Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/74664
been predominantly online stores, says Groener. The times call for revised rent formulas, according to Kelly Millin, president of the Vancouver, British Columbia–based Real Solution Mar- keting Group. "There has to be a new per-square-foot sales reporting model developed to account for online sales attributed to a retailer in a shopping center," said Millin. "I can report firsthand that lost sales to online purchases is a serious reality for our centers that's moving through like a tsunami." She cites ComScore data in- dicating that U.S. online sales grew by 15 percent last November and Decem- ber, from the comparable year-before period, versus a 4 percent increase in shopping centers; the disparity repre- sents a costly problem for the industry. At this point in the industry's recov- ery, however, a phrase like "percentage lease Internet sales" can easily raise the ire of tenants, cautions Debbie Naves, proprietor of Naves Temporary Prop- erty Management Services, Raleigh- Durham, N.C. Moreover, retailers could circumvent efforts to group such sales in with conventional ones, by means of strategies like setting up a sep- arate entity. "It's difficult enough to cut deals and accomplish annual reconcilia- tions with large tenants who market on the Internet," said Naves. Jeffrey Edelman, director of retail and consumer products advisory services at Minnesota-based consultant firm Mc- Gladrey, says most landlords lack the lat- itude to renegotiate leases to account for store-initiated online sales, particularly with vacancy rates at many centers re- maining high. Fulfillment of out-of-stock items should be subject to store-sales tabulations, but that is insignificant rela- tive to the sales volume of items ordered online for pickup at a store, he says. "Many stores operate as a distribution center, allowing the consumer to pick up," he said. Best Buy, for one, estimates that some 40 percent of its online pur- chases are handled that way, Edelman points out. Arguably, those items could be grouped into that particular store's ag- gregate sales, but Best Buy is likely to re- sist, given that high percentage volume, together with its current struggles. Inter- net orders delivered directly to a shop- per's home, he said, are "a different story and, I believe, a stretch for any landlord to try to claim those revenues." Thus far there has been no conse- quential litigation on the accounting controversy. One observer says retail- ers are unwilling to see the law tested in court, because a landmark decision could set an undesirable precedent. Re- gardless, no one should expect the old leasing model to disappear overnight, says Groener. "In many cases it will be difficult to trace where the actual pur- chase or decision to purchase was made, The Shopping Experience STARTS and ENDS in the Lot! IMPROVE LIGHT LEVELS REDUCE ENERGY CONSUMPTION INCREASE TRAFFIC DDR, Weingarten, Regency Centers, Equity One, and Winn Dixie have all seen the benefits - what are YOU waiting for? netLiNKControls.com 800.633.8711 AUGUST 2012 / SCT WLSLighting.com 47