The impact of rents, rates and changes to retail on Argenteus.
It is with great regret that we have to announce the closure of our Covent Garden branch on December 6 2013.
Recent changes to the tone of the Covent Garden market area, fluctuations in footfall and turnover, ongoing increases in rent, rates, and service charges have all conspired to make the continuation of the store untenable in the current economic climate.
Argenteus opened in Covent Garden in September 2001. At that time the area was identified with individual and eclectic stores offering quirky fashion and gift ideas. This was a perfect fit for us as an expanding company selling leading edge designer jewellery, and for many years the store was a huge success for us.
Throughout our time in Covent Garden we’ve been a popular destination store and we like to think we’ve added an element of distinctiveness to the area. Our trademark bright yellow walls and custom built interior has been a part of the Covent Garden experience through a time of much change, both within the market and in retail in general. We were often cited as an asset to the market by former landlords Scottish Widows, and for many years we were also heavily involved in the traders association, before the current owners Capco effectively closed it down.
Capco took over the development in 2006 when they assured us that maintaining Covent Garden market as an enclave for small independents was one of their key objectives. However over the past few years that seems to have been forgotten as they have pursued a policy of moving out these individual traders in favour of larger operators and chains.
The ongoing shift in tenant mix away from apparel and towards beauty, cosmetics, perfume and food has also not been helpful for us. We have always traded best adjacent to men’s and women’s clothing stores which are now virtually non-existent in the market. This has led to a marked change in the type of customer visiting. We now mostly see tourists groups who window shop or just pass though. Very few of the local residents and workers we depended on now come to buy.
In our experience, tourists are generally not large spenders. Whilst foreign touring groups, often characterised by swathes of schoolchildren, might help to push footfall figures up, they’re not interested in much beyond a place to eat their sandwiches whilst ticking another landmark off their list. They’re certainly not a demographic you can build a long term relationship with, as we like to do with our customers. It’s arguable that neither are they likely to be customers for the large international chains that are starting to dominate the area.
Conversations with other longer term retailers (those that are left), have confirmed an overall decrease in sales over recent years. The growing list of other companies closing their stores also supports this view. The frequent opening of new stores with great fanfare, is often followed by a quiet closure when reality dawns. This churn may be another reason for the loss of regular visitors.
Our decision to leave
After an acrimonious lease renewal two years ago, we were effectively forced into accepting a rent increase which was well beyond all expectations at the time. Sales then were reasonably healthy, so we believed we could swallow the higher overheads. Frustratingly though, turnover began to slip almost from the day we signed the new lease. Whilst the store is still profitable at the moment, we’re seeing costs rising every year, not least the escalation of business rates which are due to rise by over 3% next year, and service charges which have increased by 50% over the past three years.
We approached the landlords on a number of occasions, asking for a temporary rent reduction to reflect current trading conditions. This was in the knowledge that many other stores around us, particularly the newer ones, were already on significantly lower rents. When it became apparent that this was never going to happen, we reluctantly placed the store on the market. In view of the high stakes involved, we didn’t see a long term future for Argenteus in Covent Garden and so felt it was better to leave on our own terms, rather than wait for things to deteriorate any further.
After subsequent discussion with the landlords, we were offered a substantial surrender premium for our lease. Still eager to maintain a presence in the market, we suggested that, instead of paying this, and then presumably offering further concessions to secure a new tenant, they could simply reduce our rent by an equivalent amount over the remainder of our lease. Again this idea was rejected. In the circumstances, we felt we’d done everything we could to retain the store and it was time to move on.
Unfortunately, delays in negotiating our exit have meant that the store will now close just before Christmas on Friday 6th December. Obviously, we were not keen to close at such a key time of the year, not least because we didn’t want to make staff redundant just before Christmas or let down customers who we know were getting ideas for gifts. However, due to the nature of the agreement, we have no choice.
The future for Argenteus
Of course we can’t entirely blame declining sales on over-ambitious landlords. Along with most other retailers, we’ve also fallen foul of the downturn in consumer spending and the impact of the internet.
Within the designer jewellery industry there has also been a shift in emphasis away from individually curated stores such as ours, towards a more mono-brand offer. This is something that has been difficult for us to respond to due to the size, cost and location of our stores and our wish to maintain the independent ethos that Argenteus is known for.
Our exit from Covent Garden marks a change in direction for Argenteus and a refocusing of our business away from bricks and mortar retail for the near future. Over the past few years we’ve become disenchanted with a commercial property model mired in the outdated and unreasonable expectations of most landlords and developers.
The recent sea changes in the world of retail, particularly the maturation of online, have meant that a company of our size can no longer remain competitive whilst servicing the overheads demands of small stores in such high profile locations. Whilst we don’t discount the possibility of new store openings in the future, we are initially going to be investing in and re-launching our online offer, whilst continuing to re-align our property commitments.
We are currently working on a new online portal which will feature British designers and manufacturers of jewellery, clothing and accessories to launch in 2014 and we are in discussions with department stores with a view to opening concessions in key locations. The directors also have a number of other business and retail projects not associated with jewellery that they are looking to pursue in the coming months.
Trade has been very brisk since the Covent Garden store launched its closing down sale last week. With reductions of up to 50% throughout the store, customers are buying early as they realise we won’t be there for the final run up to the big day.
As we enter our 13th year of trading in Covent Garden, taking the decision to close the store has been a very difficult and emotional one for us. We’d like to thank our Covent Garden staff, our wonderful customers, our suppliers and the dedicated and talented designers we work with, for their business and help over the past years and for their kind and supportive comments since we announced the closure last week.