Well I wish someone could work it out. Can anyone tell me why, when the entire retail sector has been screaming blue murder for at least a couple of years now, whoever has money these days is still putting it out there to build a new shop?
Take the recently announced $500M to expand Chadstone shopping centre in Melbourne. I know this includes new entertainment, offices and a hotel, but I would have thought that all the negative messages on the status of retail in Australia would have clearly conveyed that there needs to be a big rethink on the strategy. Perhaps it has something to do with the reported 129 submissions, public meetings, research focus groups and mail outs to local residents. They must have all thought it a good idea.
To predict what is really going on, I feel it’s not only online that is to blame with the influx of overseas brands enabling growth. I may be right in saying that the impact of Zara on the fashion market in Melbourne and Sydney was unprecedented and several other retailers have already capitalized on this opportunity. Top Shop and GAP for example have already moved in to the market with reportedly H&M, Uniqlo, Victoria’s Secret, Abercrombie & Fitch and Forever 21 to follow. It is estimated that there are likely to be up to 182 additional stores in Australia by 2016 delivering $1.9 billion in sales or 6% share of the apparel market.*
This same report by Morgan Stanley also states that international retailers tend to pay less rent per square metre on longer leases than other tenants, and take up more floor space meaning landlords will need to make up the difference from local retailers and making it even more difficult for them to compete.
I believe the bigger picture is the unavoidable fact that geographically we have a very large marketing space with relatively few consumers, meaning we don’t have the financial margins to establish and maintain sophisticated marketing techniques in Australia, coupled with distance from the latest and greatest in the European marketing world. We are desperately trying to keep up with the big boys on the other side of the world without the budget or the infrastructure. Or is it something more?
*Morgan Stanley’s report Global Retail Brands: The Saviour for Landlords?
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