.

• Aidan Grimes is director of Asset Management, Colliers International Dublin