“Easier, cheaper, faster, better.” Virtually every corporation is chanting the mantra and trying to remain relevant to clients, enhance existing business relationships and capture new markets. Simon Business Network™ (SBN) is walking the talk with an innovative program that aggregates services and products critical to keeping retail operations humming and offers them at preferred pricing to retailers.
“It started as an interest in lowering costs of operating Simon properties and having better control over standards and the quality of work being done. But it turned into a program that helps tenants leverage off that value proposition and accomplish something very difficult to do from a national office with locations in many different cities,” says Scott Mumphrey, SBN's president.
SBN started in 1996 in an effort to provide better pricing and services to malls in Simon's portfolio through aggregating numerous operational products and services used by its properties throughout the country. Simon property managers saw that tenants struggled with getting good value and finding companies that could provide consistent, timely, quality service to all their stores. Since then, SBN has been able to deliver the same value proposition to tenants in shopping centers across much of the United States.
The innovative program encompasses a wide range of business solutions and, leveraging the muscle it gains from its size, SBN essentially sources services and products in large quantities, driving down the costs and then passing on the savings to Simon Property Group and its tenants.
Dennis Cavanagh, SBN's executive vice president points out, “When you're as large as we are and solve a waste handling or HVAC maintenance problem, it's a huge solution. In developing solutions that addressed Simon's needs, there's probably an 80% match with retailers. We looked at the big items in the expense section of the income statement and said, ‘Can we have an impact by aggregating our spending?’”
SBN provides an impressive array of products and services, including everything from paper products and office supplies to big-ticket items such as store construction and renovation, facility services, HVAC maintenance and security services.
SBN has hand-picked nearly 100 companies — Preferred Vendors — with whom they've negotiated to provide products and services to Simon and to retailers on a national basis, so retailers can count not only on lower prices, but also on consistent, high-quality service from best-in-class companies.
And every participant in the network benefits.
What's the incentive for service providers to offer discounts? A steady clientele and cash flow. “We're able to say to a provider, ‘We'll give you 50 locations and for that we want preferred pricing. In exchange, you're going to get a base contract (Simon spend) that gives you immediate cash flow, then you can leverage off that to develop the resources and capabilities to offer services to the tenants,’” Mumphrey says. In addition to steady work, providers also get unparalleled access that allows them to develop long-term relationships with retailers that are likely to hire them for their construction projects and ongoing maintenance needs.
At the heart of SBN is the Total Facility Support (TFS) and Total Security Connection (TSC) programs, which provide facility maintenance, security and construction services — all the necessary services involved in running a successful retail operation.
Retailers are getting a prescreened expert and one who is thinking of developing a long-term relationship with them, rather than of making a quick buck. There's no greater incentive to provide top-notch service.
Contractors involved in the TFS program point to numerous instances in which they performed a small repair task — changing light bulbs or unclogging a sink, for instance — and walked away with contracts for maintenance and construction projects.
SBN continues to expand and improve its array of services. Its newest programs include a preferred parking and valet program, ATM service, credit card processing services and a cutting-edge operations platform that allows retailers to manage their operational needs from a convenient, central point.
It's also looking at the possibility of aggregating local dial tone and long distance service for phones, as well as a telecommunications initiative that eventually may provide each retail operation with enhanced technological capabilities. “Retailers haven't gotten to the point of using a lot of what can be delivered through that infrastructure, but that day is coming and we want to be there when it's pervasive,” says Mumphrey.
The vast menu of services also helps Simon Property Group climb to the top of retailers' lists when they're scouting locations. Cavanagh says, “Many retailers don't have a national solution in place in all product and service categories. If retailers can be more operationally efficient by generating better economics through programs available through Simon, they're going to be more loyal to Simon malls.”
A potentially huge market also exists outside the mall walls and SBN is pursuing relationships that would provide TFS and TSC benefits to strip and community centers, big-box retailers, multi-family housing developments and other buildings situated within a convenient radius of Simon malls.
In fact, the TFS portion of the SBN program is expected to grow by 30% to 40% annually. “The economics speak for themselves. This is literally a momentum-gathering business — the more you do the more you're going to do,” observes Mumphrey. “If we can capture deeper penetration in each tenant population, TFS and TSC will continue on a very vertical growth curve.”
