How to survive 100 years in retail

  • Opinion
  • February 15, 2016
  • Warren Head
How to survive 100 years in retail

These two brands are so long trusted by Australian and New Zealand shoppers, they’ve become intergenerational. 2015 is indeed Bonds’ 100th anniversary year.

To celebrate this, the owners, Pacific Brands, launched a new range across all categories and channels, supported by the biggest campaign investment they’ve ever made. High-impact merchandising in all major wholesale partners and in its own retail networks has seen sell-through perform above expectations. 

After substantial cost reductions, Pacific Brands says it is now a very different business: much higher quality and substantially simplified, with greater growth potential and a strong balance sheet. 

One takeaway from this is it’s important to move decisively to offset stranded costs of activities that are dragging on earnings. It can provide a turning point.

FY15 looks like a turning point for Pacific Brand’s earnings trajectory. The key brands of Bonds and Sheridan are performing well, as are its retail networks. 

Two examples of how it is partnering with major retail customers are a new kids and baby concession in David Jones, provides additional trading space for the Sheridan brand, and Bonds’ first concession arrangement with Myer to showcase the new Bonds Sport range. “Bonds has a terrific opportunity to grow in the activewear market at more accessible price points than the global majors,” Pacific Brands chief executive David Bortolussi​ said.

At full run rate, Pacific Brands expect the two new concession arrangements to generate in total around $20 million of sales on a capital investment in fixtures and fittings of around $3 million, plus inventory. Beat that!

In another move, Pacific Brands have extended the endorsement by Serena Williams of the Berlei brand to be a global arrangement.

Pop-ups in our path

Now we are approaching Christmas, our major malls seem more crowded. This is not just by more shoppers, but by the arrival of more pop-up retail. I’ve been paying closer attention to the frequency of kiosks in malls after Paul Keane, the managing director of property, design and research agency RCG recently raised the subject.

It’s understandable that centre owners will wish to maximise available floor space with kiosks in key sales seasons. Fair enough, so long as the retailers with real stores get a fair crack at the consumers cruising by.

At the commencement of a lease, retailers will seek specific locations, says Keane.

“This is extremely important to a tenant,” Keane says. “Most jewellers will want a corner location so that they have maximum exposure. Fashion stores want to be located in a fashion zone with a wide frontage, whist the pharmacy will want a key location, probably near the food court. All simple retail planning, as the locations will work well for the retailer and the centre overall.”

Profile, in terms of location in the centre and store sight lines, is extremely important to a tenant, he adds. After a few years of occupation, the centre management starts filling up the common areas with kiosks. “Not such a bad thing, as they create good revenue,” he says.

 “However, what point do the rights of the ‘permanent’ tenants kick in? That is the fashion retailer who has spent a large sum of money fitting out the store, only to find that after a year or two a number of kiosks occupy the space in front of the store, limiting exposure and customer access.”

On a visit to Botany Town Centre, Keane found kiosks were impeding regular customer traffic flow.

I recently counted 22 pop-up shops, including cafes, in Northlands, Christchurch, but with regular spaced crossings crucial to everyone’s cash-flow.

Keane said the respective parties’ rights depend on what is in the lease in terms of common area occupation. “The tenant has the right to trade, and the landlord has the right to use the common area, but not to the detriment of the quiet enjoyment of the tenant and their business,” he says.

Which may make you wonder, how many people walk the aisles in a big centre? Apparently some 12 million a year at Sylvia Park, which is why owners Kiwi Property have attracted the international clothing retailer H&M to launch its first New Zealand store there in late 2016. The brand is such a big coup that Kiwi Property is willing to invest $7.7 million to accommodate the fashion giant.  

This story was originally published in NZRetail magazine issue 741, December 2015 / January 2016.

​ ​

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