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Is the future of retail in jeopardy?

  • Opinion
  • June 28, 2017
  • Paul Keane
Is the future of retail in jeopardy?

What an interesting last couple of weeks for the retail industry.  

First off the sudden termination it seems of the "Nosh Food Markets" in Auckland.  

I say "it seems" as the apparent demise may not be quite all over, but the death throes are certainly apparent. The group of Nosh stores was owned by Veritas Group who also owns the Mad Butcher group and did own a few pubs. The latter were closed some time ago and the company dispensed with Nosh to an Australian group right on Christmas last year.  We wrote about the sale at the time and didn't rate the survival potential. All that aside, the disappointing aspect of this sale and the subsequent and apparent decline of the brand, is that it seems the suppliers to the brand have been left high and dry. Veritas apparently sold the brand and stores to the new buyer on the basis of the latter taking over the debt to existing suppliers.

I am not sure exactly how you can transfer a business debt without the "buy in" of all parties, but certainly the arrangement has left a bad taste in the mouths of suppliers who have it seems not been able to recover their debt. In any event most Nosh stores have closed with doubt about their long term future and potential resurrection. It also says nothing about the way the group selected their locations and the need when selecting sites to ensure they are exposed to good traffic flows and has adequate car park numbers. Nothing will kill a business more than customers who can’t easily access the site.

Meanwhile, war it seems has been declared on the shopping centre industry.

The acquisition by Amazon of a major USA food chain has started the rumours that shopping centres are closing and the industry is in disarray. Locally, on the domestic market, questions are being asked about the survival of a number of smaller centres in this country.

First of all, as I said to one of the RCG team recently, the retail industry really is a "merry-go-round".  How come? Well take the Amazon situation. They have undoubtedly been the pioneers of the online trading industry.  Primarily, they started with the sale and distribution of books and movies (DVDs).  The latter has all but collapsed, but books and kindles still form a large chunk of customer interest. The move by Amazon into Australia has focused attention on the sustainability of certain retail types, hence shopping centres. So why have Amazon purchased a major food retailer?  Simple, they see the need for bricks and mortar and the purchase then gives them a distribution network. The company cannot guarantee deliveries if they don't have a well-bred range of distribution outlets.

So does all this mean that we will have our supermarket goods delivered by the Amazon format?  That could happen, but by then I will probably be feeding the vegetables! How much of a threat is it?No more than what retailers want the threat to be and from my perspective, I see that this acquisition signals the need for bricks and mortar.  It’s all good for the industry. Amazon wants the purchase to succeed like any other retailer.

Meanwhile, it’s ironical in our domestic market, that we see new retail development at Sylvia Park in Auckland by Kiwi Property, potentially a new development in Newmarket Auckland by Scentre Group, a new major development of Pakuranga Shopping Centre in Auckland.  All three owners and developers are plotting the introduction of new International Retailers to each centre, with an extension of each into "mixed use".  So do I fear for the downfall of shopping centres?  Not at all.  However, there are "category B or C” shopping centre owners who have failed to improve their centres and have been left with potentially derelict centres. It was not the fault of anything but the inability of the respective owners to look ahead, and most importantly maintain a "partnership" with its tenants. That's the key for the future, nothing more nothing less. 

 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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