A blog on issues affecting Australia's newsagents, media and small business generally.

This ABC story about Pearcedale Hardware is a must-read story for all small business retailers and every Australian who cares about or relies on small business retail

Pearcedale Hardware is closing today and the ABC has published a deep-dive into why:

The cost of doing business

Published

For many residents in the quiet township of Pearcedale, the local shops are the heart of the community.

On this weekday, the complex an hour’s drive south-east of Melbourne is beating strong.

Shoppers exchange cheerios across the car park and small talk about the impending rain as they bustle, car keys in hand, between the 13 shops.

The shop was their retirement plan. They hoped to rebrand it and work towards selling it, believing they could get a few hundred thousand dollars.

But they say things began to look shaky when their lease lapsed in 2019, and the owners wouldn’t sign a new agreement with them.

They were on a month-by-month arrangement, when in May this year their property agent emailed them a new leasing agreement.

“[I was in] disbelief. I couldn’t believe what they were asking,” Adrian says.

The landowners were tripling the rent — from $29,687 a year to $88,638 a year.

Be sure to read the whole story.

There are many good landlords out there who go above and beyond for their small business tenants. There are also plenty of landlords who suck.

This story is a reminder that we small business retailers sign our leases, accepting the terms and conditions, accepting the risk.

When a lease goes to month-to-month, that’s what it is. We need to manage our business with that expectation and do our own planning, rather than relying on a decision from the landlord.

I appreciate it can be difficult and challenging. But, it’s best we expect the worst and plan for it, to protect ourselves and our business as much as we can … because, too many landlords do suck.

Retail is fundamentally changing in ways we can see and, more importantly, in ways we cannot see. We have to be as far ahead of that curve of change as we can be. This means disrupting your own businesses.  Running a shop with one prime source of income (the shop) is an out of date model. we seen to diversify as to what people buy, how they buy and the locations they buy from in the retail world today. This approach spreads the risk.

Back in the day, opening the front door of your local shop was the key marketing activity. Not now. Not for many years.

I have been in the situation of the folks at Pearcedale Hardware, facing a massive rent hike. I said no thanks. I am lucky to have a diverse business such that closing one shop would not hurt too much. But … I evolved the business to be that, to not rely  on one location.

I appreciate many local small business retailers don’t feel they can do that due to capital, local situation or other factors. But, there are ways to insulate your business from the impact of a massive rent hike. The time to seek those ways out is long before you need to … and that is the core point I’d make today.

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  1. Steve

    I think we will start seeing more and more of these stories. Whilst shopping centre rentals are under pressure the opposite is probably true for high street stores. Many shops have been the recipients of rental abatements and deferrals due to COVID with all this coming to an end on January 13 at least here in NSW.
    At the same time demand for high street stores is probably increasing in key regional locations and landlords are expecting rent increases. Interest rates are low and high street commercial properties are selling quickly and at record prices. The secret is to recognise the risk and negotiate early. Month to month tenancy is a definite red flag and not a risk I would be prepared to take unless I was ready to walk away from my business.

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