Category overkill a major issue
Category overkill has become a major issue in shopping centres as landlords strive to fill vacant stores with less regard to a balanced tenancy mix, a footwear retailer has told Inside Retail PREMIUM.
John Charlton, CEO of Adelaide-based Spend-less Shoes, said one major shopping centre has 33 specialty footwear stores, two department stores, and three discount department stores selling footwear.
“If that is not enough, many fashion retailers are also now stocking a range of footwear. What’s happened to the usage clauses in leases?” Charlton asks.
“Landlords are not paying enough attention to tenancy mix in shopping centres now. It is lazy leasing and a quick fix approach to vacancies.
“We have had landlords put in competitors saying it won’t affect us because they are not our market, but category overkill is damaging centres and making it difficult for many retailers to survive.”
Charlton said there is frequently a problem with new centres and extensions that are not fully leased.
“You strike a deal with the landlord for a tenancy and then find a competitor comes along later and gets a better deal because the focus is on filling a vacant tenancy rather than a balanced and effective tenancy mix.”
Notwithstanding the difficult retail market of the past 12 months and competitive pressures in many centres, Spend-less has posted solid growth and continues to judiciously expand its store network.
Charlton says the chain opened seven stores in 2014, but also closed several underperforming outlets.
It is now the largest family footwear chain in Australia with 175 stores nationally.
The retailer is still looking to expand where it can strike the right deals.
“There are not as many opportunities now but we are planning to open four or five new stores in the next year while possibly closing as many as four in centres where the category has been overkilled.
“We are not that proud as to stay and lose money for the sake of it. We need the stores to be profitable, and keeping costs down is a major focus for us at all levels of the business.
“We actually have a MACS award for staff. It stands for ‘Mean As Cat Shit’ and it just ensures that everyone is focused on costs and productivity.
“Apart from occupancy costs, staffing costs have increased significantly in recent years and we have been working very hard to balance wages and hours with our commitment to a service standard that provides us with a competitive advantage.
“We have had to be much more disciplined in rostering staff and more focused on motivating and supporting staff to maintain productivity.”
The chain, like all retailers, is facing higher costs for stock as a result of the lower Australian dollar.
Spend-less is negotiating harder in China where prices are rising alongside the falling buying power of the dollar.
“We all have the same problem with buying, but we have been able to keep our costs down on the basis of our volume.
“We are adamant that we won’t lower quality. The discount department stores are aggressive on price but they don’t always keep the quality up.”
Charlton said Spend-less plans to be around for the long term, and while the past few years have been challenging, the chain has invested millions in upgrading technology both at store level and warehouse.
“In some ways, it was a ballsy decision, and in the past year we sometimes wondered whether the sluggish results were us or the market.
“We are now starting to see the benefits from that investment with better information and management of the business.”
Sales have been better in recent weeks, with back to school sales providing the best results since the Federal Budget last May.
Charlton said online sales are up significantly, with growth of around 98 per cent.
“We expect to do better this year, aided by our new technology and programs that we have implemented to support our staff.
“We are pleased with the growth but our value for money positioning tends to limit online sales a little,” he said.
This story first appeared in Inside Retail PREMIUM issue 2033. To subscribe, click here.