Commercialisation: The Landlord's view
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Sean delivered this presentation at ICSC SPREE 2015 event, looking at how Asset strategies and commercialisation strategies should be better aligned, 8 questions to ask yourself and a look at some of the best examples
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Commercialisation: The Landlord's view
- 1. Commercialisation: The Landlord’s view Velocity . n Direction and Magnitude
- 2. 1. The value of experience Velocity . n Direction and Magnitude
- 3. 3 SATISFIED CUSTOMERS SPEND MORE 60 70 80 90 100 110 120 130 140 5 4 3 2 1 IndexVsAverage Overall Shopping Experience Customers who have a 5/5 shopping experience spend 23% more on retail than those who rate it 3/5 Velocity . n Direction and Magnitude
- 4. 4 SPEND INCREASES BY NUMBER OF SHOPS VISITED 20 40 60 80 100 120 140 160 180 1 2 3 4 5 IndexvsAverage Shops Visited As would be expected, the more shops visited, the greater the spend Velocity . n Direction and Magnitude
- 5. 5 DINING CUSTOMERS SPEND MORE 43%+ Shoppers who use catering spend 43% more on retail than non-catering users Retail only Retail and catering Velocity . n Direction and Magnitude
- 6. 6 GOOD CHOICE OF CATERING INCREASES RETAIL SPEND 60 70 80 90 100 110 120 130 140 5 4 3 2 1 IndexvsAverage Choice of Catering Options When a customer likes the catering line-up they spend 13% more on retail Velocity . n Direction and Magnitude
- 7. 7 MATCHING THE TENANT MIX TO THE CUSTOMER 60 70 80 90 100 110 120 130 140 5 4 3 2 1 IndexvsAverage Choice of Shops Knowing your customer and predicting what they want boosts average spend Velocity . n Direction and Magnitude
- 8. 8 AVERAGE SPEND BY DWELL 0 20 40 60 80 100 120 140 160 IndexvsAverage Dwell Time Bands The longer in a centre the greater the spend Velocity . n Direction and Magnitude
- 9. Common comments Hawkers are off putting I don’t like the atmosphere Too busy to have so many stalls Why would I want my teeth whitened in front of everyone? Not interested in signing up for XXX!!! Some of the temporary brands in the mall are tacky Velocity . n Direction and Magnitude Christmas decorations, temporary retail are awful, they devalue the centre
- 10. 2. Valuing Commercialisation Velocity . n Direction and Magnitude
- 11. - Most MRBP was valued within 50-100 bps of a traditional lease - Large assets treated the income at the same yield as a traditional lease - Turnover (once proved) was treated the same as MGR for valuation of an asset - 1 year lease was sufficient to prove value Velocity . n Direction and Magnitude Key insights on Valuing Commercialisation
- 12. 3. Questions to ask yourself Velocity . n Direction and Magnitude ?
- 13. 1. Do you know how your asset values your revenue? 2. Does everyone understand the value of your ‘tenants’? 3. Do you have a MRBP Strategy? 4. Is it aligned to the Leasing & Asset strategies? 5. Do you measure what effect your activity has on the experience in the centre? 6. Do you match the mix to the audience 7. Are your centre & marketing teams aware of the Brand experience plan to maximise retailer opportunities? 8. Is your activity always ARC? Velocity . n Direction and Magnitude
- 14. Is your activity A.R.C.? APPROPRIATE RELEVANTCOMPLIMENTARY Velocity . n Direction and Magnitude
- 15. 4. Examples of how MRBP can increase the value of an asset Velocity . n Direction and Magnitude
- 16. 4. The OOH Advertising market Velocity . n Direction and Magnitude
- 17. UK Digital Outdoor Revenue Source: Outdoor Media Centre 11 20 26 30 42 66 74 101 128 182 214 272 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 £m Velocity . n Direction and Magnitude
- 18. UK Digital Outdoor Revenue as a Share of All Outdoor Revenue Source: Outdoor Media Centre 0 5 10 15 20 25 30 35 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 % Velocity . n Direction and Magnitude
- 21. Mall Kiosks
- 29. Pop-Up’s & Temp Lets REVENUE EXPERIENCEMITIGATION Velocity . n Direction and Magnitude
- 35. Development Velocity . n Direction and Magnitude
- 36. - Build into appraisals from outset - Take retailers on the journey….. - Which requires clear strategies and guidelines from the outset Finally Stop calling it commercialisation!!!! Velocity . n Direction and Magnitude
- 37. SeanC_Marketing Sean@velocitymarketing.eu Thank you Velocity . n Direction and Magnitude
Editor's Notes
- Hello, my name is Sean Curtis and I am Marketing Director at Land Securities I am not an asset manager, a portfolio director, a valuer or an agent, but I am responsible for the vision, leasing and launching of all our new developments, including all Mall Retail and Brand Partnerships I was asked to talk about the landlords view on commercialisation, so I commissioned some research but also, more importantly I asked the opinion of Asset Directors of some of the countries largest malls, plus a number of key people in this sector.
