A roundup of failures, prospects and slight shifts in retail

  • Opinion
  • September 13, 2016
  • Paul Keane
A roundup of failures, prospects and slight shifts in retail

The closure of the Dick Smith chain of stores across Australia and New Zealand earlier this year has likely stored in a distant corner of our memory banks. Not so it seems for those who are pursuing senior management for incompetence.

Failure to grasp the fundamentals

It is reported that some people in senior positions at Dick Smith failed to grasp the fundamentals of retail trading, thus the group floundered.

Examples such as the purchasing of items under their in-house Dick Smith label in direct competition with other well-known branded product they sell, and mass purchasing of product that would take years to shift, were provided as part of the incompetence process.

Of course, consumers ended up suffering in this debacle when gift vouchers purchased just prior to Christmas break in 2015 were unable to be redeemed.

All in all, a giant mess from a retail group that had maintained a good market brand over a long period of time. So could it happen again?

At risk of a repeat?

I believe so; I am not as convinced as others that retailing in New Zealand is the fertile ground that some suggest. This is particularly the case for international retailers who arrive here expecting to apply the same basic philosophy as they do in their European or USA locations.

Exposure to consumers in numbers

A core principal in retailing is ‘exposure to consumers in numbers’. A retailer will be very clear about the demographic profile that suits their particular market, and the need to seek exposure to that demographic. There is no point, as an example, of a high fashion retailer being solely exposed to blue collar workers.

It will come as no surprise to most that consumer exposure is probably most apparent in Auckland, where population growth is paramount. This is not necessarily the case in other major regional locations that have only limited population growth.

Auckland’s growth has been across all demographics, making it a prime location for top international brands and the most realistic potential for retailing.

New retailers entering the New Zealand market will need to carefully consider their future growth strategies.

Not just retailers who should be wary

In these times of aggressive economic growth in New Zealand, landlords will also need to consider these same questions to ensure they secure retail tenants with longevity.

Meanwhile, it is interesting to observe some key shifts relating to our domestic market.

James Pascoe Group’s 17.5 percent slice of The Warehouse Group pie

The fact that James Pascoe Group now owns 17.5 percent of The Warehouse Group has a certain irony. This was a low key acquisition; it was probably ‘friendly’ in that one imagines discussions would have evolved between the two parties at the highest level.

These are two home-grown New Zealand companies and the shareholding by Pascoe Group would have to be considered a “semi-major” move. The opportunity it offers both parties however is substantial.

The two groups now have 14 major retail brands between them which in itself is a major retail group. Further acquisition of other retailers will just add to the overall strength of the combined portfolios.

This combination is not unusual; across the globe many retail groups have secured sub-retail brands and grown accordingly. In Australia, Wesfarmers, Woolworths and Premier Investments are just some of the groups that own substantial retail companies. This model could see the James Pascoe and Warehouse groups be one of the same.

Easter trading to be decided on a local level

The final decision on whether to extend retail trading on Easter Sunday, and potentially other currently sacrosanct days, has been turned over to local Councils by Government. In my view, most Councils will accede to the extended hours, and shops will be open when and where within five years across the country.

Whether we need these extra shopping days or not, will be confined to the history books. Personally, I think a blanket decision would be a backward step. Some social time without the option of retail activity gives consumers an opportunity to do “other things”, and effectively encourages the consumer to shop on the trading days either side of the day retailers are closed. I doubt that we will see added sales growth as most consumers will maintain their traditional values and observe a continuance of family time.

Vouchers; a fair deal for both consumer and retailer

The length of time retailers should retain the life of purchased shopping vouchers was also recently discussed. Some suggested that there should be no time limit, as it does not benefit the consumer. This is absurd. As much as consumers need to be protected, you can’t have a retailer selling a gift card or voucher that has no expiry date. Imagine the impact on balancing the retailer’s books!

Retail and property, hand in hand

We have said many times previously that retail and property interests go hand in hand. The ability for each to survive in concert with the other is essential for the future growth of both.

Watching it unfold

Change will continue, naturally things evolve. The next twelve months, as we enter 2017, will be an interesting time for both parties. The most significant feature will be uncertainty which in itself difficult to predict!

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.

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