What the
heck is Retail doing?
In the past
I’ve mentioned that I get a daily update via Inside Retail- an Australian firm
keeping its finger on the pulse of all things retail in this country. Lately
there has been an almost weekly article about the latest retailer who will be
shutting their doors or has called in the administrators. The types of retail
don’t discriminate- clothing, food, electronic and so on.
What is
happening?
Let me state
that I don’t believe retail is dying. It’s an industry as old as man in some
form of barter/ exchange process. I think what is currently happening is a mix
of many factors. The economy is not strong, wage growth for average Australians
has not been great in the past few years. General living expenses such as
utilities and grocery costs are increasing. There are a few world and local
factors that are also adding influence such as the Coronavirus, on/ off
tensions with America and the middle east and drought and bush fires.
Another
factor that I see a lot in this industry which I believe carries weight with
the declining retail situation is that we have reached a point with our
population and the amount of shops this country can actually sustain. In a
broad statement I believe we’re at saturation with shops. Yet time and again I
watch retailers signing up to new shopping centre extensions or new
developments.
The leasing industry has a lot to answer for.
Here’s a few
examples.
Within an 8-minute
drive from my house I have 3 Woolworths and 2 Coles to choose from. Within 15 minutes’
drive I have 2 Big W’s, 2 Kmarts, 2 Targets and now approximately 15 Woolworths
stores and a similar amount of Coles and I haven’t counted IGA’s and Aldi
stores.
Too many
choices-it’s a first world problem. That’s without mentioning the countless
double/ triple ups of smaller retailers around my home. Over the years I have
watched retailers be seduced by leasing agents and being told how their
business needs to expand and open more stores in order to survive. They get
lured in with facts and figures about supposedly how many new customers will
come shopping at the new location and how this will prove more convenient for
their customer base. The anchor stores are also used as bait for the smaller
fish.
I can attest
that if you have a good store with good product people will travel to you. You
don’t need to open multiple stores, because just one store can become the
destination if it’s good enough. Many of the big chains now shutting have
simply spread themselves too thin. The multiple locations are not drawing new
customers they are simply eating into their existing customer base that are
already shopping at one of their other stores. Add to that the other economic
factors mentioned above that have led to people spending less and that’s when
you really start to feel the pinch.
In addition
to one retailer having multiple stores there are also the competitors selling
very similar products who also have multiple stores. Not only has a retailer
increased their outlets, within meters in the same shopping centres will be
their competitors who have also opened multiple stores of their own.
I had a
hairdresser client who had opened in a Westfield centre from its very
inception. At the time there were 6 other hair salons. 20 years later there
were 25 salons. Considering that the population had increased and the size of
the centre, the increase in hairdressers was not in proportion. It felt to him
like the goal posts were constantly shifting.
The leasing
department for large shopping centres have targets to meet. They must fill
their tenancies and sometimes that can lead to some questionable tactics. I
believe there is a lot of adjustment to happen yet until we arrive at the
correct balance of retail to population to economic factors.
