Gems in the passage

They may not be the most lucrative tenants, but they are still an important source of income. Furthermore, they complement the offer of 
a shopping centre, stimulate the footfall, create an atmosphere of trading and give some human warmth to the usually austere interiors. Some administrators worry that such stalls reduce 
a shopping centre into a mere market square; it is up to them, however, to position the stalls in the right way

Emil Górecki

All sorts of cosmetics, used mobile phones, leopard-print computer accessories and jewellery made of buffalo eye stone – these are just some of the bric-a-brac that can be bought at stalls in shopping centres. During the high season, the goods on offer additionally includesbaubles with football team logos, painted eggs, chocolate chickens and thousands of heart-shaped pillows. Sometimes you can come across a trader offering digital TV connections or a new model of car. In the US, income from these types of stalls constitutes up to 3-5 pct of a shopping centre’s total income. “Such concepts are much more commonplace there though, as Americans are more open to them. There are, for example, stalls for the promotion of just one book – but this would never be feasible over here,” explains Paweł Goździowski, head of leasing of Cefic Polska, which administers twelve shopping centres, including Wileńska (total area 117,000 sqm) and Arkadia (287,000 sqm) in Warsaw, Turzyn (27,000 sqm) in Szczecin and Borek (32,700 sqm) in Wrocław.

How much can you make on the passageway?

According to Colliers International, the income from short-term leasing can constitute 1-2 pct of the total net income of a shopping centre. Their colleagues at Jones Lang LaSalle, however, estimate this to be 2.5 pct and even up to as much as 10 pct. Paweł Goździowski reveals that depending on size, duration of the contract and the season when the stall is set up in a centre, as well as on individual negotiations, average lease rates fluctuate between PLN 3,000 and PLN 10,000 per month. Maciej Kiełbicki, managing director of Mayland Real Estate, the developer and owner of shopping centres such as Karolinka (total area 70,000 sqm) in Opole, Pogoria (38,000 sqm) in Dąbrowa Górnicza and Jantar (leasable area 22,000 sqm) in Słupsk, estimates the possible income from stalls to be around 5-7 pct. He also points out that Mayland RE does not receive this level of income from stalls just because its shopping centres are very new. Such a result can be achieved by malls that have been operating successfully for a number of years.

What can you buy at stalls in shopping centres and what can’t you find? “We make sure that their offer complements the shops’ offers. We try to avoid situations where a jeweller in a shop would have to compete with a jeweller on a stall. Even if both concepts are present in shopping centres, they still complement each other. Not every client will go into an outlet of a well-know jeweller and not every client will stop at a jewellery stall. A shopping centre is egalitarian in this respect, it does not exclude any group of clients,” Paweł Goździowski explains.

Maciej Kiełbicki divides stall tenants into three categories. The first one are shops offering seasonal products, e.g. Christmas decorations. The second one offers goods that we rarely think about, bought on impulse when the opportunity occurs. The third are tenants offering services, such as banks or digital TV suppliers. “Generally, their offer only complements what the outlets already have. A permanent outlet will not be able to support itself from the sale of wrapping paper or national flags. The stalls situated in the common areas also stimulate the facility and create an atmosphere of trading. Some owners or administrators prefer leaving the common areas empty, which gives the impression of sterility. Others do just the opposite, allowing as many stalls as possible to operate, turning the place into a market square. In my opinion it is best to have something in between, when the stalls do not block shop windows, do not obstruct the passage or distort the clarity of the interior,” argues Maciej Kiełbicki from Mayland Real Estate.

However, the head of leasing at Cefic emphasizes that protecting the interests of permanent tenants is the priority of the owner. They are the ones who bring the main income, for a longer period of time and pay rent proportionate to their turnover. The stalls are only a method of obtaining additional profit. “Some tenants are oversensitive about their shop windows, so we make sure the temporary stalls do not obscure them. There are more complaints about that than about the competition from the stalls,” says Paweł Goździowski. Some strong players among the permanent shopping centre tenants include a provision in their contracts that forbids stalls being positioned in front of their shops.

