The last couple of days, I have been canvassing (the term used in the commercial real estate world when one walks from shopping center to shopping center talking to tenants about their interest in relocating).
Sometimes, I am shocked by the response of the tenants I speak to. No wonder many small retail businesses fail or never achieve their potential. Their product or service is outstanding, but they lack one thing……………the location that brings in traffic – THE BIGGEST MISTAKE.
By way of example, I walk into a shoe store that has been in business for 28 years! So immediately I know by looking at the inventory, the friendliness of the owner who approaches me that he must be doing something right to have been in business for 28 years. The only way I knew about the store was I saw its advertisement in the local newspaper highlighting its 28th year of business. I looked the store up on a map because it isn’t located on a major street. I spent 10 MINUTES trying to find it. The store is located all by itself on a small street that barely gets any traffic.
I suggest that the owner seriously consider relocating into a shopping center with a very dominant anchor tenant and other national and regional tenants that draw thousands of customers into the shopping center daily. I am confident that the tenant’s sales would double if it was located within this shopping center. Instead the owner tells me he would never move because his rent is only $700 a month.
He isn’t alone. So many retail businesses make the same mistake. Let me give an example of what they are missing out on. Let’s say this shoe store’s annual sales are $100,000. His total rent for the year would be $8,400 – 8.4% of his gross sales. If he were to move to this better shopping center, his sales would double to $200,000. If his rent was $1,250 per month for a total of $15,000 annually then his rent as a percentage of sales would drop to 7.5%. And since many of his costs like insurance, utilities, etc. would not increase, his net profit would increase substantially.
I’ll conclude by giving two other pieces of valuable information that this owner disclosed that boggles my mind on his single minded focus on the rent. He goes on to tell me that the owner of his current property won’t fix the air conditioning and during the summer months of 100 degree heat, his store is a furnace. How much business do you think he loses because customers won’t shop there. I offered him brand new air conditioning. No go! Moreover, he tells me most of his customers complain about parking and have a hard time maneuvering in and out of the two parking spots next to his store. The shopping center I offer has excellent access and parking and plenty of it. Still No go!
I’m saddened to see that this wonderful small business with an excellent product and service is missing out on so much success. If you are a retail business in Arlington, TX, please look at the big picture! If you have any questions about your site selection even if it isn’t about Lincoln Court please contact me. I would be happy to give you my thoughts on your site selection. I love seeing small business succeed. After all, our entire economy and future of America is dependent on small business.