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Suicide bombers die alone - how shopping centers earn on small tenants

 
Tags: Cases | Business models | Mall | Small business
 

And how to understand in time that the suicide bomber is you. Memo for unlucky small tenants.

How to be a suicide bomber without even knowing it

Yegor with his wife and son walked around the largest shopping center in their city. The huge one-floor mall stretched out in length, with an Auchan, a building materials store and boutique galleries, was full of people on a festive day. People with trays were on duty at the food court, waiting for the next table to be vacated. Animators performed on stage, and parents and children crowded around. The grandeur of the consumer paradise fascinated Egor and constantly provoked a picture that was pleasant to the eyes.

By that time, he already had several outlets in small shopping centers in the city. Egor traded cases for iPhones (and not only) and related accessories, and also took orders at his point for minor repairs. Typical island trade. The business was quite successful, the margin reached 30-40 percent. Egor, like a young Napoleon, dreamed of building his own business empire. Well, not an empire, but to become a leader in his city in the selected segment was quite real. But for this, it was simply necessary to enter the largest regional mall.

In the end, despite the high margin, the flow in current shopping centers was not very large, and sellers were often bored - the total income of his business was stable, but small.

Work in the largest shopping center will not only make money, but also increase the workload of masters - and this is efficiency. Yegor already presented the design of the new point and he even had some ideas where it can be placed.

The mentioned amount of rent was somewhere 2 times higher than his expectations. It was also required to pay a security deposit and an entrance bonus. “These are the only conditions that we can offer you,” convinced him in the department for working with tenants. - They are so loyal only because they open out of season. And it’s incorrect to compare us with prices in other shopping centers. They rent square meters, and we are the traffic of customers. We have such traffic that you can easily beat off this lease. ”

In his first month, Yegor worked at a loss of 60% of the turnover. “Summer,” they threw up their hands in the rental department. “You have to wait for the season, one December with its pre-holiday madness will close all your summer losses.” Yegor knew this from his own experience - sales astronomically increased in the New Year’s weeks, when people massively bought gifts for each other. But September was replaced by October, it was replaced by November, and the loss was kept at 30% of sales. Even the traditionally nursing year, December did not bring it into a plus - the loss almost approached the zero mark, but did not overcome it. He paid rent and salaries to sellers on time, taking income from his several profitable objects in unpretentious shopping centers to cover losses in one, but pathos. Then Yegor realized that it was not in him and he again decided to pay a visit to the rental department. “Yes, it’s very strange,” they were surprised there, but subtly hinted that other tenants did not know about similar problems, and the attendance of the mall was growing steadily. They do their job perfectly - there are a lot of people in the shopping center, and Yegor saw it with his own eyes. But for some reason, all these crowds did not seek to buy his accessories for iPhones, but rushed to Auchan, a construction hypermarket and a food court.

They answered the request to lower the rent that the issue should be agreed with the owners of the shopping center, but for now they offered their feasible help - first of all, in advertising support. A number of additional signs were installed in the mall, Yegor’s video was rotated on the local radio, and his discount offers were regularly reposted in the mall’s groups on popular social networks.

“Now I understand,” Yegor laughs, “that even if all the walls of the shopping center are sealed with my advertisement, this will not greatly affect the flow. People do not notice the ads, they look at pointers a little, for the most part they do not subscribe to the store’s social networks. In that business, traffic, traffic, and traffic again decide everything. If now it is like that, then all marketing efforts will increase it by only 10 percent, no more - the traffic is weakly subject to even the shopping center itself. All this mouse fuss, which unlucky tenants pay out of pocket, placing excessive hopes on advertising. "

After a couple of months, Yegor went to the rental department again. It was winter, it was stable at a -20% loss, but did not lose hope - now it was clear to him at what rental rate he would be a plus. It seemed that now he will receive a small discount, and things will get better. But along with the discount, Yegor was offered to change the location of his point. He stood next to a large anchor - a cheap clothing supermarket, and now he was offered to move around the corner, into the passage between the galleries. Nobody was standing there before.

It seemed that the place was almost the same, but the savings in renting were obvious.

