Insights

Consumer Packaged Goods Need a New Plan
Consumer Packaged Goods Need a New Plan 1440 428 ASG

When it comes to surviving the evolution of retail, it’s not just retail brands who are having to reinvent themselves and find new, customer-centric avenues to survive. The future of wholesale is in the same boat and so are consumer packaged goods (CPG). According to McKinsey, CPG losses over the last decade ranged from 7% (food) to 18% (household products and beverages), and disruption in the CPG market is coming from everywhere:

  • Ecommerce has leveled the playing field to a degree, allowing unknown startups to compete effectively against well-known brands.
  • Younger consumers are not as brand loyal.
  • A consumer shift toward healthier products has left some brands lagging far behind the trends.
  • Amazon.
  • Increase in local competitors.
  • Private label brands are taking a significant share of the market.

Costco introduced the Kirkland brand in 1992, 27 years ago, and that brand did $39 billion last year, whereas all the Kraft and Heinz brands did $26 or $27 billion. So here they are, a hundred years plus, tons of advertising, built into people’s habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all of Kraft-Heinz brands.
– Warren Buffet, Forbes


How Do Traditional CPG Brands Compete? D2C Is the Answer

Just as wholesalers have been discovering, many CPG brands have sensed a change in the market and are likewise making the move to direct-to-consumer models – and if they’re not, they should. Startups are agile enough that this shift is easy for them; traditional CPG brands, however, struggle to adjust to the shift. Unfortunately, those that don’t adjust will struggle more so. There are benefits to D2C for CPG brands:

  • Direct communication with their customers.
  • More control over their brand presence, instead of being at the whim of the retailer’s shelf space and competing brands.
  • More control over the price, making the brands better able to compete. 
  • Total control over brand image.
  • Deeper understanding of data about, and engagement with, their consumers.
  • New opportunities for strategic growth.


Overcoming the Challenges to D2C

It’s crucial to understand the difference in strategy and execution for digital brands, wholesale brands, and CPG brands versus traditional retailers. The strategy and approach are different for the execution of a DTC model for those not traditionally involved in retail. The biggest challenge CPG brands have to overcome is much the same as wholesale: Well-established brands often get stuck doing the same thing because that’s what they’ve always done – but they have different stakeholders to please, too. 

Most large CPG companies still have a 1980s view of private label. They are not aware of how much the industry has changed or how much it is driving and impacting retailer activity. A lot of marketers overestimate the importance of their own brands and underestimate the importance of the retailer’s brands to the retailer. Others don’t understand the private label threat well enough to take it as seriously as they should.
– Jim Wisner, former Jewel-Osco executive who runs a marketing consultancy in Libertyville, Illinois. (PPIQ)

Will private-label CPGs put big brands like Kraft Heinz and Proctor & Gamble out of business? Unlikely. But these legacy brands are having to justify slower growth, lower profits, and in some cases, product line losses to their shareholders. At the end of the day, CPG brands that don’t consider D2C may not survive.


D2C: A Roadmap to Success and Survival for Wholesale and CPG

Before a wholesale or CPG brand can shift to D2C , they must first shift their mindset. These brands have been insulated from direct contact with – and in many cases data from – the consumers who enjoy their brands. To succeed in a D2C world, that has to change. Marketing, branding, market position, and location decisions must be based on a deep understanding of the consumer and their relationship to the CPG brand. The talent shortage in the CPG industry is a big hurdle to accomplishing this.

Challenger brands and private label brands have a lot of the same appeal. Private brands provide value and a lower price with the perception of similar quality. Challenger brands may be priced higher, but they offer a tangible benefit to justify the premium. Big brands are stuck in the unenviable middle. They’re not telling their story in a compelling enough way about why shoppers should be willing to choose them.
– Timothy Campbell, senior analyst at Kantar Consulting (PPIQ)

Then, CPGs must create a relationship with the consumer. How? It starts with data. Where are your customers? Who is loyal to your brand? Why? Do you have the insight you need to open flagship stores?