Problems over the blocking of shop windows are rare nowadays. New shopping centres take into consideration locations for temporary stalls as early as at the design stage. As a result, the presence of a stall located in a special zone is natural and there are no hanging cables to be seen. “Only a few years ago designers did not take into consideration such a sale concept in their designs, but it is different nowadays. Stalls like these have a standard height and width, specially designed electrical connections, good access and exposure,” says Maciej Kiełbicki.

Santa at the stall

The best period for trade is of course December, Easter and Valentine’s Day. The need to purchase at least a small gift is so pressing at these times that the stalls owners simply push their way into shopping centres. It is clear that there is not enough space for everybody during these busy times. So how does an administrator decide who drops out in this competition? “We take into consideration two factors: the order in which the applications have been received and the attractiveness of the offer in the shopping centre. Rates fluctuate at a maximum level of around 10,000 in these periods, and in spite of that we have a wide selection of potential tenants,” claims Paweł Goździowski. And Maciej Kiełbicki adds: “Such stalls are an element of decoration in themselves. They offer presents, decorations and packaging, which are not necessarily available in other stores in the shopping centre. Moreover, buying baubles and ribbons at special stalls might simply be more pleasant than buying them in a hypermarket.” According to 
Anna Machlarek, the director of Galeria Kazimierz in Kraków, part of Globe Trade Centre’s portfolio: “Stands base their offer on impulsive shopping, so the range of products corresponds with the 
spontaneous desire to have something at a particular moment. Will this concept develop further? I think it will, as long as we want to buy presents and gadgets for each other in order to brighten up each other’s lives,” she adds.

A concept for export

Crocs shoes have appeared in Polish shopping centres relatively recently. Nowadays you can buy them almost exclusively at stalls in shopping centres. There has been one permanent outlet of this brand in Wrocław’s Pasaż Grunwaldzki for two months. According to John Pilon, Crocs’ representative for Poland, the results of the outlet compared unfavourably to results of the stalls. He emphasizes however, that the shop has only been open for two months. “People notice and find stalls much more easily, they have more freedom there and more choice. Besides, stalls can be much less expensive than we are: 15 sqm of a regular shop costs 10 times more to run than a 30 sqm stall. The annual turnover per sqm at our stall in Blue City shopping centre exceeds the turnover in any of our other outlets in the world,” reveals John Pilon.

The figures speak for themselves. Crocs will
appear in 15 more locations next year, but in stalls not shops. Mr Pilon adds that the
conditions for trading in a given shopping centre are
important for him – namely the flexibility of a contract. “Leasing a shop usually means a 5-year contract at least. In contrast, contracts for stalls can be signed for short periods of time and if our stand does not generate a high enough income we can quickly close it and move to another location,” he explains.

Interestingly, in other countries Crocs shoes only used to be sold in permanent stores. The 
distributor admits that initially the stalls were leased in Polish shopping centres without the 
consent of Crocs Incorporated. However, the 
concept proved to be so successful that it is now being introduced to Russia, Germany and Austria, and will also be used in other countries in the future, including the USA.

Krakowski Kredens is a distributor of high 
quality food and has 28 outlets in Poland. Three of these are located in leading high streets, four of them are stalls and the remaining ones are permanent 
outlets in shopping centres. “Stalls are a necessity for us, providing us with a temporary solution. We lease them only in the places where it is important for us to be but where there is no permanent outlet of a size or location suitable for us. We offer premium class goods and stalls are normally associated with lower quality products. Besides we care about self-service, we want to allow the customer to have a look at our products, read the labels and calmly decide about the purchase. Shops are much more profitable for us. We used to have a stall in Arkadia shopping centre in Warsaw until recently and now we have a shop there, and we can see that it functions much better,” explains Ewa Lewek, vice-president of 
Krakowski Kredens. She also underlines that the price of leasing 1 sqm of a shop is comparable to leasing 1 sqm of a stall and is sometimes even cheaper. The company entered the market only recently, at a time when tenants rule the leasing market.

Where stalls have yet to go

Such stalls, however, are not yet to be found in shopping centres administered by 
ECE Projektmanagement. Special occasions such as pre-holiday fairs are an exception. ECE wants to maintain a degree of order and clarity in their facilities, and to expose the windows of regular stores effectively. However, the company does not want to comment on the flaws of having stalls in passageways because such a possibility is currently being considered. Everybody knows that every square metre leased counts in hard times. ν