Mace Group

Matthew Turner of Mace Retail looks for the recession's silver linings in retailers' property portfolios and counsels early readiness for the coming recovery.

Nobody would wish for a recession but faced with hard questions over priorities and an increased focus on costs retailers would do well to take a long hard look at their property portfolios and optimse its value to the business. After all, property often represents a retailer's second biggest cost after staff, and with an open mind there are definitely possibilities for consolidation, development, cost saving and rationalisation. Taking advantage of this now will confer competitive advantage on the visionary businesses for when the recession recedes.

Booms tend to foster sloppy habits. Growth for retailers often meant making the arduous decision about whether to have 3 locations in a single town or just 2. With expansive consumer spending retailers spent nearly 15 years getting out of the habit of being self-critical and analytical about which of their outlets produced the footfall and profit for a truly sustainable business. From coffee chains to lunch purveyors, clothing brands to footwear companies many adopted the notion that just being visible on every street corner was significant in itself, sometimes achieving ‘mind share' rather than market share.

Tough but intelligent choices
With the boom well and truly over retailers need to re-establish a property strategy, rather than sit on their liabilities. We've found that retailers, whilst they may possess or lease a large amount of property as a business, they are often are too core business focussed to stay on top of the latest innovations to get the best out of their portfolios. That's not core business, so why would they really want to get involved?

At Mace Retail we've helped a variety of major high street brands to really stress-test their ownerships and leases to work out how best to set profit against performance, optimise the value in their estate. And here's the first silver lining, with the property market under such generalised pressure leasers are more flexible than ever, making the time opportune to exercise a little muscle and get the best deal for your business.

Additionally, the fierce competition for consumer spend makes it certain some brands will disappear or merge, this in turn is providing more supply of retail space, again pushing prices down. For a business with a strategy for upturn readiness, it's critical to make the right leases and acquisitions now when the market rates are favourable. A major food retailer might pick up 100 new branches from a previous competitor at a bargain price. But it will take a sophisticated strategy to analyse and identify where to prioritise rebrands and refurbishments to leverage the potentially best performing outlets ahead of the others.

It all adds up to opportunities to grow at lower costs of acquisition, construction and occupation, fitting a business with medium term competitive advantage.

The price of cost cutting
It helps to have a knowledgeable and supportive partner in these rather unprecedented times. There is after all no point spending money with external consultants if the costs are not recouped by further efficiency. At Mace Retail we always make a big commitment to the people we work for but in the current economic climate we've been sensitive to retailers' need to cut costs without destroying the value of the work we deliver for them. We've engineered an intelligent balance between cutting our costs sustainably and maintaining quality of service. We undertake to provide our service at no extra net cost to our customers.

The partner element is critical in allowing businesses to be truly radical and innovative when regarding their own holdings. Mace Retail saved one of the big 4 foot retailers in the UK over £30m in our first year of working with them through a robust delivery model and a market tested supply base.

Timing is all
Accepting that times are hard but that you and your competitors are all in the same boat is the vital first stage for beating the recession. But making changes and improvements and optimisations to your property has to happen at the right time. Once a full quarter of growth is recorded again and the recession's end is in sight some fairly predictable things occur in the market. Prices go up, for rents and acquisitions, and the supply of services/materials to make the improvements needed shortens. For a nervous business which has just about survived the recession this amounts to emerging into the daylight only to find the world already back in battle, with most players in the marketplace having the same eureka moment, sending the price of upgrades right back up.

Better then to put sensible and sustainable programmes of property upgrade, rationalisation or consolidation together now, whilst the numbers are favourable. By getting the supply chain in place now, the retailer will be ready to align their business effortlessly with the improvement in consumer spending and behaviour. For retailers a measure of just-in-time procurement is key to their ability to meet market demand. Without effective and strategic management of the supply chain and procurement required retailers won't be able to do this. A case of just-too-late.

Overdue decisions
For many businesses, particularly retailers who appeared in the last 15 years, the wake up call posed by the recession has highlighted other issues, problems perhaps dormant to this point. Rapid growth often meant a piecemeal approach to planning and delivering new branches, not necessarily getting the best deal by taking a fully programmatic approach where all suppliers are challenged to give the best value for the client. Mace Retail has been appointed to step in and provide this kind of leadership on property and clients are often surprised, and always delighted, to see the savings they can make when roll-outs or refurbishments or construction is handled in a fully joined-up way.

As is hopefully now clear, leading retailers will take advantage of these unsettled times to carry out some powerful strategic decisions around their property holdings. These will be the businesses that we see thriving into the twenty-first century, retailers with the business acumen to grow through a downturn and prepare for the upturn. For Mace Retail it's business as usual - we do our best work taking the time to innovate around our clients value proposition, finding ways to drive best value for them, in good times and bad.

Talk to Mace Retail today:
matthew.turner@macegroup.com
www.macegroup.com/retail