- The presentation I am going to take you through today is split into 4 sections; 1. The value of Experience to the consumer and the impact Mall Retail and Brand Partnerships (MRBP) can have How the industry values commercialisation (in both senses of the word) 8 questions you should ask yourselves Best in class examples and the
- I commissioned some research with one of the country’s leading research agencies in retail destinations, CACI to look at whether there was any correlation between the quality of experience in a mall and the spend they enjoyed Bear in mind, these are against a relatively flat outlook for overall non-food retail sales for the next 3-5 years As you would expect, happier shoppers spend more
- And again, as you would expect, the higher the number of stores you can encourage a consumer to visit, the greater the spend
- Interestingly, food has a huge effect on spend and this is I think one of the really benefits that MR&BP brings to an asset. Mall retail has consistently brought food innovation to malls for many years. Bubble tea, smoothies, frozen yoghurt to name just a few - It is an area where new operators are truly given the opportunity to trade, and, if carefully incubated, go on to expand. When consumers can grab something to eat or drink, recharge their batteries, they go on to spend more.
- And the better the variety, the better the fit with that locations’ customers, then the better the spend
- This is an area that I feel is currently polarised in our sector, some, like Westfield match the offer to the customer profile incredibly well, take Kuoni at Westfield London for example, and it absolutely can be accretive revenue, but, as we will cover later, not everyone gets it right, (or cares)
- Not surprsingly, the longer the dwell, the increased spend levels Put these factors together and you have a powerful opportunity to play a role in the asset’s strategy, by adding brands that match the consumers needs Incentivising customers to spend, which in turn promotes more spend Adding food that will tempt them to stay longer, refuel and spend more Imnprove the overall experience
- BUT, and this is a big BUT, these are the comments from CACI’s annual shopper survey about commercialisation. We will talk about ARC in a moment, which is how we approach MRBP So ask yourselves, do you run and hide when the survey is conducted or do you actively ask for questions to see Whether the mix of your retailers adds to the experience Are the brands right for the customers coming in Even ask the retailers if the mix is complimentary in terms of mix and location Then the approach starts to become aligned for the asset
- I asked a number of people who are responsible for the P&L of an asset and I was really surprised by the answers they gave , They said No longer a nice to have Fundamental, important revenue stream for any assets On a similar level of importance to a car park in terms of revenue contribution to the bottom line In short, they held the revenue in high regard BUT if there was one common complaint (apart from hawkers) it was that they didn’t FEEL the MRBP teams were aligned with the strategy for the asset, seen as “doing their own thing” sometimes at odds/at a tangent to the core business. IN THE AUDIENCE THIS DAY LESS THAN 10% KNEW THE VALUATION, OR YIELD OF THEIR ASSET
- You must be Be clear what MRBP adds to each of the key asset metrics of experience, dwell, spend And, I would argue, even return per foot as it may well be some of the most productive space 1. If you understand yield, you understand an asset director's mindset 2. Do you understand the rent for in-line space and do your colleagues understand your business, if not, why not educate them 3. Have you written and shared your strategy over 2-3 years and does the asset team sign it off (they should) - do they understand the turnover only elements such as experiential space or top-up elements like advertising? 4. Are you aligned? 5. Actively ask to be included in consumer satisfaction surveys 6. Understand your catchment to understand what they may want and where the in-line leasing may have gaps 7. Are you challenging marketing to be supporting your retailers as much as in-line retailers? – when was the last time they hero’d their products? Ran a promotion or did PR for you (think Christmas gift guide)? 8. Is it ARC?