D2C data is a gold mine for any business and this is even truer for the CPG industry. If you think about it, there are no other data sources within the four walls of a CPG or FMCG organization that afford the richness and ‘always on’ feedback loop to demand and supply metrics. This is a dream come true for those tasked with advanced analytics and measurement as it is the cleanest way you can stimulate and measure consumer loyalty and then develop robust data-based decision behaviors around demand sensing and forecasting.” – Vidyotham Reddi, Global Director of Advanced Analytics & Measurement at Mars Inc. (LeadsRX)

Finally, you need to use the data to make strategic decisions about your brand. Do you build out your own retail shops across the country or test pop-ups in certain high-traffic areas? Do you sever ties altogether with the retailers who carry your brands or focus on some kind of hybrid that allows your brand to remain on retail shelves even as you build your own branded stores? How do you keep your brand-loyal consumers engaged?


The Way Forward for CPG Brands

So many CPG brands have no visibility beyond the retail space they occupy. That space is quickly shrinking, especially as retailers compete with their own labels. The CPG industry needs to embrace communication, branding, and risk taking. To have the ability to understand consumers, CPG brands must learn to take calculated, educated risks to discover what works and what doesn’t, incrementally expanding into direct-to-consumer markets as they refine their testing. Pick a market. Do a test. Refine and do a bigger test. But DO something.

Outsourcing Retail Strategy and Lease Administration
Outsourcing Retail Strategy and Lease Administration 1440 428 ASG

There are 10,000 Boomers retiring every day, and they are taking an enormous amount of institutional knowledge with them. This has been most noticeable in the healthcare and insurance industries, but in the next decade, we’re going to feel it in every industry. 


The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions.  Consequently, these replacements have limited high-level work experience, creating a giant skills gap. And as these succeeding generations aren’t having kids quickly enough to create future replacements, the gap and skills shortage will continue to widen.


What does this have to do with retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand.  While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail – I’m seeing this painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit. 


Lease Administration Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. For example, in one instance affecting a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.


The Case for Outsourcing Lease Administration

It’s not just the constant back and forth with ASC 842 updates or even lease negotiation; at the end of the day, outsourcing lease administration ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center. ASG saved its clients $5 million last year.

ASG manages leases effectively, ultimately serving as a profit center for many of our clients. An investment made with us results in measurable savings – without the headache of arguing over every dollar saved, because we don’t charge an additional contingency fee on the recoveries we generate.  You keep every dollar. For one client last year, that amounted to $1.1 million.  We will do the heavy lifting for your implementation of ASC 842 reporting capability on our lease management platform, many times at no additional cost over the base service fee, saving you thousands in accounting consulting fees and headaches. Your experienced lease administration executives are going to retire. Now is the time to outsource that function to a highly skilled and effective organization who lives and breathes leases.

Doug Tilson to Head Tenant Representation
Doug Tilson to Head Tenant Representation 1440 428 ASG

Asset Strategies Group (ASG) is pleased to announce the addition of Doug Tilson, who will lead Tenant Representation.

Mr. Tilson brings enormous experience in regional malls, off mall, flagship, and outlet venues in both re-structuring real estate portfolios and executing growth strategies. His in-depth experience in retail strategy will be a huge asset in helping ASG clients maximize the value of their real estate portfolios.

Mr. Tilson brings enormous experience in regional malls, off mall, flagship, and outlet venues in both re-structuring real estate portfolios and executing growth strategies. In his role as Executive Vice president of Real Estate for Express, Mr. Tilson set the strategic direction for store locations and real estate strategy across the U.S., Canada and Puerto Rico. He also oversaw store design and construction, as well as real estate legal matters. His in-depth experience in retail strategy will be a huge asset in helping ASG clients maximize the value of their real estate portfolios.

