Thursday, 27 October 2016

Rents and the death of the high street

Aaron Renn reports on the arrival of a mustard shop in New York's Upper West Side:
Maille is a supermarket brand of dijon mustard. It’s a product of Unilever, the Anglo-Dutch food and consumer products giant. You may not know Unilever, but you know their brands, including Hellman’s, Dove, Lipton, and even Ben and Jerry’s.

This particular location provides mustard tastings, and sells dijon in a variety of flavors not typically available. I believe they also have some vinegars. I was once needed some dijon and purchased a jar of their regular flavor for $7 – which is $3 more it sells for at the grocery store a few blocks away. They apparently charge as much as $99 for a jar of black truffle mustard.
Shortly before this description Aaron had noted the departure of his local (Upper West Side) Starbucks following a rent hike to $140,555 per month. As he points out you've to sell a whole lot of coffee just to cover a $1.7m rent.

So why the mustard shop? And how is it that Unilever (fresh from scrapping with Tesco over Marmite) feel able to justify forking out something similar for a shop round the corner from that defunct Starbucks? The answer to this question is central to how we see tomorrow's high street. I've written before about the shop as part of a brand marketing strategy:
Just as Diageo wants high net worth customers in the Johnny Walker House, the future high street success wants high spending, high end customers - the every day buyer can shop from his computer and have it delivered or collect from the Post Office. In town retailing becomes an event, an orchestrated, animated marketing promotion. The customers walking into you shop are there because you've invited them - to a product launch, an anniversary, a preview. They're dressed up to party not slouching round the shops in jeans and an old t-shirt.
What Aaron Renn is saying, however, is that because the cost for the mustard shop rent is coming out of Unilever's marketing budget, it's a drop in the ocean. Moreover, that rent isn't set against sales (even though you can pay $99 for some truffle mushroom) but against the objectives set by the brand managers - measures of equity, voice and share are just as important as sales. After all the supermarket's more likely to buy the product (and maybe pay a little more for the product) if it's the mustard with the flash shop in the posh Upper West Side.

The effect of this is to push up rents and to push out actual retailers. With ever more sophisticated home or click-and-collect delivery systems the ability of real retailers to compete is diminished. The high street as we know it is already pretty ragged but what this tells us is that the future of town centres - even in wealthy places - is as a billboard rather than a shopping centre.


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