Background
In the heart of major retail centre, a well-established retail business faced a market value rent adjustment for their prime location. The increase was substantial and threatening the business profitability and long-term viability. The business owner, concerned about the potential impact, sought our advice to navigate this critical situation.
The Challenge
During the initial discovery meeting, the business owner expressed concern that the rental increase was unaffordable and well above market adjustment. They were initially seeking assistance for the negotiation with the landlord, wanting us to prepare a report to show that the rent increase was unfair.
Retail Business Benchmarking Information
Upon initial review of industry benchmark data compared to the retail store, it appeared the business owner was correct with rent as a percentage of turnover already higher than industry standards. We conducted a thorough benchmarking analysis and determined the retail business was not achieving adequate sales per square metre compared to industry standards. This revelation prompted a deeper investigation into the underlying issues.
The Analysis
Using advanced tools such as foot traffic analysis with door counters, we uncovered an underlying issue. The problem was not the rent expense being excessive, but rather inefficiencies in the sales process. Specifically, the sales staff capacity and capability were identified as the primary factors contributing to lost sales opportunities.
The Solution
To address these issues, we recommended a multi-faceted approach:
Staffing Strategy: The retail business began employing casual staff during peak busy periods to ensure adequate coverage and customer service.
Sales Training: Comprehensive sales training programs were implemented to enhance the skills and effectiveness of the sales team. This training focused on customer engagement, upselling techniques, and closing sales.
The Results
With improved staffing and enhanced sales capabilities, the retail business experienced a significant increase in sales. The income generated not only met but exceeded the industry benchmark sales per square metre.
Despite the increased rent costs, the business saw a remarkable 300% increase in net profit after accounting for our advisory fees, training costs, and additional staff expenses.
Conclusion
By addressing the root causes of their sales inefficiencies, the retail business not only survived a substantial rent increase but thrived, setting a new standard for success in their industry.
*No names are disclosed for the privacy of our client. This is a real situation and unsurprisingly one we encounter often. If you, or anyone you know, needs assistance in a similar situation, we offer a free, no obligation Discovery Meeting, so please, feel free to contact us for a confidential discussion.