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Consumers set to benefit as disruption drives down prices

AmazonConsumers are set to benefit the most in the Australian retail sector as disruption drives down prices and bricks and mortar retailers focus their efforts on customer experience and service.

According to the latest Collier’s research and forecast report, the highly anticipated entrance of Amazon along with the entrance of other offshore retailers such as TK Maxx and JD Sport mean there is more choice available than ever before for Australians.

“The Australian retail sector is undergoing immense change and disruption, forcing retailers and landlords to refine their strategies and align better to consumer preferences,” said Daniel Lees, research director at Colliers International.

Lees said new platforms like the Amazon Marketplace will provide more depth to the current online offering available to Australian consumers, while also delivering end to end online sales infrastructure that was previously out of reach for many small to medium-sized domestic retailers.

“The Australian consumer remains quite healthy, which explains why so many offshore retailers have been executing entry strategies over the past few years,” he said. “We have a high income population which is concentrated within a relatively small number of capital cities and that population is growing. Internet penetration is also high, and many Australians are well travelled with a strong appetite to adopt global brands and fashion.”

Colliers said its research found the wealth effect delivered through the housing market has created a strong spending environment, and the range of products available means consumers have never been more tempted to purchase.

While the battle between online and stores will affect Australian retail, unlike the US, which has seen major store and mall closures, Australia is well placed to integrate disruptors into society.

“Compared to their American counterparts, Australian landlords realise that they cannot compete with online retail on price alone and have therefore invested heavily in experiences and place making to create an experience for consumers available exclusively in-store,” said Michael Bate, head of retail at Colliers International.

Bate added Australian landlords are also exceptionally good at developing an engaging tenancy mix and creating environments where retailers can reach optimal performance.

“We’re now starting to see some of the best tenancy mixes we’ve ever seen in Australia,” he said. “Landlords are seeing new opportunities to capture shopper attention with increased food and beverage options and providing unique instore and in centre experiences.”

Although retail sales figures have been trending lower over the past three years, much of this can be explained through supermarket wars, turnaround strategies within department stores and corporate failures within the household goods sector.

Sentiment levels have been remarkably resilient in the wake of several recent geopolitical events and the composition of the labour market has been improving in recent data releases. Price increases of major items such as food and fuel have also been subdued.

“Although there is perceived general shift in the market towards online retailing, there are certain sectors of the market where a physical retail presence is and always will be essential,” said Julian Demetrovics, director of Retail Tenant Advisory at Colliers International.

Demetrovics said retailers who specialise in the higher end of the market, particularly in food, fashion and jewellery are now spending more time and capital on their fit outs to focus on maximising the customer experience.

“Landlords are creating individual retail precincts which emphasise the experience of shopping, not relying primarily the brands and products themselves to attract customers to their centers,” he said.

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