Living well for less: What ‘should’ it cost?

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Posted by: Matthew Ogg, Policy Adviser | Last modified on 15/11/2019

At our most recent event on focused on asset management, Patrick Dunne challenged industry thinking and left one particular question for all to consider in parting: what should it cost? As Head of Property, Procurement and Cost Transformation for Sainsbury’s, with a wealth of knowledge cultivated across business sectors and across borders, he should know.

 

“What should it cost?”

In these times of challenging market dynamics, systemic change driven by technology and a changing consumer, it’s a fair question. Managing occupational costs is key to a sustainable and profitable business.

 

It’s clear from the Sainsbury’s property strategy that change is underway. Store formats and investment are evolving; some stores are closing, but others are indeed opening – this is still a thriving business. But they have to be in the right place. They have to be efficient. And where they work with a landlord, they want good relationships.

 

Partnerships with other retailers that compliment a mixed-use strategy are also evident. Creative thinking in supply chains, use of space and asset disposal are all elements placing this business at the forefront of positive change.

 

Service charge or service change?

One issue arises again and again across industry. Service charge.

 

It is clear service charge remains one of those aspects on which both owners and occupiers need to continue to come together. Owners are paying for vacant space in many places and so have a vested interest, as much as occupiers wish to ensure costs are well managed. Occupiers’ costs need to be properly justifiable, but have already seen a number of savings over the recent past; how far can you truly go?

 

Neither stakeholder should lose sight of value. However, if you only reduce costs you may instead compromise service – and ultimately the customer experience.

 

Asking what things should cost, and ensuring a fair price for fair service lies at the heart of the matter.

 

We should constantly be asking ourselves difficult questions:

 

How many layers are there to delivery that means better prices cannot be achieved for example?

 

What would it cost in another sector, are we learning from others?

 

Can we better utilise economies of scale – at a local geographical level across businesses, rather than a national strategy across a portfolio – for better outcomes?


Collaborating for a better future

We can also continue to be open, robust and realistic on leasing, rent negotiations, dilapidations and other costs, while recognising some non-negotiable costs are more difficult to manage, like business rates. It is of no surprise we are all in agreement on the urgent need for rates reform. 

 

Managing occupational costs comes back to trust and transparency. Both sides must recognise the needs of the other, there must be some give and take. Therein also lie opportunities. We can do more together.

 

Insight from leaders such as Patrick Dunne and his award-winning team should be heard, and heeded. Revo continues to be a platform for such debate, for our members, and for our industry.

 

For everything else, you had to be in the room.

 

Join us next time as we conclude this seminar series for 2019 with “Delivering performance for investors and occupiers” over breakfast on 27th November in central London. Free for Revo members.

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