Prior to his tenure at Express, Mr. Tilson was Senior Vice President of Leasing at Steiner & Associates, a commercial real estate developer that specializes in new town center concepts. From 1999 to 2005, he was Senior Vice President of Real Estate for Tween Brands and also held several senior real estate positions with Limited Brands.

A graduate of The Ohio State University and Capitol University Law School, Mr. Tilson is a member of the ICSC Board of Trustees and brings deep developer relationships and extensive market knowledge.

ASG is thrilled to welcome Mr. Tilson to our team.

How Individual Cities Can Influence Real Estate Investment
How Individual Cities Can Influence Real Estate Investment 1440 428 ASG

Numbers drive virtually everything, especially in real estate. And no investor wants to establish real estate property if the prospects of success are poor. Before committing to any property development, a real estate investor wants data on business growth rate, the resilience of the economy, population size, tax incentives, and other components that are a piece of any retail real estate lease or contract. However, as the landscape of consumer demands becomes more personal, as well as socially mindful, individual cities are now defining the retail real estate market.


Economic size is only one factor.

Global leaders, such as London, New York, and Tokyo, are noteworthy cities in which to invest. Their sheer size and booming economies result in ambitious growth, accounting for a sizable percentage of global real estate investments. However, the markets are known to be cyclical. It’s a fast-paced environment with a sink-or-swim mentality, and not every business is capable of thriving.

Although large cities are attractive to real estate investors, they are far from the only option. Smaller cities captivated by innovation or driven by a niche product offer their own paths to success. Retail real estate is no longer limited to who can open the biggest store or have multiple locations throughout a city. The traditional approach to dominating the market has shifted, and consumers crave something more. Columbus is often the epicenter of retail.


Demographics and local interests matter.

Numbers drive virtually everything, especially in real estate. And no investor wants to establish real estate property if the prospects of success are poor. Before committing to any property development, a real estate investor wants data on business growth rate, the resilience of the economy, population size, tax incentives, and other components that are a piece of any retail real estate lease or contract. However, as the landscape of consumer demands becomes more personal, as well as socially mindful, individual cities are now defining the retail real estate market.


Individual cities have a unique competitive edge.

The cities that are most successful are those that have a distinctive reputation. Size does matter, but it certainly isn’t the only stimulus for achievement in retail. The enterprising mindset of the city itself, regardless of industry, will drive the innovation and unique experiences that consumers want. Peer groups have a significant influence on how a city grows and the retail that thrives, ranging from tourist hubs to entire neighborhoods driven by sustainability practices.

It can be challenging to balance efficiency and innovation, but different cities will demand completely different stores and retail strategies. What functions well in New York City is not guaranteed to launch similarly in Tokyo. A flagship store may do well in the suburbs of Chicago but sink completely in the neighborhoods of Toronto. The demographics of an area can be so specialized that two stores within the same city limits cannot market themselves the same way. Retail real estate must spend less time defining who they are and more time strategizing how they fit into a city’s existing strengths.

6 Tips to Generate Customer Loyalty
6 Tips to Generate Customer Loyalty 1440 428 ASG

In today’s retail landscape, the loyalty of your customers is one of your greatest assets, particularly as you leverage an efficient omnichannel strategy. Research has shown that customers that make their purchases both online and offline have lifelong value, but what is it that attracts consumers and keeps them coming back for more? These tips will help businesses maximize their return on marketing efforts and build a brand that consumers will love.


1. Stand for something

Consumers want a transparent brand that boasts a sense of community. They’re looking for brands that back, focus on providing ethically sourced products, and demonstrate how they value employees. Your consumers want to know that you treat people and the environment right. Your brand should have a stance that consumers can get behind and feel good about when they make a purchase.


2. Do more

Excellent customer service should be obvious, but many retailers fall short in this area. Sometimes return and exchange policies don’t resonate with the needs of the customers or HR isn’t hiring the right people for the available positions. Your culture should create an environment in which the people working at your business are driven to help the customer – and empowered to do so.

