Commercial property and business needs to respond to change

  • Opinion
  • June 30, 2015
  • Paul Keane
Commercial property and business needs to respond to change

A trip to Greece is an exhilarating experience: history, food, culture, sun and casualness.  Having been there three times, I have enjoyed the escape and the traditions it has to offer. About five years ago on a visit to Greece, we again decided to visit the Acropolis.

It’s an ancient citadel, located on a high rocky outcrop above the city of Athens. The Acropolis contains several ancient buildings of great architectural and historic significance, of which the most famous is the Parthenon. It’s a must visit if you’re in Athens. It’s quite breathtaking and the lights at night are something to behold as they cascade over the ruins of Ancient Greece.

On that visit, we just walked up into the Acropolis, right through the entry gates, along with dozens of other like tourists. It subsequently occurred to us that there was no charge for entry, but discussion proved that staff had been sacked due to them pilfering entry proceeds. As a result the entry stations were abandoned and tourists were getting in for free.

This is not a travel story, it is an analogy.

We can learn from the Greek economy

Greece as a country has had a very young entry level for retirement, with very generous superannuation to retirees. Working is not encouraged, it is very much a casual approach to life with little or no energy required by individuals. As a consequence, it is normal for the economy to be under threat.

The current economic debacle could threaten the long term future of the country, and by the time this opinion piece gets online, the country could be bankrupt. The impact on Europe and the Euro could be significant, and New Zealand will not escape the potential economic tsunami that may follow. 

But why has this happened? It’s all about not taking the bad medicine when one needs to. Greece has lived off social funding for years and the chickens are finally coming home to roost. What can we learn from this? 

Lessons for an ageing population

The first lesson is for New Zealand to look seriously at the aging population and to control the age for receiving the national superannuation. Times have changed. People are more aware of saving for retirement, and those in their 30s and 40s have the opportunity to save from now for their future. The National Government of the 1970s abandoned the retirement savings scheme and this must not be allowed to happen again, where the future was abandoned for “Think Big” opportunities of the time. Increasing the retirement age is probably well overdue. So where’s the analogy?

Controlling the outcome: Shanton

The closure of the Shanton retail chain, finally announced late last week, is the analogy. None of us can escape from economic pressures, but we can avoid a calamity, and we can control the outcome. Changes in customer behaviour, moving with changing customer aging, recognising demographics that suit your store location, controlling growth and sales, and ensuring profit is king is how to avoid going bust.

It’s really quite simple. The Shanton brand was most recently focussed on the lower socio-economic group, in that the fashion range available was priced to attract that demographic. The problem is that this group has little disposable income and the consequences are that Shanton remained a discount outlet. Probably a case of “too many eggs in one basket”!

Adjusting to the circumstance: RCG

The analogy is also interesting from RCG’s perspective. This company was founded on its retail expertise. We have worked with retail clients from across the retail spectrum for over 25 years. We remain close to retail and retailers. However, we have not ignored the need for adjustment to our business as circumstances change or economic situations also change.

Whilst we pioneered the large format retail experience that evolved in the early 1990s, we have learnt that nothing stays the same and LFR is now not as powerful as it once was in terms of aggressive development.

As a result we have adapted our skills, bringing mixed-use and commercial residential developments within our portfolio, thus ensuring that we continue to grow. As a result our people continue to benefit in changing environments and they have acquired the skills to allow us to continue to develop.

The Greek experience is a lesson for all.  Running a marathon was the epitome of human endeavour in days past, but there are now bigger physical challenges that demand more of us. A quote from that famous Greek Philosopher Aristotle is meaningful: “The roots of education are bitter, but the fruits are sweet”!

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