- THERE IS TOO OFTEN A DANGER THAT WE ONLY CONSIDER OUR PART OF THE JIGSAW IN THE UK SPECIFICALLY, WE MAY FOCUS ON THE REVENUE, NEVER MEASURE THE EXPERIENCE AND IGNORE THE BENEFIT TO THE ASSET
- Be clear what MRBP adds to each of the key asset metrics of experience, dwell As well as the commercial numbers
- HEADLINE: Significant opportunity Growth in DOOH is providing landlords with the opportunity to increase asset value For example, we have one asset where a large scale screen has increased value more than any leasing changes could deliver without a major extension or refurbishment
- THERE IS A SIGNIFICANT CHANGE IN ASSET MANAGERS MINDSET WHEN YOU START TALKING THEIR LANGUAGE! I Won’t tell you exactly, but this is one of our top 15 tenants in Trinity Leeds, start talking like that and the leasing manager stops talking about hinderence
- Westfield are pioneering new formats, but also the location of large screens with experiential space immediately in front, to allow brands the chance to immerse consumers in an experience
- Food: MRBP has always been at the forefront of food innovation in malls and an area that consistently adds interest and experience to the consumer visit Trinity Kitchen, street food trend – created a new type of food hall where we swap out all the street food vans everyt 8 weeks to keep it fresh Mainstream Retail is often the poorer relation in kiosks and RMU’s and I think in UK has affected asset managers view of what they believe is comercialisation Often it is the retailing skills of the operator who needs support from the MRBP teams which is key Improved quality should add longer lease lengths and again add value to asset Kiosks can and should act as incubators (IMAGE: eg Bubble Tea, or xxx) Experiential Category growth by size and shape of the chain Brands are increasingly looking to take advantage of flexible seasonal space, much in the same way as the online pop-up players model
- ON A RECENT TRIP TO GERMANY I SAW SOME GREAT EXAMPLES OF INNOVATIVE MALL KIOSKS PROVED HOW THEY CAN CREATE INTEREST, AND ADD TO THE CONSUMER EXPERIENCE
- OR PROVIDE COMPLIMENTARY PRODUCTS IN INNOVATIVE WAYS
- TRINITY KITCHEN WE HAVE 6 KIOSK SPACES ALLOCATED FOR STREET FOOD VANS
- AS ITS ON THE FIRST FLOOR WE DRIVE THEM INTO THE BASEMENT, EMPTY THEIR FUEL, PUT THEM ON A TRUCK WITH A HOIST AND THEN LIFT THEM UP INTO THE FIRST FLOOR WE DO THIS EVERY 8 WEEKS TO CREATE INTEREST AND KEEP THE CENTRE RELEVANT AND INTERESTING KIOSKS CAN, AND SHOULD ACT AS INCUBATORS FOR THE ASSET – at TL we took Rola Wala from a street van to their first lease
- Often it is the retailing skills of the operator who needs support from the MRBP teams which is key (IMAGE: white rose before and after) Improved quality should add longer lease lengths and again add value to asset
- 6. Advertising a. Significant opportunity Growth in DOOH provides landlords the opportunity to increase asset value (PWks example) b. JCD SLIDE IN DOOH GROWTH c.
- THERE IS TOO OFTEN A DANGER THAT WE ONLY CONSIDER OUR PART OF THE JIGSAW IN THE UK SPECIFICALLY, WE MAY FOCUS ON THE REVENUE, NEVER MEASURE THE EXPERIENCE AND IGNORE THE BENEFIT TO THE ASSET
- Westfield are, in my opinion by far the market leaders in this space,
- A word on developing, as new schemes are delivered b. Less CA
- 2. So how can we be sure commercialisation adds value to the customer experience and the asset a. Ensure the activity is ARC Appropriate, Relevant & Complimentary b. Ensure everyone understands the value i. Do you know where your commercial partners rank in importance to an asset? How do they compare with your inline tenants? ii. JCD is xth tenant in Trinity, everyone knows this c. Stop calling it commercialisation Lets look at some examples by category 5. Pop-Up a. key area in delivering asset value i. Rates mitigation and revenue – an area that leasing often ignore ii. IS THIS SAME IN ANY OTHER COUNTRIES FOR RATES? b. Adds to experience c. Requires co-ordination with Leasing and asset team d. IMAGES: Westfield • The whole event is really about best practice and getting the delegates to understand the wider opportunities to create a unique destination by introducing innovative but complementary specialty retailing and/or commercialisation channels • What are key factors for success from the Landlord perspective ? • One question is - does maximising NRI mean you have a detrimental effect on existing tenants and/or the relationship with them ? ( this is the healthy balance issue I think…) • How do you manage that retailer relationship and show that the destination as a whole benefits from a proper specialty leasing /commercialisation strategy. • Does this activity add to the asset value ? Could it drive higher rental value from in-line stores ? • Is customer experience the most important factor in a challenging retail landscape ? and does innovative specialty leasing really add to that ? • Have you (or have knowledge) of any research done with consumers on their views on whether the specialty leasing motivates additional spend or dwell time ? • Should we build in the practical requirements for specialty leasing/commercialisation in new developments – what are the essentials and what’s the challenge of older centres which weren’t designed to accommodate this type of activity ? • Examples of strong mall trading , especially growing entrepreneurial businesses – and food of course which could focus on Trinity etc - would be useful • Where do you think this is all going ? Recommendations for the future ?