The retail sector is enjoying a shot in the arm as Christmas shoppers flock back to shops in a show of confidence. As restrictions ease around the country, research by Deloitte found 72 per cent of Australian consumers are happy to face holiday crowds in stores and malls compared to 61 per cent of Americans and 55 per cent of those in the UK. About 70 percent of retailers are also forecasting their e-commerce sales to exceed those of last year.
Positive signs first appeared in October when Australian Bureau of Statistics retail data for the month showed a 7.3 per cent increase in trade over the same period last year. The festive spending spirit will further be buoyed by personal tax cuts announced in the recent Federal budget, coupled with consumers divesting themselves of the cash they would normally have spent travelling overseas – some $60 billion annually.
It all boils down to good news for the retail sector which has been among the hardest hit this year. Bricks and mortar retailers were already facing mounting pressure from online when lockdowns and social restrictions threw e-commerce into overdrive. Some dived, others thrived, Woolworths and Coles among them as non-discretionary spending spiked. Strong online grocery sales led to the fast-tracking of technology with Woolworths now using robotic packing systems 5 times faster than manual labour. Similarly, the world’s largest sporting goods retailer, Decathlon Group, announced a few days ago a partnership with leading contract logistics solutions, DHL Supply Chain in a new Goods-to-Person Robot (GPR) solution for its Sydney warehouse. The GPR can move at almost one metre per second allowing up to 144 customer orders per hour to be despatched – more than double the capacity of manual labour.
Shifted goal posts
Shoppers may finally be content, but landlords and investors now face a tricky new playing field. Regional centre owners took the biggest hit this year reports Colliers International in its Retail Research and Forecast Report _ Second Half 2020. Far better off have been neighbourhood and Large Format centres whose owners have not endured such substantial write-downs on income. Their rents remained largely above 80 per cent throughout the year compared to levels of around 40 per cent seen by the regional centre owners including Vicinity, Scentre Group and GPT in April to June.
While such tough economic conditions halted the bulk of investment decisions this year, recent months have yielded significant improvements in investment volumes points out Colliers International’s director of research Kate Gray. The year ahead, too, is shaping up to be markedly brighter.
“The outlook for investment is more positive leading into 2021,” Ms Gray said. “We expect that non-discretionary centres will be in high demand and that there is a possibility of yield compression and increased values for well-located, strong catchment centres. There are several institutions which are looking to invest further in this sector.
“We also see that quality assets, regardless of size and sub-category, which have strong catchments and performance will continue to be in demand. The next 12 months could provide some significant buying opportunities for long hold trophy assets.”
Happy on High Street
Among others to rise triumphantly from the pandemic’s (still smouldering) ashes are high street shopping strips. Mark Fletcher, director of newsagency marketing group newsXpress and a distributor of point of sale software, said sales data gleaned from around 3500 clients across 9 retail channels showed double-digit year-on-year growth in high street retail strips across every location - suburban, regional and rural.
“In our latest analysis of 60-plus such businesses the average year-on-year revenue growth is 22%,” Mr Fletcher said. “Some newsagencies are up 25 per cent to 40 per cent year-on-year as lockdowns forced people to shop locally.” Consumers have continued to shop at their local stores following the lifting of restrictions rather than solely at shopping centres. “They’re still going to shopping centres,” Mr Fletcher emphasised, “but more people are now shopping locally.”
Also positive was consumers’ continued spending following the early introduction of Christmas retailing. “Some stores chose to do this in October which is about four weeks earlier than usual,” Mr Fletcher said. “But instead of spending slowing straight afterwards it’s been maintained and grown since.”
Newsagencies have fuelled much of their own trade by stocking larger ranges of giftware catering to the pandemic-driven shift in consumer taste. Flying out their doors are comfort goods – from candles to face masks to incense; greeting cards; jigsaws games, toys and anything Australian Made. “One regional newsagency in Queensland sold $41,000 of giftware in November alone compared to $17,000 in the same month last year,” Mr Fletcher said. “Overall Christmas looks strong and retailers are very positive about next year. Those that have done especially well are pet shops, garden centres – they have done massive trade – product and farm supplies and toy retailers.”