This article follows on from 'Clicks & Mortar: The marriage of the future and the past within a traditional retail lease structure - Part One' which discussed turnover rents.
Collection of consumer data is another area that is giving rise to an increase in conflicts (predominantly in out of town retail parks and shopping centres) centred around the provision, and use, of Wi-Fi and data services.
Very restrictive provisions in standard draft leases essentially prevent retailers from doing anything that shall, or may, interfere with landlords' data services or Wi-Fi provision. Whilst landlords and tenants, alike, can collect valuable data on consumer shopping habits by tracking movements via mobile phone, who may use that data and for what purpose is now becoming a common battleground.
Consumers are demanding more and more from their shopping experience and smart retailers are implementing structures within their businesses to satisfy and, ideally drive that demand. Some are already trialling or have implemented consumer data collection technology that, with incredible accuracy, captures customer movement around the store. In addition, if the customer has downloaded the retailer's phone app. He or she should not be surprised to receive push notifications of real time in-store offers specifically tailored to their shopping habits. This is obviously all very valuable to retailers with a traditional bricks and mortar offer, trying to marry that with multi/Omni Channel thereby allowing them to keep pace with online only retailers who have been able to accurately track customer behaviour for years.
The race to capture consumer data and to achieve first mover advantage off the back of it, is, of course, an incredibly valuable race to win. Where the power rests as between a landlord and a tenant is one of the fiercest battles to be fought and has led to very restrictive provisions appearing in draft leases which attempt to prevent the tenant from implementing any data collection initiatives either entirely, or, without the express consent of the Landlord.
For such data to be held to ransom in this manner is potentially very damaging for the tenant's brand and its development. A clear policy on the issue communicated to the Landlord at the outset of a matter will assist the tenant in its negotiations as the deal moves forward. There may need to be a trade of terms elsewhere though any such trade-off is far easier to achieve (and less costly in terms of time and money) if discussed before sign off on Heads of Terms.
Technological advances are having a significant impact on market. In the last year alone the market has witnessed collaboration between a national retailer and popular auction website for collection points in store and petrol filling stations offering collection points for deliveries by online-only companies. Conversely we have seen online companies moving to bricks and mortar offerings, and, more retailers using existing stores as 'fulfilment centres' with large storage areas to enable orders made on-line to be serviced by next day and, increasingly, same day deliveries.
Bricks and mortar stores may remain key to a non on-line only retailer's trading identity and success for many years to come. There is little doubt however that to keep pace with the on-line only sector these retailers will have to embrace the challenges that multi-channel and omni-channel retail are likely to bring. The control of consumer data and the very meaning of 'Turnover' are two key, though by no means the only battles, to be fought in the continued marriage of 'bricks and mortar' and 'clicks & mortar'. Maybe, in time, an accepted market position may emerge. In the meantime it is important that landlords and occupiers alike engage with each other and their advisers to head off issues such as those discussed in both part One and Part Two of this article at an early stage in each transaction as possible.
After all, neither party has an interest in the marriage ending in divorce.
This article first appeared in CBRE's Autumn edition of IN_retail Magazine.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.