New Rules Driving Retail Success

New Rules Driving Retail Success

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  NEW RULES DRIVING RETAILSUCCESS Retail focus The influx of international brands and intense media interest in shopping trends has thrown a great deal of focus on retailing this year. It’s not just New Zealand’s big cities that are seeing fresh retail opportunities, but our suburban centres and provincial towns too. Confidence is returning as businesses and property owners adopt new models that better reflect shoppers’ needs and expectations. From a sector that has seemed under siege by changes in consumer behaviour, a squeeze on discretionary spending and the apparent menace of e-commerce, shopping is finally back in vogue – but the rules have changed. Understanding and responding to these dynamics has helped innovative retail landlords reap rewards as store offers, formats and experience transform for the new economy that is increasingly blending both physical and digital channels. Understanding the key drivers Before sharing some of the dynamics behind success in retail property it is important to understand key trends driving shoppers in today’s new economy: Purposeful shopping Up to 80% of all purchases are now digitally influenced. This prioritises retailers and destinations, such as shopping centres, that have good online visibility and usability. CHRIS WILKINSON Adaptation helps retailers and property owners meet changing consumer needs and expectations. It’s not just New Zealand’s big cities that are seeing fresh retail opportunities, but our suburban centres and provincial towns too. Wall Street Mall, Dunedin 10  PROPERTY PROFESSIONAL  |  SPRING 2016
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  Convenience is king Consumers are increasingly time poor. They need assurance that products are available, and stores are easy to reach and open when they need them. This places emphasis on customer centricity, ease of access, and features such as click and collect in our busiest parts of New Zealand. Food and beverage is the new anchor An increasing percentage of consumers’ discretionary spend is going to cafes, restaurants, grocery and fast food outlets. Having a strong food and beverage offer within towns, suburban centres or malls is fundamental to ensuring the success of retailers. Suburban shopping Shopping close to home is seeing a renaissance as consumers re-engage with their community and recognise social value in supporting nearby businesses. ‘Localisation’ is a key trend across Australasia, which is helping lift the spirits and fortunes of suburban traders – and their landlords. In New Zealand, the recent lowering of alcohol limits for drivers has spurred an increase in quality neighbourhood drinking and dining establishments. This has been a catalyst in filling empty shops and, in turn, reconnecting residents with their nearby retail offer. For property owners in suburban areas there is a window of opportunity to leverage this increased engagement by developing retail environments that reflect the community, support gentrification and fit the needs of the businesses that best suit these areas. Characterful façade improvements, collaborative efforts with other landlords and a close working relationship with the local council’s urban designers can rapidly transform areas, creating destinations of choice for contemporary consumers – and tenants. Shopping malls While a great deal of attention has been focused on mega-mall Sylvia Park securing H&M and Zara to create a distinctly competitive edge, most New Zealand shopping centres have a similar retail offer which is increasingly challenging performance and goodwill. Consumers, tiring of homogenous stores, are prompting centre owners to prioritise the acquisition and encouragement of new brands, concepts and store formats. Delivering an offer that is unique, exciting Chris Wilkinson is the Managing Director of First Retail Group Ltd, a New Zealand based specialist advisory that works with major retailers, local and central government and property owners across Australasia and the UK. e: [email protected] Consumers, tiring of homogenous stores, are prompting centre owners to prioritise the acquisition and encouragement of new brands, concepts and store formats. Gore shopping area and aspirational is driving success internationally through retailer succession and development programmes, chains that ‘localise’ their stores and ranges – and shopping environments where customers can escape and enjoy retail ‘utopia’. There are a number of ambitious projects currently underway that will transform existing centres through luxurious environments, high levels of customer experience and unique retail mixes. These investments have been PROPERTY PROFESSIONAL  |  SPRING 2016  11
