An independent retailer in Sydney has hit out at commercial landlords, saying exorbitant rents forced her business to relocate from its home in Mosman after nearly three decades.
Managing director of Oz Resort swimwear, Jacqueline Major, says her company was paying retail rents upwards of $130,000 a year for its shopfront in the North Shore suburb of Sydney, which became simply unsustainable given the store’s revenue was sitting just on $1 million a year.
“There’s nobody [in retail] doing the sort of money to sustain that now, it just doesn’t even equate,” she tells SmartCompany.
When Major spoke to her landlord about the significant pressure rents were putting on the business, she says she was told, “you’re the only one with a problem”.
“I said, ‘you’re my problem — it’s the rents all up’.”
Major decided the best choice was to find a new setup, so after trading in Mosman since 1988, she took the plunge to relocate the whole business to a warehouse she had bought years ago in Balgowrah.
“I made the decision to move it all into the warehouse, and the thing is, we’re now getting people coming to us. We have change rooms set up there — and people really don’t mind it.”
Major says she’s not alone, either; she knows of other retailers in Sydney looking for warehouse space instead of traditional retail shopfronts to set up their operations in a way that is much more cost-effective.
“I’m loving it — I wish we had done it years ago. And thanks to Google and that sort of thing, people are still coming,” she says.
Major predicts even more retailers in Sydney will be pushed into using new shopfront models, saying one only needs to look at the high turnover of tenants in areas such as Paddington and Mosman to see shopping strips often don’t keep new tenants for more than a year or so before rental pressure gets to them.
“People that have a passion like I still do for swimwear, right now, how are you able to do it? We can go online, or we can do what we’re doing by warehousing,” she says.
The move away from Mosman means Oz Resort is paying “nowhere near” what it was previously in terms of shop overheads, which Major says is giving the business new opportunities to capture customers.
“We can now afford to do a bit of discounting, and by undercutting some pricing, we’re getting a lot of people in,” she says.
The pressure of commercial rents on the retail sector has been a fiery issue over the past 12 months, with even the likes Premier Investments chairman Solomon Lew saying the situation was forcing his company to close flagship locations in Melbourne’s Bourke Street Mall.
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Other company founders have taken drastic approaches to negotiating rents: in 2017, SumoSalad founder Luke Baylis defended a decision to place the leasing entities of the food company in voluntary administration to resolve a rental dispute with shopping centre giant Westfield.
Having operated in the retail space for 30 years, Major says the current rental pressure isn’t good for brands or the community, given the high turnover of shopfront tenants.
“Landlords just want to get anyone in there and get some rent,” she says.
“I don’t know one retailer, except for those big brands with multiple retail stores, that can sustain these rents.”