Not only should you meet your customers’ expectations, but you should exceed them whenever possible.


3. Emotional Connection

We’re well beyond the time where encouraging a sign up for your email marketing and customizing your newsletter with coupons will even deliver ROI. Today’s customers expect to be surprised and delighted; they want a reason to come to your store – and that reason is highly-customized, hyper-focused, and experience-driven.


4. Create convienience

We’re well beyond the time where encouraging a sign up for your email marketing and customizing your newsletter with coupons will even deliver ROI. Today’s customers expect to be surprised and delighted; they want a reason to come to your store – and that reason is highly-customized, hyper-focused, and experience-driven.


5. Encourage conversation

Human connection is what drives retailer, regardless of innovations like AI and machine learning. Consumers love technology, but they still love being heard by a person. Ask for reviews online and encourage both positive and negative feedback from existing loyal customers. What attracted them to your business and why do they keep coming back? Such information could drive future marketing campaigns. Don’t hide behind chatbots or self-help checkouts. Your consumers want access to every aspect of retail, both robotic and human, and an honest conversation will offer better insight than any focus group.

6. Loyalty Programs

Rewards are the driving force of many purchases, like a simple points system or the classic McDonald’s Monopoly game. Loyalty programs encourage repeat visits to your store, giving you a chance to impress your consumer base even after a promotion is over. Give customers a reason to visit your business beyond the usual daily engagements.

A loyal customer is also your best marketing strategy, because they will speak highly of your brand to friends, family, and across social media. There are no limits to the benefits of a loyal customer, and with retailers fighting over consumers, engagement is a top priority. Generating leads for sales is important, but not nearly as crucial as gaining the trust of repeat customers. It costs more to attract new customers than it does to retain loyal ones. When you already know how to connect with your target consumer base, it significantly reduces marketing costs. It’s easier to promote new products to those that already love your business.

Reinventing the Modern Mall
Reinventing the Modern Mall 1440 428 ASG

Drive through any city in the U.S., and you’ll see a mall with too much empty space. Retailers that have traditionally been the anchor store in malls across the country – Sears, Macy’s, BonTon – are closing and going out of business. While many analysts are claiming the mall will become a thing of the past, malls can survive by embracing innovation, reinvention, and evolution.


New Lease Structures

While the Hudson in New York City may end up being the prototype of the future, what I’m seeing in malls across the country is a willingness to forgo the traditional lease. Shorter-term leases, leases with no percentage of sales, and leases with flexible terms and space requirements are helping landlords keep the space occupied. The successful mall of the future will redefine how they occupy space as well as how they keep it occupied. “[F]or many malls, their revenue models are going to change entirely,” explains Storefront Chief Executive Officer Mohamed Haouache.

Pop-Ups and Kiosks

Modular tenancies are growing in popularity, “providing digital native brands with the opportunity to rent space without the typical lengthy commitment.” And according to Lexology, “Pop-ups allow malls to bring in new, innovative, and buzzworthy brands at a time when malls are in need of a boost. Some malls are even dedicating permanent spaces, formerly occupied by traditional brick-and-mortar retailers, to various rotating pop-ups.” The successful mall of the future will be flexible and creative in how the space is used.


Demographics and local interests matter.

Numbers drive virtually everything, especially in real estate. And no investor wants to establish real estate property if the prospects of success are poor. Before committing to any property development, a real estate investor wants data on business growth rate, the resilience of the economy, population size, tax incentives, and other components that are a piece of any retail real estate lease or contract. However, as the landscape of consumer demands becomes more personal, as well as socially mindful, individual cities are now defining the retail real estate market.


Individual cities have a unique competitive edge.

The cities that are most successful are those that have a distinctive reputation. Size does matter, but it certainly isn’t the only stimulus for achievement in retail. The enterprising mindset of the city itself, regardless of industry, will drive the innovation and unique experiences that consumers want. Peer groups have a significant influence on how a city grows and the retail that thrives, ranging from tourist hubs to entire neighborhoods driven by sustainability practices.

