The rise and fall of retail groups is always a talking point, but traditionally it is overtaken by other events. The conversion of Victoria Park Market, a traditional retail icon on the fringe of Auckland’s city centre, is one such example, as is the Veritas Group.
The Victoria Park Market example
In years past the Victoria Park Market was a bustling retail and entertainment environment. It captured people, particularly on weekends, with its market-style offering and buzz! It was certainly a common visiting point for families, with an offering that tested the purse strings. Time has since moved on. The VPM has been redeveloped and is not what it once was, and the style of its offering has changed with the times.
Victoria Park Market went through a major refurbishment and strengthening a few years back. Although its hospitality precinct began with a hiss and a roar, the retail spaces in the main market area proved difficult to lease. Just as difficult, it seems, was attracting shoppers back to the market.
In the last couple of years, we’ve seen hopeful leasing campaigns, sales campaigns for units in the market, announcements of reopenings, a potential ‘outlet centre’, and recently the return of actual markets on Saturdays.
Now we find that the remaining 41 units still owned by the developer are being sold individually. This is not a good sign for the development, as why sell off a centre if it is successful?! In many cases, unit titling occurs because the returns from selling individual units are higher than for selling a whole property. From the vendors’ perspective the outcome is beneficial. However if we use some vision and look out ten years, the results for the individual new owners may not be as rosy as the offer currently appears.
In the case of Victoria Park Market, the situation is a little different. Most of the units up for sale are vacant, although the centre redevelopment was completed more than three years ago. Which begs the question, why are the units still empty three years on? And will selling them off individually really assist Victoria Park Market to regain its lost mojo?
It’s extremely difficult to keep individual owners focused on a combined outcome that satisfies all participants. Regrettably, the same may apply here. Retaining that “market” and ensuring all retailers are performing will be hard to achieve.
The Veritas investments example
Veritas Investments is another example of potentially expanding a business area into uncharted or naive waters. The group was formed as a reverse listing of the Mad Butcher franchise group. What soon followed was the purchase of the Nosh chain of food stores, and The Better Bar Company, with pubs in Auckland and Hamilton.
Judging by the performance of the share price, the asset value of the group seems to be languishing. So why is it that some groups divert their attention from their core business in pursuit of other activities?
In the case of Veritas, one needs to ensure a “hands on” approach to managing fast-moving consumer goods businesses; this is the key to success. Pubs and mini markets need that sort of careful care and attention, with sound management and infrastructure. That seems to be lacking.
In summary this week
In all retail environments, it’s good to have a new idea and to pursue it actively. However the implementation can sometimes be much more difficult, and knowledge and expertise are essential. People who know what they are doing are always the ingredient for success. That also applies to the sale of bricks and mortar.
Sharewatch | Dick Smith
With the media focus on Dick Smith, we thought we’d look at one of their competitors, JB Hi Fi. This company has been in New Zealand since acquiring the Hill & Stewart chain in 2007. JB Hi Fi now has sales of more than $210 million a year in New Zealand, although profits are still exceptionally slim: just $1.6 million in 2015.
Their latest results are for the six months to December 2015 – where JB Hi Fi made sales here of $127 million, up 12.7% with comparable sales up 5.2%. This is in large part due to “elevated market-wide demand for third party prepaid content cards”, which lifted sales by $8.4 million. This helps to explain why there are so many racks of prepaid cards in supermarkets and everywhere else these days! JB Hi Fi also opened two new stores in New Zealand in 2015, one in each half of the year.
Across its entire Australian/ New Zealand operation, JB Hi Fi is now maturing, with profits and sales continuing to increase but growth tapering off. It plans to open just 20 more stores, to take its total from 194 to 214. This will most likely take several more years.
Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils.
This post originally appeared on RCG’s blog.