Many retailers’ brick-and-mortar rents are tied to sales volume. As more sales begin and end in different channels, the figures used to calculate percentage rents begin to become fuzzy.
Retailers’ efforts to create a seamless omni-channel company are in full bloom, with everyone from Saks Fifth Avenue’s EVP/CIO/COO Mike Rodgers and SVP/CTO Windell Manuel to Stein Mart’s CIO Andrew Black talking about it at Oracle’s CrossTalk. With all of the opportunities for increased sales, driving customers to and from brick-and-mortar, and increased customer engagement, there is a new cost that may be coming into play, percentage rents.
For years, retailers have had many brick-and-mortar leases tied to a percentage of sales. Recently, however, the calculation of these rents has come into question. This is entirely due to the retailers’ desire to eliminate channels. I can walk into a Best Buy, try out the TV I am interested in, and buy it from bestbuy.com either through an associate or on my own phone. Depending on how integrated the process is, the store may or may not get credit for the sale. Additionally, the sale may never show on the actual sales volume used to calculate rental increases and decreases. Who gets credit for the sale, and where will it show on the books?
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