It can be challenging to balance efficiency and innovation, but different cities will demand completely different stores and retail strategies. What functions well in New York City is not guaranteed to launch similarly in Tokyo. A flagship store may do well in the suburbs of Chicago but sink completely in the neighborhoods of Toronto. The demographics of an area can be so specialized that two stores within the same city limits cannot market themselves the same way. Retail real estate must spend less time defining who they are and more time strategizing how they fit into a city’s existing strengths.

Mixed-Use Projects Benefiting Real Estate
Mixed-Use Projects Benefiting Real Estate 1440 428 ASG

Consumers want a better shopping experience, but that doesn’t mean they expect a ground-breaking demonstration or innovation every time they step foot in your store. As the industry shifts, mixed-use projects are significantly benefiting retail real estate. Rather than a retail-only development, large properties are being used for different purposes that reach consumers across the spectrum. Rather than a typical mall, usage is shifting to “live-work-play” design.


Mixed-use projects broaden the shopping experience.

Retail real estate no longer revolves around discrete destinations, such as a supermarket or large gym that typically stands alone. Malls that are losing their anchor stores are focusing less on a replacement and more on incorporating movie theatres, gyms, and grocery stores that were never the traditional choice. By involving different kinds of retailers, the shopping experience is broadening considerably. Mixed-use projects offer a one-stop destination where consumers stay longer, spend more, and have a better experience in the process.


More efficient use of retail space.

Brick-and-mortar locations are using AI to streamline inventory management, identify the best locations for warehouses, and reduce inventory to hold less in-store. Mixed-use projects benefit everyone by capitalizing on the available space more effectively, reducing overhead costs, and leveraging foot traffic to other retailers sharing the space.


Retail lease terms and regulations are being reconsidered.

Retail lease terms are shifting as physical stores evolve, and these changes are often in favor of the retailer. And as laws change, regulations are being updated as well. Microbreweries are of considerable interest to consumers, and the legalization of marijuana offers a new frontier for retailers that have been prohibited from doing business in certain retail spaces. Mixed-use projects that house different types of retail may see common features of the standard retail lease no longer be relevant. Pop-up stores are becoming more prominent, eliminating percentage rate, for example.

The retail industry is undergoing multiple changes, but the opportunities for success are increasing every day. There are several ways to do business, but traditional methods of retail are not a part of the new puzzle.

6 Trends That Will Shape Retail in 2019
6 Trends That Will Shape Retail in 2019 1440 428 ASG

Predictions in retail the last few years have been grim. Experts have sworn retail Armageddon was upon us, and many touted the downfall of brick-and-mortar stores. However, recent quarterly statements from major retailers have been telling a different story. E-commerce has made a statement, but physical locations are evolving, not vanishing. 2018 has laid the foundation for the changing wave of retail, and these trends are sure to make a statement in 2019.


1. Data will reign

Consumer data is precious. Success in retail lies in smartly predicting consumer demand, and data is the key. Not only will data analytics boost sales, but it will offer personalize the shopping experience and help retailers understand customer behavior. This information will guide everything from marketing strategies to products and services, and data will continue to play a major role in all parts of retail.


2. Physical and digital will coexist

Brick-and-mortar locations are still standing, and despite the popularity of e-commerce platforms, online sales do not exceed in-store sales for the typical retailer. 2018 has demonstrated that waging a war between the two is not the path to success, and that communication between both methods of retail is paramount. Consumers want it all, and in 2019 the customer will be more than always right. The customer is an individual, and they’re shopping for an experience instead of a product.

3. Social commerce will take center stage

Platforms like Instagram and Snapchat are taking advantage of the audience that they captivate multiple times daily. Social commerce is leveraging social media platforms for both likes and purchases, and it’s a genius method of retail that will become more prominent in 2019. Social commerce buys in to the demand for consumer experience and interaction, while also offering goods and services that are incredibly convenient.


