27 September 2009
Small Retailers Moving To The Web
Sep/28/2009 05:29 Filed in: Store Closing
Sale
There
is a trend developing in the small retailer
community. As the recession continues, business gets
tougher and customer foot traffic declines, many
small retailers are choosing to run a Store Closing
Sale.
But wait... they're not going out of business. They are simply changing their business model. Increasingly I am talking with small retailers who want to give up their brick and motar location and move to a "online only" operation.
The reasons - you can save a lot of money if you don't have to pay the high rent associated with good retail locations, you're open 24/7 but you only have to staff it when you like and your primary market area is no longer limited to the 2-5 mile radius around your store.
For specialty or niche retailers it's much easier to find large numbers of buyers online, where they draw from customers all over the country and in some cases from all over the world who are interested in their particular niche.
So once again, the small retailer is adapting and changing. They've found a way to survive and compete.
The only sector of the retail industry that is having sales gains during this current recession is the online retailers. It didn't take long for the small retailer to catch on.
"Store Closing Sale" might not be the sign of a small retailer in trouble. It could be the sign of one on the move - a move to the web.
But wait... they're not going out of business. They are simply changing their business model. Increasingly I am talking with small retailers who want to give up their brick and motar location and move to a "online only" operation.
The reasons - you can save a lot of money if you don't have to pay the high rent associated with good retail locations, you're open 24/7 but you only have to staff it when you like and your primary market area is no longer limited to the 2-5 mile radius around your store.
For specialty or niche retailers it's much easier to find large numbers of buyers online, where they draw from customers all over the country and in some cases from all over the world who are interested in their particular niche.
So once again, the small retailer is adapting and changing. They've found a way to survive and compete.
The only sector of the retail industry that is having sales gains during this current recession is the online retailers. It didn't take long for the small retailer to catch on.
"Store Closing Sale" might not be the sign of a small retailer in trouble. It could be the sign of one on the move - a move to the web.
Store Closing Sale & Lease Considerations
Sep/27/2009 06:16 Filed in: Store Closing
Sale
I've
talked with hundreds of small retailers over the last
two years that are experiencing very drastic sales
losses. This has caused many of them to consider a
store closing sale or going out of business sale.
One of the first questions they ask is, “What about my lease”. My suggestion to them is to look at the fine print in their lease. With a little luck it will contain a clause that is relatively common in many retailer’s leases. It is the “co-tenancy clause”. It allows for tenants to demand cuts in rent or even penalty-free pullout if key tenants or a specific number of stores leave the mall or strip center.
The breach of a co-tenancy clause typically allows the retailer to pay as little as half of the rent while the landlord searches for a new tenant (it's now much tougher to find that new tenant) and if one is not found within the specified grace period, the retailer can break its lease without the usual cancellation fee.
Rent is among the largest expenses for a small retailer. As sales continue to decline, the fixed cost of rent eats away at the already thin profit margin or increases the losses that the small retailer is experiencing.
Bankruptcies of major national and regional retailers led to many mall and strip center vacancies. In 2008, at least 27 major retailers filed for bankruptcy protection. So far in the first half of 2009, another 13 have followed according to Bankruptcy.com.
The decision on what to do about their lease has always been a major concern for small retailers considering closing their store and running a going out of business sale. The abrupt increase in the number of national chains closing retail store fronts has made the enforcement of a co-tenancy clause a possible out for the small local retailer.
As always, when dealing with legal issues like leases, I always recommend that you consult with a lawyer.
One of the first questions they ask is, “What about my lease”. My suggestion to them is to look at the fine print in their lease. With a little luck it will contain a clause that is relatively common in many retailer’s leases. It is the “co-tenancy clause”. It allows for tenants to demand cuts in rent or even penalty-free pullout if key tenants or a specific number of stores leave the mall or strip center.
The breach of a co-tenancy clause typically allows the retailer to pay as little as half of the rent while the landlord searches for a new tenant (it's now much tougher to find that new tenant) and if one is not found within the specified grace period, the retailer can break its lease without the usual cancellation fee.
Rent is among the largest expenses for a small retailer. As sales continue to decline, the fixed cost of rent eats away at the already thin profit margin or increases the losses that the small retailer is experiencing.
Bankruptcies of major national and regional retailers led to many mall and strip center vacancies. In 2008, at least 27 major retailers filed for bankruptcy protection. So far in the first half of 2009, another 13 have followed according to Bankruptcy.com.
The decision on what to do about their lease has always been a major concern for small retailers considering closing their store and running a going out of business sale. The abrupt increase in the number of national chains closing retail store fronts has made the enforcement of a co-tenancy clause a possible out for the small local retailer.
As always, when dealing with legal issues like leases, I always recommend that you consult with a lawyer.