In hindsight the late 1990s was the ‘Golden Age of Shopping’ reflects Cardsharp. It was the early days of New Labour, ‘Brit Pop’ dominated the music scene, Tony Blair was still the ‘blue-eyed boy’ and real incomes were rapidly were rising on the back of a booming economy. The internet was making an appearance, but was still viewed as something for ‘tomorrow’s world’ for most of the UK population.
This was also the golden age for Clinton Cards. As it pushed towards 1,000 stores, ‘visiting a Clintons’, was almost generic for ‘going to buy a greeting card’. Television comedians joked about Clinton Cards and it was rarely out of the national press, whether in the business pages or popular pages. Clintons was almost a national institution.
It was also a time of sky-high rising shopping centre rents. As the UK consumer indulged their love of shopping, landlords creamed it. Demand for the best locations led to an all-out competition, with retail chains constantly outbidding each other to acquire the prime spots.
And Clintons really was one of the prime players in this inflationary game – in fact Cardsharp recollects the specialist card chain being the top shopping centre tenant in the number of units it operated from in the malls. It was ironic that Clintons, who kept such tight control over what it paid for the products it sold, was known to be a bit of a ‘soft touch’ when it came to paying over the market rate for rents. In fact, Clintons was beloved by retail property companies, as its overpaying, meant that the going rate went up on other properties they were letting in the high street and shopping malls.
In those glory days for retail, property owners held the upper hand. It was a dysfunctional man/servant relationship, and Clintons and indeed other retailers, were clearly the servile ones. Landlords imposed upwards only rent reviews, insisted on full payment three months in advance, and would often send out winding up petitions for payments just a few days late. They got the reputation of being mean, cynical and lazy, as did many of the agents that represented them.
And although with the rise of internet shopping and the recession of 2009-2011 meant that things changed for the worse for many retailers, things didn’t change noticeably for the landlords. Many retailers became busy fools. Profits were declining or disappearing, but they still had to pay bullying landlords. Retailers who were employing the labour and (in most cases) paying taxes, were more than servants, but in many cases, victims in these relationships.
However, recognised Cardsharp, landlords’ failure to adjust to the new retail environment started to come back to bite them on their bums. As internet sales (across all products) pushed up to 30% of retail sales, chains wanted to reduce the size of their store portfolios. Many faced administration and business failure, but in most cases, landlords did not seem to be very flexible. The only way many chains could stay afloat was to throw-out the rule book and use the questionably dubious business tactic of the CVA, the creditors voluntary agreement. Although Cardsharp does not condone this practice, (recently carried out by Paperchase and Clintons in the card sector), it could be argued that the landlords brought this on themselves by their own greed and failure to compromise.
And now the Covid-19 crisis has created a crisis for landlords. With bricks and mortar sales curtailed in so many sectors, valuations are broken as retailers go bust in so many sectors. Retail property companies are losing value at an alarming rate, exemplified by major retail property names, Intu Properties and Hammerson, seeing their share prices drop by 90%. In the meantime landlords are having to pay rates and insurance on their emptying unit portfolio. The upward only rate review is now consigned to history.
So, reflects Cardsharp, one of the few positive benefits from this tragic crisis, will mean that retailers that sell greeting cards will be paying much lower rents. With social distancing probably in place for some time and difficult economic times ahead, rents could fall by over 50%. This could be a saving grace for many hard-pressed card shops.
More fundamentally, the whole business model will change. Cardsharp predicts there will be a real shift towards landlords settling for rent to be paid as a percentage of turnover. This particular model has operated successfully for those with retail sites at major airports and other travel locations for many years and is clean and simple to operate. But more importantly, it means success and failure is shared between the landlord and the retailer.
So, concludes Cardsharp, the days of wine and roses are over for retail landlords. For the last few years they have experienced astronomical returns, while retailers bled. The boot is on the other foot now, but Cardsharp for one, won’t weep them. They have had it coming.
