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Retail developers in Australia are living on borrowed time

Retail developers in Australia are living on borrowed time

Originally published on December 14, 2016

Australian retail shopping centre developers are trying to adapt to a changing world. The quote below is from the 2016 Recommended Retail Practice Report, recently released by AMP Capital Shopping Centres.

“Retailers who can give shoppers a sense of pride in a particular place will increase shopper engagement and subsequently sales. At AMP Capital Shopping Centres, this is referred to as our place making strategy – by this we mean capitalising on the unique characteristics of a place to create a destination that is local, authentic and relevant to that community. Putting place at the heart of what we do enables us to grow the value of our centres for our communities and customers.”

Do these shopping centres live up to the hype?

I checked the Southland SC in Cheltenham. This area was full of market gardens before the 1950’s (http://localhistory.kingston.vic.gov.au/htm/article/411.htm), and afterwards for the Lucas car parts factory http://localhistory.kingston.vic.gov.au/htm/article/103.htm). But the design or style of this shopping centre reflects neither of these topics.

Likewise, Malvern Central SC has a heap of local history to draw upon. At the very least, Malvern Star bicycles and Hubert Opperman comes to mind (http://www.malvernstar.com.au/about-us/). But there’s nothing unique here, either.

Finally, Stud Park SC is located at the corner of Stud and Fulham Roads in Rowville, and it opened in 1989. I turned to YouTube to find some footage of what Stud Park SC actually looks like. From about 4:41 through until 5:13 (https://www.youtube.com/watch?v=AvdBaMbgkuQ) it’s clear that it just looks like…any other shopping centre…anywhere in the world.

I understand that it’s expensive and difficult to retrofit existing shopping centres, especially in urban locations. I get that there are fire/safety/planning regulations that need to be followed. It’s also likely that there are both retailing models which suggest that this is the “right” way to build. And I’m no expert on either shopping centres or retailing.

But while AMP Capital (and others?) seems to understand the concept, they don’t seem to be able to execute it. Many (all?) Australian shopping centres are essentially just giant concrete and glass boxes. All of them have more or less the same floor plans. They virtually all contain the same chain stores, from Hobart through to Darwin.

The importance of being a destination

Many developers seem to misunderstand that most people visit their existing shopping centres for convenience above anything else. This article explains why: https://www.insideretail.com.au/blog/2016/09/14/supermarkets-time-wars-and-the-go-economy/. The places I mentioned above are not “destinations”– nobody has ever said “London, New York, Stud Park” in the same sentence.

People are drawn to markets and shopping streets overseas precisely because they are not generic experiences. Savile Row, Fifth Avenue, Bond Street, Rodeo Drive, Ginza, Avenue de Champs-Elysees, and others have earned their reputations over time. Part of their appeal is prestige – much (all?) of what is sold here is expensive. But it’s also because they stand out from one another; Rodeo Drive would not make sense in Tokyo, for example.

These streets don’t go out of fashion, because they represent decades or centuries of history, and become references in literature, films and music. Local residents and authorities look after and treasure these locations.

Australia has similar retail spaces, such as Chapel or Brunswick Street in Melbourne, or Oxford Street in Sydney. They are not yet internationally famous, but are well known domestically.

When I visit Japan, I enjoy visiting shotengais (shopping streets), such as this one in Fukuoka: (http://www.japan-talk.com/jt/new/kawabata-shotengai). They are truly the heart of their communities, and exist for people on foot, not for cars. There are often shrines and other community buildings included within them.

Stuck in the past – and vulnerable as a result

Why does it matter? Because a tsunami of change is hitting the retail landscape: https://www.insideretail.com.au/blog/2016/11/25/the-grim-retail-reaper/

Australia’s population is aging, but you’d never guess this from the mainstream shopping centres. There are few seats available for people to sit upon unless they are customers of a given store. Another thing you can count upon in any Australian shopping centre is a cacophony of music and noise. Everything is loud and garish, and aims for the lowest common denominator.

Are shopping centre developers aware of the pressure middle classes are under everywhere? http://www.nytimes.com/2015/01/04/business/the-economics-and-nostalgia-of-dead-malls.html. Chapter 3 in this Grattan Institute report (http://grattan.edu.au/wp-content/uploads/2014/04/188_productive_cities.pdf) should be fascinating to the shopping centre industry. Together with Australia’s housing bubble, people living on cheaper land are likely to earn less, meaning less to spend. If higher returns come from selling direct to consumers, why would retailers pay ridiculously high rents in shopping centres? And why would smart brands want to open up in generic locations?

Then there is the challenge of online retailing. It hasn’t taken off yet, but I think that’s only because of cost and delivery factors. And when (not if) Amazon arrives in Australia, many of the anchor tenants for Australian shopping centres are forecast to come under sustained pressure: http://www.smh.com.au/business/retail/disruptor-amazon-set-to-shake-up-jb-hifi-and-harvey-norman-20160926-groe32.html

It is five minutes to midnight for the Australian shopping centre development industry. Press releases about being the heart of communities are just marketing baloney. It’s high time to start building and renovating shopping centres in ways that actually achieve this goal.

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