It may seem unnecessary to point out the changes in retail shopping preferences. Everyone is aware the impact online shopping is having on brick and mortar stores and shopping malls, right? Apparently not. It seems some of the companies and industry sectors most impacted have put their heads in the sand hoping the trends will change.
The impending retail crisis is not just about some retail closures. There is a domino effect that impacts a variety of sectors.
Landlords
If you lead a company that owns a mall or property leased to a retailer, you need to get creative with the property. The knee-jerk reaction property owners take when retail declines is to cut back on expenses. Scaling back on maintenance, lighting, cleaning and security is an invitation to bankruptcy court. Instead, creatively invest in the property. Incorporating unique entertainment venues — like an ice skating rink or group gaming activities — brings people to the property and customers to your tenants. It is also important to know your target audience. A high-end shopping customer will not likely frequent a mall with JC Penny and Sears as anchor stores. Developing the right level and blend of tenants can keep your property bustling.
Vendors
If you lead a company that sells directly to retailers, be cautious when selling on credit. However, if you tighten credit too strongly you will strangle the possibility for the retailer — and your company — to succeed. This is where companies can get creative. Utilizing a “consignment” structure or other bankruptcy proof methods can keep a fresh inventory flow through the retailer and more security for the vendor.
Lenders
It’s been almost five years since interest rates dropped drastically, and many mall owners and retail lessors refinanced debts. Research has shown a large number of those loans will be up for renewal soon. Are you ready to negotiate creative refinancing terms? Be very aware of the retailers’ business model and how aggressive the leadership has been in adapting to the new retail climate.
Taxing Authorities
The impact of a tax revenues from a fully leased shopping mall is significant to local government. However, tax revenue is not the only reason to be concerned about retail success. Site selectors looking for communities to bring businesses and jobs quickly spot blighted retail centers. It is a red flag to the possibility that the community may be in decline.
For more than 40 years, Tripp Scott has played a leadership role in issues that impact the state of Florida. This information is shared as a resource for business leaders who are or sell services to retailers.
About the Author
Charles Tatelbaum
For the past 50 years, Charles Tatelbaum has focused his practice on bankruptcy and creditors’ rights issues, complex business litigation, Uniform Commercial Code transactions and lender liability litigation and other types of secured transactions, as well as domestic and international letters of credit.
He regularly represents secured and unsecured creditors in transactions and insolvency situations, creditors’ committees, and throughout the U.S. he represents business clients in complex business litigation, the defense of lender liability claims, all types of bankruptcy proceedings and products liability defense based on warranty.
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