high street retail

I was asked recently why we see fewer newsagencies in shopping centres in Australia. We do, and there are reasons. I made a video on this, and here is the written version for those who prefer to read.

Shopping centres are expensive places to trade. You pay for the space, you pay mandated cleaning costs for the centre, and you pay a marketing levy for promotion that may bring nothing to a newsagency. In one centre, our marketing contribution was around $45,000 a year. We got no measurable value from it. None.

Then there is the lease itself. A typical centre lease includes a permitted use clause setting out what the business can and cannot sell. I can speak from experience here. In one of my newsagencies, in a major Melbourne centre I will not name, we were permitted to sell gifts and toys. We ranged Halloween product. The landlord claimed it was outside our permitted use. We said they were toys and party goods. They responded with a legal challenge, and under that lease, fighting meant paying their legal costs as well as our own. It was not worth it. We ended up exiting the centre.

In a centre, your trade also relies on the centre performing, and that is out of your hands. Majors come and go. Lose two anchor tenants from your end of the centre and your section can be quiet for months while the landlord sorts it out. When that happens, a small business retailer does not get heard the way a national chain tenant does.

If a newsagent told me they were thinking about going into a shopping centre, my first question would be: why? What do you expect to get that a high street location cannot give you? Yes, the high street has less foot traffic. But outside a centre you control what you sell, when you open, your own marketing and your own costs. Inside, the landlord can influence all of it, and they generally want you trading under a brand, looking like a franchise. I do not believe the franchise model has a future in our channel. Cookie-cutter retail belongs to the era when magazines, papers and lotteries were strong. The most interesting newsagencies today look nothing like each other, and that is the point.

Landlords will not love this post. I have held enough centre leases to speak from genuine personal experience, and this is my opinion.

There will be some in our channel who disagree with me. I’d ask them, what’s their skin in the game? Do they have a shopping centre business? Do they own a group that favours shopping centre settings? Do they make money from shoplifts landlords require?

There are plenty of vested interests in contemplating this topic, until you’re out and not reliant on anything shopping centre related. Then, you gain perspective, I think.

If you do see a shopping centre newsagency, support them, because they need it. But the innovation in our channel is happening outside the centres, where a retailer is more free: more flexibility, more control, more of yourself in the business.