Total Facility Support's Construction Services
Total Facility Support is the centerpiece of SBN and one of its fastest-growing components. According to Dennis Cavanagh, sales in TFS were $76 million last year and he expects the figure to exceed $100 million this year. Moreover, SBN anticipates TFS business will grow 30% to 40% annually for the foreseeable future.
TFS has assembled a list of providers that reside in the mall and can service all facility needs, from maintenance, cleaning and repairs to complete store build-out and remodeling projects.
Three Preferred Vendors — Varsity Contractors, Inc., UNICCO Service Company, and Control Building Services, Inc. — provide construction and maintenance services at Simon properties, while PCL Services Inc. and AnCor, Inc. provide strictly construction services. (For more details about the benefits of the construction services program and how it works see the roundtable discussion, “A View From the Field,” page 6).
“As we've developed this business, retailers have realized the value proposition we can offer them is unmatched,” says Brian Nelson, SBN's vice president of sales. “We have very talented people on-site in very good service companies, so we have a greater knowledge pool to draw from, offering consistent, high quality service at exceptional prices.”
The TFS approach can eliminate trip charges. Retailers and contractors develop on-going mutually beneficial relationships, and jobs are completed in a cost- and time-efficient way. Moreover, providers gain an edge they can pass on to clients because they're familiar with Simon standards and the inner workings of each mall and they've built solid relationships with subcontractors and local government agencies so that each transaction is speedy and smooth.
“The contractors are more efficient in getting work done because they have the complete cooperation with the mall's landlord,” says Barry Goldberg, director of store planning and construction for New Weathervane Retail Corp., New Britain, Conn. “Simon's providers' prices are competitive and we can get things resolved with one phone call versus going through a bureaucratic process.”
It also gives Simon a marketing edge and makes its properties more desirable. Bruce Harrell, director of tenant coordination for Simon, says, “We hope that when tenants look at Simon they say, ‘I want to go to a Simon mall because my costs will be better controlled, and the company can almost guarantee a turnover date.’”
He sees the contractor relationships as enormously beneficial because they can avoid the pitfalls associated with infrastructure quirks and avoid change orders and cost overruns. They're familiar with local code issues, building inspections, and the wrinkles required to get certificates of occupancy.
“They know what causes delays and how to avoid them, and the one-stop shopping helps tenants get through the construction and opening process faster and with better cost control.” And for Harrell's department such efficiency is appreciated. “We have significant motivation to help our tenants open early. We want a quality product and to get stores open faster so we can get rent coming in faster.”
Teri Guerrero, EyeCare Centers of America's project manager of construction and design, sees benefits of SBN especially when she needs quick turnarounds on jobs for stores. She has used Preferred Vendors both for construction and maintenance jobs. “You're not just getting some guy who hasn't worked in the mall before,” she says. “Having contractors who can work with us and the landlord to work out kinks and make it a smoother transition is beneficial. It makes life easier for us when we're running up against permitting, landlord approval and a tight schedule.”
TFS is in an expansion mode and its benefits are now being offered to entities outside the mall so strip centers, big box retailers, multi-family housing complexes and even colleges can draw on SBN's aggregation power. “They can see the same advantages of completing projects on time and within budget and tap the strong relationships that our contractors have with local subs,” says Nelson.
Total Facility Support Services
The Total Facility Support program shaves off time and dollars on all the construction and maintenance services required for the smooth operation of a retail business. Clients of Simon Business Network can tap the group's affiliation with 95+ Preferred Vendors to save money and reduce the headaches associated with retail projects. The services include:
- Complete space build outs
- Renovations and restorations
- Construction cleanup
- Parking lot paving and striping
- Barricade partitions
- Lighting design and installation
- Consulting, engineering and roofing
- HVAC repairs and maintenance
- Plumbing installation and repairs
- Electrical repairs
- Lighting maintenance
- Sprinkler installation
- Fixture and store repair
- Ceiling tile work and replacement
- Decor installation
- Janitorial services
- Carpet and hardwood maintenance
- Window and glass cleaning
- Trash and porter service
- Parking lot sweeping
- Snow removal
- Emergency and disaster cleanup
Advantages at a glance
- On-site management
- Single source of contact
- Uniformed personnel
- Professionally-trained personnel
- Internet connections for communication
- Quick response time
- Insured and bonded personnel
- Use of high-quality products
- National purchasing power
- Connection to Simon Property Group