Across the U.S., fashion brands are shutting down their stores as numerous states have issued orders for people to stay indoors and avoid large gatherings. To avoid the inevitable massive hit to sales that closing stores will have, some brands are negotiating with their landlords for reduced rent and other concessions due to the extraordinary crisis that is the coronavirus outbreak.
Koio, a DTC footwear brand that makes Italian leather shoes, shut down all four of its stores last week in Miami, New York, San Francisco and Los Angeles. Founder Chris Wichert said, despite the fact that 70% of the brand’s sales are made online, the closing of the stores has already hit the company hard. The Miami and San Francisco stores are managed by a company called Leap, which shares costs, profits and operations from the store with Koio. Wichert and his partners at Leap have been asking for their rents, which are between $10,000 and $20,000 per month depending on the store, to be split in half for the remainder of the period when they’re closed.
“We are trying to both pay all of our employees and pay our rent,” Wichert said. “We are trying to negotiate with landlords to share the burden and reduce rent for the months we’re closed, but it’s really challenging. Landlords are not as willing to work with the brands as we’d like. Hopefully that will change, but the only way to make it through this crisis is if landlords and brands work together and share the burden.”
Brands from H&M to Topshop to Untuckit have all approached their landlords with similar requests. Topshop reportedly asked for 50% off its rent for the next few months, while British retailer Debenhams asked for five full months rent-free, according to The Guardian. The coronavirus has amplified the issue of landlords not giving enough leeway to their retail tenants, something that’s been going on for at least a year. But now the consequences will be even swifter and more immediately clear: If landlords don’t give their tenants a break, those retailers will be forced to close, and no brand will be ready to fill that space any time soon.
“Like we’ve been seeing even before the crisis started, the landlords need retailers, and they need to be able to give concessions during a crisis. Otherwise, they’re harming their own future prospects,” said Scott Stuart, CEO of Turnaround Management Association. “If they lose tenants, they’ll be hurting themselves too.”
But if landlords are being slow to act, it’s not necessarily due to malice.
“If the landlords aren’t being helpful, it’s not that they don’t want to be,” said Dalia Strum, chief partnership and marketing officer at RethinkConnect. “I’ve been behind the scenes on a few of these conversations, and I think a lot of landlords just don’t know what to do at the moment. They’re talking with other property owners and still trying to figure out how to create alignment, and decide what’s best for them and for the retailers. It’s an uncertain time.”
But until the landlords can come around, brands like Koio are still stuck with rent payments at a time when brick-and-mortar sales are impossible and online sales are dropping, leading them to explore other measures to make up the lost sales.
“We’ve never ever done discounts before, but we’re doing a few now, starting with a few things from earlier seasons,” Wichert said. On the product side, Koio is introducing a work-from-home package consisting of slippers and tube socks.
“Thinking outside the box is going to be very important,” Strum said. “Even if you do get rent relief for 60 days or something, the more important thing will be figuring out a way to restructure your business so that stores being closed isn’t as much of a problem.”