4. Click-and-collect services will emerge

In 2018, it was made clear that shipping was pivotal to consumers. If shipping wasn’t free or immediate, buyers weren’t interested. Retailers are expected to absorb the full costs of shipping and returns, and it’s hurting profit margins. To battle the rising shipping costs, click-and-collect services will emerge in 2019. The option to collect at stores will ease the burden retailers are facing and still offer consumers convenience with perks like curbside pickup.


5. Sustainability will be the norm

This trend gained traction in 2018, but it is guaranteed to hold even more weight in 2019. Consumers expect their products to be ethically sourced and their services to offer more than what can be purchased with dollars. Consumers want to know that a retailer is doing to reduce their footprint and if they support a specific cause. A retailer who hesitates to do more than increase their profit margins will see a decrease in consumer loyalty.


6. Omnichannel strategies will launch interactive customer experiences

The ultimate consumer experience is what every retailer is desperate to capture, and with technological advances and an omnichannel strategy, 2019 will offer new possibilities. Artificial intelligence, virtual reality, and augmented reality will become more than just buzzwords. They will exist in interactive aisles that communicate directly with individual consumers, blending all methods of browsing and purchasing. It’s a competitive market, and nothing but innovation in retail will be seen moving forward with an omnichannel approach.

Physical retail is not collapsing by any means, and despite the strength ecommerce has shown, this platform is not yet ready for a complete takeover. It’s unlikely that any online platform will be able to exist without a physical presence, and vice versa. The trends of 2019 forecast growth for the changing industry, all with consumers closely watching and waiting for the next creative retail experience.

The Must-Have Checklist for A Successful Pop-Up
The Must-Have Checklist for A Successful Pop-Up 1440 428 ASG

Customer experience is the new currency, and retailers are pressured to capture the interests of consumers. Brick-and-mortar merchants are finding new ways to promote their brands through omnichannel strategies, proving that physical locations are far from obsolete. Of course, knowing whether to open a new location can be daunting in the face of so many store closures. Yet, there are several businesses growing digitally and physically, with booming sales from physical and online stores.

It can be tempting to launch an initiative that involves new retail real estate, but your confidence in a long-term retail space may be lacking if you aren’t sure how the market will respond. As a means of testing retail marketing strategies, many businesses are turning to pop-up stores to introduce innovative products, new designs, and fresh branding.


What is a pop-up store?

A pop-up store is a temporary space fashioned for the purpose of generating awareness and excitement about a retailer’s latest enterprise. Costs are usually settled up-front, and retailers typically seek busy areas that are prone to heavy foot traffic. It is significantly less expensive than launching a full store, and if implemented correctly, can result in higher sales and customer loyalty even after the pop-up has closed. However, there are some key details to which retailers must pay attention, to help ensure success when establishing a pop-up.


The Checklist

□ Have a clear purpose – If there is nothing new or exciting about your brand, reconsider your choice to launch a pop-up. Consumers won’t be drawn to a store that lacks novelty. Know your exact purpose for launching a pop-up and keep it simple. Don’t try to launch too many creative ideas at once.

□ Don’t play it safe – The entire premise of a pop-up is the ability to take a risk without the potential for too much loss. This is the moment for retailers to be enterprising as they assess their target audiences. Data analysis should drive your reasoning, but to revolutionize your business, you must step outside your comfort zone.

□ Aim for high foot traffic – A pop-up store should always be placed in a high-traffic area. The time you have to gain attention is limited, so visualization is key. Your pop-up should be designed to draw in people, but you must go where consumers are.

□ Invest in the right marketing techniques – A pop-up is not a permanent location, but marketing techniques should be driving consumer interest before, during, and after the pop-up premiere. Create excitement through local marketing strategies and use other channels to build interest.

