Internet sales and the shopping centre tenants

The inclusion of a provision on the online sales in the lease agreements for the shopping centre space requires a thorough analysis of the standard rules regulating lease contracts and an update of some of facility procedures. One of the most important issues here is to determine the principles on the turnover rents. Typical contractual clauses require a tenant to pay a turnover rent on the top of the base rent provided that the share of turnover specified in the contract is higher than the base rent. The key issue in constructing lease contracts is to determine what the term ‘turnover’ exactly means and what it includes. In the case of the so-called multichannel retailers, namely the shopping centre tenants which also run internet sales, the bone of contention typically derives from this issue.

It is because there are a few ways to make retail revenues nowadays: a customer can order a product online for home delivery using an in-store tablet or computer (and bypass the store counter); a customer can order a product online for later in-store collection; a customer can only visit the store to try out or try on a product before he/she orders it online for home delivery. At the same time, a customer can also order a product online to be delivered home without ever visiting the physical store. In the two latter examples, the landlord will not be able to measure the overall turnover generated by the tenant. However, the turnover made in the first two cases could be recognized in lease contracts. This practice is becoming increasingly popular, particularly in the US where online retailing grows at a much faster pace than it does in Poland. The multichannel turnover should then be defined as the revenue from the sale of products transacted in-store, including the purchases made with the use of the internet and other digital technologies (which are currently known of or will be developed in the future) as well as the products only collected from a store, delivered to a store or ordered for latter collection from other places on devices located in a store.

So far lease contract provisions obliged tenants to use cash registers in order to evidence their sales. The lessor most often could not verify tenant’s turnover from its operations in the outlet in any way other than by looking at cash register reports. Nowadays a store’s customers make purchases not always by physically showing up there. Thus reporting the turnover must reflect not only printouts from cash registers but also the degree to which a given outlet was involved in the sale of a product. Tenants should also report their turnover from the sale of products ordered in terminals installed in their outlets or/and only collected in an outlet, regardless of where exactly such transaction was processed.