Magazine article Marketing

Amanda Aldridge on Retail: Retailers Find There's Cash in Concessions

Magazine article Marketing

Amanda Aldridge on Retail: Retailers Find There's Cash in Concessions

Article excerpt

Just nip into your local department store and you will find that concessions are a regular feature of the retailing landscape. These 'stores within stores' have been around for years and are a key component of the department store model, albeit potentially invisible from the customer's perspective. Selfridges is a great example of the art. Concessions form the core of its stores, each of which is styled as a 'house of brands'.

What is changing, though, is that concessions are breaking out of their department store heartland, with a host of retailers now finding them attractive. In the past couple of weeks alone, WH Smith announced it is to open eight Virgin Mobile concessions in a 12-month trial, which could lead to a further 500. This follows the success Superdrug has enjoyed with its concessions for mobile operator 3. House of Fraser is to open nine Caffe Nero outlets to add to the existing one in its Dickins & Jones store in London.

Somerfield has joined the party with the opening of concessions for German non-food retailer Tchibo and discount fashion chain Peacocks at some of its biggest stores. There has also been action at the smaller end of the market, with high-street video game retailer Game opening a trial concession in Nottingham for online gadget seller Firebox. Even the introduction of cash machines in pubs is part of the trend.

So why all the interest? The main reason is the ongoing need for retailers to 'sweat their assets'. Upward-only rent reviews and a squeezing of margins, as a result of increased competition from discerning consumers and the internet, have put great pressure on high-street retailers. They are continually being forced to make better use of their store space and improve returns per square foot.

To this end, they have begun to look at introducing product categories that might deliver an improved margin.

Concessions are a great way of doing this. They enable a retailer to move into a new category at a moderate cost.

If the venture doesn't work financially, this should be discovered before the end of any trial period.

If on the other hand, it proves successful, the retailer stands to make decent gains by charging the concession turnover-related rent. …

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