But just a week later, Yegor realized that he was again left in the cold. Rent decreased by 30%, while sales fell by all 50%. “Yes, something with your point, we can’t find the optimal balance,” the short, stocky guy shook his head, who had been Yegor’s main contact in the rental department all this time. “It happens, but rarely for so long.” Come on, we will return you to the old place, but at a new rate. The only thing is that you need to coordinate this with the representative of the owner of the shopping center. ”

The representative of the owner was extremely busy and the window for meeting with Yegor was found in his schedule only after 2 weeks. He asked for a long time about business, about sales. Wrinkled his forehead: "I want to collect the maximum information about your project and its indicators, only this way I can help you." But the discount and return to the old place were ultimately approved.

"All communication with the administration of the shopping center looked as if everyone around me was trying to help, looking for options," Yegor smiled now, "and my business is so useless that nothing helps him."

Nevertheless, Yegor left early on Monday morning to start moving the point to a new old place, with a sense of accomplishment. This is a business, it is not easy, it requires perseverance and struggle to stay afloat. But he did not enjoy the victory for long - after a couple of days a couple of meters from him a similar point opened with accessories, cheaper and less quality. Since then, its revenue has fallen by more than 60%. Egor wrote a statement about the termination of the contract and passed any suggestions “to adjust the terms of cooperation”.

"Without sucker, and life is bad"

"Yegor is a typical" suicide bomber, "an employee of one of the largest Moscow malls explained to us on condition of anonymity." Everyone at the very beginning understood that he would not be able to repay his rent.

A suicide bomber is a small tenant whose business is obviously doomed to failure, as the rent offered to him will always be higher than the money that he can earn here.

This jargon is well-established and well-known in the development business. The problem of a suicide bomber is that he will never be able to qualitatively calculate his income in a particular shopping center. He does not have enough statistics, experience, knowledge, desires for this. He always acts "by the nose", will succeed / fail. But the administration of a large shopping center knows its attendance very well. She usually collects monthly sales reports from all of her tenants and she calculates popular business formats herself. The art here is precisely that, to put not too high, but still unrealistic rental rate. It will seem to a suicide bomber that “a little more”, this will allow him to be detained in a shopping center and invest his own money.

Large malls build long-term relationships with anchors. They are offered the most favorable and tasty conditions, because anchor create traffic. Shops like selling accessories for iPhones, some small souvenirs or food do not create anything, they feed on traffic. Actually, it doesn’t matter to the visitor globally whether he will buy a accessories at the “Everything for iPhone” shop or at the “iPhone Plus” shop, he doesn’t have loyalty to such shops, he will never come to the mall for the sake of a particular brand.

But such a business is very simple to open and the stream of people who want to go to the visited shopping center never runs dry. Crowds of visitors in the mall on Sunday attract tenants better than any advertisement. It is more profitable for a shopping center to rotate such tenats than building long-term relationships with them - while they die and pay excessive rents from their own funds, they bring additional revenue to the shopping center. And when they die, new kamikaze will come in their place, and so on ad infinitum.

Finally, do not forget that the mall’s sales department can have its own KPIs. Bonuses are often tied to a deal with a new tenant, and the more rotation, the more income. Attracting a new tenant at a high rate means always getting respect from the management. And the pursuit of revenue makes you take literally every free corner in the shopping center.

Therefore, the main task is not to achieve the success of the tenant, but to detain him with various tricks for as long as possible in the shopping center. The tenant is surrounded by “care”, they begin to offer advertising support (which in fact is free for the shopping center and absolutely useless for the tenant), endlessly move it from place to place, and reduce the rented area. But the end is initially known to all, the only question is when the tenant himself understands this. "Nothing personal, just business." Nobody is interested in the personal tragedy of a person, lost nerves and money.

It’s good if it’s a person’s personal savings - but many start a business with borrowed funds.

And for the recovery of unpaid amounts, there is a legal department of the shopping center, and for the tenant the lawsuit is obviously losing. In this world, the law of the jungle prevails. It’s a special art to keep the suicide bomber “low season” so that the next business shahid opens in September, when the buyer returns from vacations and from summer residences.

“I tried to tell my story to a new tenant,” Yegor recalls. “I wanted to warn him, purely humanly, against my mistakes.” But he looked at me as a loser and openly rejoiced that I was moving out. " Among tenants, it is not customary to exchange information on paid rental rates, to consolidate negotiations, all this information is a business secret. And if they say, they are often overpriced. Suicide bombers are divided - they are destined to die alone.

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