They say that necessity is the mother of invention and the really great thing about a tough market is that it drives great ideas. As marketers its our job both to stimulate creative thinking and to contribute most of the innovation. I reported recently on how the agency sector is being inventive in it’s search for a new model more appropriate to our time and we are all familiar with the scramble for the silver bullet that’s going on in retailing. Now I see that the UK retailer Primark aren’t content to be just another retailer, they’ve decided to up the anti and buy an entire shopping centre.
Primark’s idea, it seems, is to create a flagship store and then rent out surrounding units to complimentary retailers. It’s not a completely new concept of course. Primark aren’t the first store group to become landlords. Many others, including Tesco have operated models like this for some years and its not a million miles from the department store model. I even launched a similar initiative with the supermarket group Delhaize in Central Europe a while back. For those of you who aren’t familiar with the world’s fifth-biggest supermarket group, privately-owned Delhaize are food specialists rather than generalists. They don’t need the space of a hypermarket, but acquired a few big units in their march through the ex-Communist markets. Our idea was to create a mini-mall within the unit, but outside of the area of the supermarket and rent spaces to local retailers. This guaranteed them customer traffic and an alternative to the demise that small local traders meet when a big international retailer comes to town.
Initiatives like this are good PR and even better business. They really endear multiple retailers who move into town to the local population by countering common criticism that the multiples are the death knell of the independent store. They may be responsible for the closure of many independents, of course, but this has rather more to do with the incompetencies of some independents than it is the fault of the multiple and by placing the locals in the thick of shopper traffic they generate the big boys are at least giving the small shopkeeper a chance to show what they are made of. Those that have what it takes can experience their best ever business, but the few that just don’t make the grade and doubtless never would.
The city of Birmingham, the English location of the proposed Primark centre, is also a classic demonstration of how renovations, revised traffic flows and new developments can dramatically change the dynamic of a place and with it the fortunes of shopkeepers and other businesses. Coincidentally, I’ve been working with a major shopping mall in Dubai recently that had suffered as new, bigger malls opened and the epicentre of the city shifted – radically in the case of Dubai. The same is true to a lesser extent of Birmingham, the centre of which has has been in a constant state of flux for as long as I can remember, with the focus shifting dramatically with every new development. It will be interesting to see what Primark can make of their acquisition, which has been something of a victim of all of this. I will also be fascinated to see what tenants they attract to the mall which has been sliding down-market for as long as I can remember. Primark do entry-level retailing as well as anybody and they have a choice here to leverage either their fashion credentials and create a popular younger environment or focus on their low-price credentials and attract the Poundstretchers of this world. With two new fashionable mass-to-premium-market malls within a stone’s throw, this isn’t as easy to call as it might seem, but my guess is that a mall with lower-mass-market, but tasteful tenants would stand a better chance of success than a mix that would compete with the two other malls. Are there enough of these kinds of retailers? It might be a struggle, but time will tell.
This does however raise another thought that may be the driver behind Primark’s plan. As a tenant they have no control over who their neighbours are. They can take space in a mall that promises to deliver the customer profile that suits them best, but if we are honest there’s always going to be a degree of compromise in sitting in a mall that’s controlled by someone else. Even if the profile is right for you today, the landlord can choose at any time to change all of that and leave you in an alien environment. Then there’s the fact that the reputation of any brand is also coloured to some extent by the company it keeps. By owning their mall Primark get to choose their neighbours, which gives them the opportunity, if they are smart enough, to optimised the profile of the mall’s traffic to suit their own offer. It also means that they can be seen to associate only with retailers that enhance their reputation and if that wasn’t enough, they can also eliminate competitors. Now, this seems like a plan that other retailers might want to consider!
In the Middle East, of course, because pretty well all the retailers worthy of a visit are franchises and most franchisees own more than one franchise (Companies like Chalhoub and AlShaya seem to own most of them) you wonder if it wouldn’t be worth these companies investing in their own malls. This is especially true because many mall owners and managers are just chasing rents and aren’t sufficiently marketing savvy to manage their brand well enough to maintain a focussed customer profile. Of course, the franchisees have the money even if they don’t have the mall management expertise, so it will be interesting to see, with places like Dubai, Saudi Arabia and Bahrain now over-accommodated with malls who is first to raise the game by taking on a mall and optimising it. Things could get interesting!
Phil Darby
June 17, 2014