With flattening retail sales and the continued growth of online sales, Shopping Centres face the potential of falling foot traffic and retailers putting their hands up for rent abatement or exiting a bricks and mortar presence altogether.
Although it may not seem it, it’s times like this when it is invigorating to be in business. Why? Because it’s in tough times that re-invention and strategic clarity come to the fore. Fortunately, we have some great strategic thinkers in the Property sector in Australia who can join with us as we move the Australian Shopping Centre industry from being convenience based and mission shopper-driven to becoming an EXPERIENCE for leisure shoppers.
Yes, it’s now all about the experience. To be more specific, an experience that one cannot get from behind the keyboard shopping on Amazon and the like. And central to any Centre experience is food and beverage (F&B).
Here are 5 key strategies we at Brain&Poulter (B&P) are utilising when contributing to asset plans for Centres to increase the F&B offerings, secure MAT and rents and transform Centre experience.
STRATEGY 1: CLARITY ON CURRENT PERFORMANCE
Never be tempted to throw the baby out with the bath water! One of our best insight tools is to heat map F&B performance by precinct or category. This visual tool quickly shows the winners and losers in Centre. Look for:
Tenancies/cuisines exceeding average MAT and MATm2 with low occupancy costs. These are the GOLD and mean you can look to increase the tenancy size or duplicate this usage for quick returns.
Tenancies achieving above average MAT but below average MATm2. We find lots of these tenancies. You can downsize this tenancy footprint and add an additional store/use while still ensuring the tenant continues to achieve their turnover. A WIN/WIN for everyone.
STRATEGY 2: PROACTIVE RATHER THAN RE-ACTIVE TENANCY MIXING
Rockpool Dining Group is on a rapid expansion, a poke bowl start-up wants space, hatted chefs are knocking on your door to showcase their newest casual dining concept. There is no shortage of deals to be done.
There will always be the temptation to open your doors to the latest and greatest operators. But B&P’s research shows that a mismatch between cuisine and Centre demographics can result in poor sales for any operator, no matter how ‘on-trend’ their offering is.
Typically, when optimising the tenancy mix for our clients, our aim is to ensure about 70% of stores are highly matched to trade area preferences, 20% reliable heavy lifters and 10% emerging categories. In this way, each retailer can aim to capture maximum expenditure. This, in turn, means they can afford to carry upper-end rents and meet annual rental increases.
So sometimes, it’s better to reject the deal on the table, share the rationale with leasing and motivate them to seek a better fit for the longer term good of the asset and retailers.
B&P’s tenancy mix hierarchy put together from a four-way assessment of the trade area, high street competition, current performance and emerging trends provides leasing with a clear blueprint on exit/hold and replacements strategies as vacancies or lease expiries arise to achieve stable long-term operators with the highest appeal to customers.
Figure 1Curate the mix based on demographics not on available deals to ensure maximum uptake
STRATEGY 3 – WORK ON THE TWO DAY PART ECONOMY
Food catering engagement in Centre by day is reactionary. It is not the main reason to shop a Centre. Instead, food catering tenants benefit during the day from shoppers visiting the supermarkets, DS, DDS and mini-majors.
Daytime success is closely linked to pedestrian traffic and can be finessed and improved by tweaking the mix, adjacencies and seating productivity. Currently, some 30% to 40% of all daytime customers will engage with food catering in Centre.
The night time economy is a completely different kettle of fish. At night, shopping centre dining precincts can achieve a near 100% conversion rate from pedestrian traffic by offering a carefully curated tenancy mix, entertainment offers and, that word again, EXPERIENCE.
Night time success of the precinct is weighted to the needs of the trade area within a 7-minute drive of the asset, the neighbouring high street competition and the design attributes of the site. Currently, 80% of F&B spend occurs outside of shopping centres. With heavy capital investments by both landlords and tenants, careful planning is required to introduce such precincts in most assets to make sure it attracts customers away from the high street and into The Centre.
Figure 2Broadway by Mirvac/Perron capitalises on both day and evening dining opportunities
STRATEGY 4 – INSIST ON EVIDENCE-BASED DESIGN
Over the years, B&P has witnessed a fair number of food precincts that might win the architect lots of awards, but fail the Centre and the retailer when expected sales don’t materialize. B&P has been able to backtest design decisions such as access to the dining precinct, width of the precinct, location and amount of al fresco seating, tenancy frontage styles and single versus double storey precincts to produce evidence-based scorecards or best practice design principles to ensure dining precincts trade well. They’re not always popular with the designers but used positively, can fast-track schematic design and leasing to create highly profitable new precincts.
STRATEGY 5 – APPLY THE POWER OF 10
The Power of 10 is a unique and powerful new SECRET WEAPON, B&P has developed in creating award-winning F&B precincts like Tramsheds, Broadway and Sydney Fish Market. The foundation of B&P To The Power Of 10 is a scorecard of benchmark practices to incorporate into the precinct strategy, design and tenancy mix to engage the 5 levers that affect MAT and rents, namely:
- Increase dwell time
- Attract more customers more frequently
- Generate more frequent repeat visits
- Capitalise on spending power of the trade area
- Reduce investment and operating costs
Step 5 is so secret we can’t share the details in this article but once you understand the 5 levers of F&B success and have a tool to check you have done everything possible in your asset plan or development strategy to apply The Power of 10 to each lever, you get the results that AMAZON PROOF the asset.
If you’re curious about this new tool, request a call back from one of our food retail experts.
With Australia/NZ Shopping Centres still only capturing 20% of all sales from fast food, cafes and restaurants, there’s plenty of room to continue to secure retail sales growth through F&B. It just needs to be planned and executed thoughtfully.