Beware the Pitfalls of Leases
I’m about to sign a lease on a new mall store. What should I look out for?
A. THOSE NOISY HERDS that wander through malls are a sweet sight to any would-be retailer, but the foot traffic comes with a steep price tag — incidental costs can run from $18 to $55 per square foot per year. Wherever you set up shop, scrutinize the lease for so-called “pass-throughs” — charges on top of the basic rent for things like common-area maintenance. Make sure you’re paying a share that’s proportionate to your unit’s actual square footage.
Look carefully too at who pays for utilities, taxes and insurance. Some other things to check: If the contract includes a provision for annual rent increases, see if you can get the landlord to agree to a cap. Further, if you’re not fully confident in the outlook for your venture, bargain for a short initial lease with an option to renew. This will cost more at the beginning but it’s better than being strapped to a slowly sinking shop.
Alternatively, you can ask for the right to sublease your space. That way, if you do need to cut and run, you’ll be able to have another tenant take your space and pay the rent, without having to break the lease.
VENDOR RELATIONS
Can an existing vendor really deny shipping you product if you refuse to sign a terms and conditions letter?
The short answer is yes, they can, says Cecilia Gardner, president of the Jewelers Vigilance Committee. A vendor is perfectly within its rights to set “reasonable” terms and conditions as long as its ultimate goal is not the restriction of business, she says. It might help your state of mind to discuss the issue with the vendor as these new conditions may stem from changes in the vendor’s own legal obligations, Gardner says. An example of this is the USA Patriot Act, which requires vendors to fully identify their business partners. “Many vendors are now making it a requirement of doing business that their customers fill out an ‘Identification Form’ that complies with the obligations of their anti-money-laundering program. Failure to complete the form may lead to the end of the business relationship,” Gardner says.
REFERRALS
How long should I wait before acting on a customer’s referral?
Unless the “referee” suggested you either call immediately or wait for a specific period, a reasonable follow-up would be two to three days, says Ivan Misner, a business author and contributor to the Brain Trust website. Send your prospect a note or e-mail, or make a phone call, expressing your gratitude to the friend for making the referral and your interest in seeing what you can do to help. Be mindful not to be pushy at this stage of the relationship, Misner adds.
BOTTOM LINES
When is the best time to ask a customer about their budget?
This is a little like asking, When is the best time to die? Put it off as long as possible, or if you can manage it, never, says sales trainer Dave Richardson. When you ask early or even midway through your presentation you are exposing your customer’s budget and setting a potentially unnecessary limit on what you can show her. “Since a budget is a budget is a budget, most salespeople are reluctant to suggest an add-on,” Richardson says. By waiting, you give yourself the opportunity to be much more creative, show her beautiful pieces and build value. The bottom line, Richardson says, is that if a customer inquires about the price, give it to her. But if she doesn’t mention it, don’t ask. After all, how many times have you seen someone spend more than they’d planned?
E-COMMERCE
What are the pros and cons of using PayPal on my website?
PROS: As a way to get your start in online retailing, PayPal has much to recommend it, most notably the ease with which you can launch the service, the sense of security it provides the shopper, and the low costs. There are no setup charges and no monthly fees, just a transaction fee of 2 to 3 percent — similar to what credit-card merchant-account processors charge. Some recent enhancements aimed at helping small and midsize businesses have also fixed a lot of the drawbacks previously associated with the service. Merchants can now accept debit and credit-card payments for a nominal fee per transaction. The new Express Checkout service eliminates the need to re-enter billing and delivery information for every customer purchase. Also, you can add your own branding during the checkout process, and direct buyers back to your website after the transaction is completed. Another attraction is that PayPal manages the entire transaction, so a business doesn’t have to handle or retain sensitive customer data like credit-card numbers.
CONS: As improved as the service is, it will only be a matter of time — success willing — before you’ll need to opt for a full merchant account and a custom shopping cart if you are selling a wide range of items. Second, if you offer only PayPal and no other payment service, the customer has to go through the hassle of opening a PayPal account. Finally, some jewelers have complained that PayPal doesn’t do enough to protect merchants in cases of disputed chargebacks.
This article originally appeared in the February 2008 edition of INSTORE.