Why do antique mall owners tell dealers they are selling space when they are really selling traffic?
Who pays for traffic?
A well-worn aphorism is that there are but three important considerations in real estate: location, location and location. I submit that this isn’t true for antiques dealers. For antiques dealers, the three most important considerations are location, traffic and lease. Within each of these three categories are variables that can mean the difference between a dealer’s outstanding success and dismal failure.
Not all antique mall booths are equal
Location, for example, doesn’t just refer to the location of the building you’re in. A small dealer (Vendor A) who has a booth inside a well-located antique mall but whose booth is located in a poorly trafficked aisle benefits less from the mall’s location than the other dealers in the mall. If Vendor A pays the same booth rent as a vendor in a better-trafficked part of the mall (Vendor B), then Vendor A has a bad lease. Compared to Vendor B, Vendor A is overpaying for rent because he has too little traffic. If Vendor A pays rent consisting of a base rent plus a percentage of sales, his situation worsens. Which dealer is likely to still be in business in two years: Vendor A or Vendor B?
I’m going to stick my neck out and boldly state that antique malls (and antique shows) that rent space based solely on booth size are cheating themselves and their dealers.
Dealers, what are you paying for when you rent booth space at a mall or a show? Storage space for your merchandise? Of course not. If you want to store your inventory, use a storage locker. You’re paying for traffic; you’re paying for customers to see and purchase your goods.
Antique Malls should charge according to traffic
Mall managers, what are you selling to your vendors? Space? If that’s what you think you’re selling then you need to take a closer look at your business model. You, too, are selling traffic. Your facility and your advertising budget should be configured to maximize traffic. The dealers who benefit most from your traffic should pay the most rent. And, you should cut a rent break to dealers who are stuck in no man’s land. Also, if a dealer has his own advertising budget or sells merchandise that is a draw for your mall, he should pay less rent than a dealer who depends on the mall to deliver traffic to his booth.
The above suggestions are based on the model used by management companies at regional commercial malls. Professional management companies who run malls – those with anchor stores like Sears and JC Penney – recognize that all sections of their malls are not equally trafficked and they price them accordingly. Commercial malls charge for traffic first, space second. Space adjacent to an anchor store or in the main traffic lane is priced higher than space in the corridor leading to the restrooms or an exit. Anchor stores that supply traffic to the mall pay lower rent than the specialty retailers who benefit from the traffic the anchors generate. The key is traffic: where it comes from, and who delivers it. Gould, Pashigan and Prendergast in their study Contracts, Externalities, and Incentives in Shopping Malls (The Review of Economics and Statistics, August 2005) explain that even though the big anchor stores take up most of the space in a mall (average 58 percent) they pay less rent (average 10 percent; some anchors pay no rent at all). Anchor stores get a huge “rent break” because they are a draw for the mall and have huge advertising budgets.
How can antique malls maximize their rents while simultaneously leveling the playing field for their vendors? By using a traffic counter. There are many available (Google search phrase: “mall traffic counter”) and it’s a small investment considering the return. A wireless traffic counter will not only tell you how many customers you get into your mall, but where they go once they’re in. When you know where your traffic is going (and where it’s not going) you can re-arrange your booth layout to draw traffic to where you want it to go.
Why do grocery stores put meat and dairy in the back of the store? Because most folks buy meat and dairy, and will work their way through aisles of other merchandise to get to the meat department. How many shoppers would go to the back of the store if meat, bread and dairy were displayed up front? Not as many. Having an accurate customer count provides other benefits as well; with it you can track the effectiveness of your advertising and plan your staffing needs based on a metric other than sales.
Here’s how to figure your rents based on traffic: Divide the mall space into zones and keep a traffic count in each zone for each selling season. The zones with the highest average annual traffic count should have the highest base rent. Zones with the lowest traffic count will have the lowest base rents. If you offer your dealers a percentage lease, then the amount you collect will rise as sales rise, and sales will definitely rise.
Mall managers, you’ve spent a lot of money to get customers into your mall; don’t you want them to spend some time there and see as much merchandise as possible? A one-half percent improvement in sales can mean thousands of dollars for you and your vendors. Such an increase – and more – can be achieved with your existing customer base. All you have to do is re-arrange your booths and adjust your rents.
How do you keep vendors from kicking and screaming about their booths being moved or their rents being raised? (None will argue about their rent being lowered.) You don’t. You will almost certainly lose a few vendors. If you take a year to track traffic flow (and you should if you want an accurate count), keep the dealers in the loop regarding the upcoming change so they will have time to get used to the idea.
Once the change is in place, vendors will see that they are more profitable because their rent will be a smaller percentage of sales, and that will make everyone happy.
If you price your booth rent according to traffic flow rather than square footage, you’ll find that your dealers will be more profitable, and with profitable vendors, you’ll have less turnover and fewer associated headaches.
Previously published in Antique Trader Magazine