Monday, February 24, 2020

Retail in Australia

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.

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