□ Emphasize the experience – The consumer is less concerned with what you’re selling and more curious about the inventive experience that your pop-up can provide. Engagement should be your top priority, whether your tools are interactive kiosks or charming professionals. Go above and beyond that which a traditional brick-and-mortar location is capable and use the small space and limited time to your advantage.

□ Capitalize on social media – Retailers should be focused on engaging with people and generating a buzz. Create Twitter hashtags and Snapchat geofilters. Launch a discussion on Facebook or give followers the opportunity to pose for Instagram. Encourage those who are drawn to your pop-up to share their experiences on social media and spread the word of your amazing brand.

Any retailer can take advantage of a pop-up store. Regardless of business size, there are incredible benefits to this short-term physical location. There is no right or wrong way to implement this strategy, if your message to the consumer is clear. Creativity is what you’re aiming for, and it is one of the most cost-effective and lucrative ways to promote your brand. The future of retail still exists within physical locations, as long as every enterprise is driven by all channels available to you.

10 Tips to Negotiate a Retail Lease in your Favor
10 Tips to Negotiate a Retail Lease in your Favor 1440 428 ASG

Where you establish your next brick-and-mortar store will significantly impact your retail profit margins. There is no doubt that a poor location leads to slow foot traffic, bottoming sales, and store closures, but even an excellent location does not guarantee success. There are other factors to consider, and one that should be discussed as diligently as location is the retail lease. These ten tips will help you ensure that a retail agreement is in your favor.


1. Determine your budget

Do not try to stretch your finances too thin in the hope that sales will make up for lost margins. Your budget should be non-negotiable, and your discussions should only be with landlords that have spaces within your price range.


2. Separate your wants from needs

Budget may not be a negotiable aspect of the agreement, other than trying to lower the rent, but you can determine your retail space needs in advance, as well as those items on which you can compromise. Have a few bargaining chips ready and understand that while it would be nice to have everything on your list, some items may not be necessary.

3. Decide on the desired lease length.

Landlords have traditionally preferred long-term leases, offering cheaper rent in exchange, but with the influx of pop-ups and the demand for short-term leases, retailers have more flexibility. There are options to meet short- and long-term leases, so decide before the negotiations what term length your business will thrive on.

4. Have options

You should never put all your eggs in one basket. It is completely acceptable to negotiate more than one lease, even if you only plan on opening one location. This gives you an extra bargaining tool, as well as the ability to walk away if negotiations are not in your favor.

5. Prepare to barter

Never accept the initial price offer from the landlord. The asking price is deliberately high because they expect retailers to aim for a lower price. Start low with your initial bid and work towards a middle ground.

6. Beware phantom space

Measure the square footage of the retail space that you are considering for rent. Previous renters may have rearranged the space to suit their purposes, changing the available square footage, or landlords could be exaggerating is the size of the space offered.

7. Allow for mistakes and changes.

Measure the square footage of the retail space that you are considering for rent. Previous renters may have rearranged the space to suit their purposes, changing the available square footage, or landlords could be exaggerating is the size of the space offered.

8. Push certain responsibilities to the landlord

There are matters of renting a retail space that should stay in the hands of the landlord. A broken HVAC system can drain your finances considerably, as well as costs associated with whatever adjustments you must make to the space. You can incorporate a fixturization period into the lease, where the landlord waves rent and utilities for a month in exchange for creating an updated space.

9. Consider the perks

Once you near the end of the retail lease negotiations, you can return to the wants that you set aside from the needs earlier in the discussions. Employee parking and Wi-Fi can be expensive and can be arranged as free perks in the lease agreement.

10. Ask for legal assistance

A poorly negotiated lease can drain your business financially. When in doubt, never hesitate to solicit the skill of a retail real estate expert. They can ensure that the final lease offers the most opportunity for your business’s success, and that there are no loopholes that you could get caught in. Location is important, but the retail lease agreement is crucial to how well your business fairs in the space provided.

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