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Retailers entering ‘stabilised growth’ phase

Cotton On South AfricaAustralia’s retail landscape is entering a period of stabilised growth, with turnover in the sector growing 3 per cent in the third quarter of 2017, according to property firm CBRE.

In its Q3 retail marketview report, CBRE said this is the fourth consecutive quarter of growth around 3 per cent following declines since the beginning of 2016.

Growth in Australia’s retail sector is being underpinned by improving household goods sales in NSW, VIC and the ACT.

CBRE senior research manager Danny Lee said momentum in food and beverage also continued to build, with cafes, restaurants and takeaway food the only category performing consistently above 4 per cent.

“Food and beverage maintains a defensive advantage against online retailing, which has helped ensure its strong continued growth, in conjunction with ongoing innovation in the sector,” Lee said.

“The rise of online retail is expected to continue at double digit growth, as has been the case in Australia over the past decade. This will continue to place pressure on Australian department and discount department stores – making it imperative for retailers to get ahead of the curve in innovation.”

CBRE’s head of retail leasing for Australia, Leif Olson, said while the increasing demand for convenience would continue to drive growth in online sales, bricks and mortar still plays the most vital channel in  retail.

“Retailers need to be flexible and adapt their strategies to capture maximum audience reach. With consumers increasingly wanting a balance between experience and online retailing, omnichannel offers both worlds and therefore finding a balance between the two will help further position retailers for success,” he said.

The report highlighted Cotton On Group as being one retailer that has adapted its business model through innovation, with it working on rolling out ‘megastores’ that offer multiple brands under one roof. It has also relaunched its online platform, enabling consumers to make purchases across multiple brands.

The focus on innovation is also highlighted by the entry and exit rates of retailers in Australia, with some sectors having a higher exit rate due to technology and experience driving new concepts, and replacing older ones.

Some sectors, such as cafes and restaurants, are more defensive however, with a net entry rate of 13.5 per cent.

“This is a trend we are seeing across the Australian retail landscape. Shopping centres are also remixing centres and adding significant portion of floor space to new food & beverage precincts,” Olson added.

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