Renting space in department stores

1 October 2007 at 5:35 pm | In Business | Leave a Comment

There are basically 2 ways department stores get money from external brands:

  • external brands give a certain percentage from sales made each month – each month’s sales could be different. If the brand has low sales figure, the brand pays lower for the space rental but which company wants to low sales figure in its outlets?
  • external brands pay a pre-agreed amount every month – no matter what the brand earns that month, the company needs to pay only the specified amount. No more, no less. Of course, if the brand didn’t do as well as expected or maybe the amount is very near the rental space, the company might as well close the outlet there or find other ways to boost sales.

Is the retail market getting saturated?

1 October 2007 at 3:12 pm | In Business, Etiquette | Leave a Comment

Shopping malls in Kuala Lumpur and Selangor (mainly focused in Klang Valley) are growing and everywhere you go, you see the same brand.

In Mid Valley alone, G2000 has 2 outlets as boutiques, 2 outlets in Metrojaya (1 for Ladies, 1 for Men) and it has another outlet in The Gardens under Isetan. In 1Utama, there’s G2000 outside Jusco, another in the new wing near Parkson and also 2 outlets (again, 1 for Ladies, 1 for Men) within Parkson.

Seed also has the roughly the same strategy – opening at new wings and maintain (by extensive renovation) the old outlet in Mid Valley and Sunway Pyramid.

When Metrojaya opened in Times Square, a lot of people asked Metrojaya, “Are you crazy? Your Bukit Bintang still have Metrojaya and it only has people during sales!”

In that area (Golden Triangle), there are Sungei Wang/Bukit Bintang Plaza (low end, highstreet, local), Lot 10 (mix of highstreet and a few couture), Star Hill (luxury, couture), Berjaya Times Square (low end, highstreet, local with influences from Japan, Taiwan, Korea and China/Hong Kong) and now Pavilion (luxury, couture and highstreet).

(WikiMapia – The Golden Triangle)

Metrojaya defended that Times Square caters to different customers – for customers who can pay more. Yet if you go to Times Square and Bukit Bintang/Sungei Wang, you’ll see countless local brands and some international brands (outside Metrojaya) but most of them sell cheap to affordable merchandize. Not a luxury brand there. Youngsters go there for window shopping and entertainment more than really spend money.

Companies want to retain existing customers at the old outlets yet they do not want to miss out the hype of something new. Most people would prefer to shop where it’s comfortable and to some, comfortable = new, fresh, clean.

To the customers, it’s convenient for them – they can get what they want in both area (old and new). If there are more shops that they love in the new wing, they can just shop in 1 area and get what they want. When shoppers walk the whole shopping mall and see many outlets of the same brand, they would be bored, “Oh, it’s another outlet of that.”

But when the stock is not available, they’ll have to walk over to the other side to get it. Would it be better to concentrate all the stock in 1 outlet in a shopping mall?

From the backend, companies can actually save more money in renting spaces and boutique lots, manpower (less staff by 1-2 for each shift or more staff per customer), time in stock management. When there are too many outlets in 1 building or even an area, how do the companies pay commission and divide stock?

“It’s so unfair! We have to fight with old wing. Do you know our commission is separated? Old wing outlets share with old wing, new wing with new wing. So what happens when our customer wants the stock from there (old wing)?”

“That b*tch at the old wing control their stock so much and just do not give to other outlets. When their customers want stock, they call HQ for stock and HQ bow to them sending out memo for us to give our stock to them!” Complained one of the staffs in a retail fashion company which opened outlets in the old and new wing of a shopping mall. “Give already, we sell what ah?!”

To most customers, the most important thing is that they get what they want. They do not really care about the staff’s commission except for those rare ones. So the more stock available at where they shop, the better but not too many. Too many of the same stock displayed would give the impression that the products do not sell well. We wouldn’t want to wear something that nobody else wants.

Opening too many outlets may just saturate the industry. There are bound to be some outlets not making a lot of money and just “wave at flies”. Sure you can probably get your peace of mind shopping there, getting the staff to walk to the storeroom and get new stock (new, untried, in plastic bag) but would you want to shop in a dead quiet place? It would be so obvious – do you walk in slowly and quietly so that nobody notices you? Or would you just skip that brand because there’s nobody shopping inside?!

I remember a friend reminiscing her brief work at a Hong Kong brand with Taiwanese celebrities as models. “All of us stood at the front because we had finished folding the clothes. We were so bored we started chit chat among ourselves. When a customer wanted to come in, walking in almost, we stopped chatting immediately. We turned to the customer and greeted loudly and excitedly. We got a customer!!! Finally!! But the customer was so scared, she ran away.”

Of course, if it’s bringing brands previously unavailable here – great!

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