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  spurred by increasedcompetition in the shopping centre space, with new owners entering the marketplace. Malls have been quick to recognise the potential vulnerability to their assets – and the tenants’ future – as consumers increasingly blend shopping in-store with online purchases. With digital strategy and technology at the heart of future developments, owners are rapidly working to ensure their centres and stores are prioritised in customers’ minds. Utilising Wi-Fi, apps, digital signage, social media and other methods to reach and engage shoppers through an integrated approach, some centres are transforming connection and engagement. In Dunedin’s Wall Street Mall, a successful marketing strategy has leveraged social media to effectively engage the city’s inner city and student population, driving traffic and trade for the centre’s stores and cafes. Customer advocacy is a big factor that helps malls become aspirational destinations. Encouraging consumers to talk about, share and endorse a centre is not only cheap marketing, it is also having a transformational effect on visitation for target demographics, as Wall Street’s owners have discovered. Encouraging frequency of visit and sales uplift is a key goal as centres seek to grow performance and relevance in an increasingly competitive environment. Some have found a solution in what has in the past been their greatest commercial challenge – consumers’ digital connectivity. Innovative malls like Coastlands’ Shoppingtown on the Kapiti Coast have leveraged technology to reach customers, then reward them for visitation and spend. As part of a comprehensive strategy that integrated all aspects of the mall’s digital presence and reach, Coastlands developed a relationship with its customers and the wider community on levels unachievable through traditional marketing formats. This depth of connection differentiated the mall’s relationship and has helped increase goodwill. Free Wi-Fi has been a core element to that centre’s digital success. Enabling regular customers, visitors and tourists to access the web has helped lengthen customers’ stay – boosting performance for food operators and retailers. Wi-Fi functionality has also helped better understand customers’ visits, journeys and preferences within the centre, enabling managers and marketers to get a clear picture on trends. Provincial towns Challenges in rural economies have hit provincial towns hard, which has been reflected in the retail sector. With less spending, and a greater focus on thrift, store vacancies have increased and commercial confidence has suffered. NEW RULES DRIVING RETAIL SUCCESS New Zealand’s two largest cities – Auckland and Wellington – have been buoyed by international retailers scrambling for presence. Old Bank Shopping Arcade, Wellington 12  PROPERTY PROFESSIONAL  |  SPRING 2016
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  One town thathas bucked the trend is Gore. Early action by a mayor and council that recognised the economic and social value of its township has seen a major uplift in the town’s fortunes and confidence. When a well-known retailer closed its doors and couriers began buying larger vans to cope with online purchases, the council knew it was time for action. External support was brought in to develop a strategy and an action plan, then retailers and property owners came together to turn ideas into action. The GoRetail Group, and it’s Love Gore – Shop Local programme, have become an icon now in resilience for provincial towns with other areas keen to emulate Gore’s success. Core to the success of the programme has been an integrated strategy that brings together all elements that drive retail performance, objectivity and expertise, as well as a determined approach from the council and stakeholders that has ensured endurance. Like shopping centres, free Wi-Fi has benefited towns like Gore, encouraging people to stop and spend time and money in the stores, cafes and restaurants. Data from the system is also being used to determine visitor frequency and trends. Gore is seeing new stores opening, businesses collectively developing online shopping and a confidence few other towns can match. Main centres New Zealand’s two largest cities – Auckland and Wellington – have been buoyed by international retailers scrambling for presence. First it was Top Shop, then David Jones, who have helped put retail back on radar – and reconnect consumers with the shopping experience. These stores have spurred a flurry of leasing activity near to their new locations as other chains have been eager to benefit from the draw of these traffic drivers. At a higher scale still luxury retailers have been busy – assisted by New Zealand’s increasingly international residency and visitation. Asian customers, in particular, have propelled demand for icon brands, many of which have located in Auckland’s Lower Queen Street area. Tiffany’s recently announced store in Britomart further strengthens this area as an aspirational destination for premium shoppers. For many retailers their presence in Auckland’s emerging luxury quarter is often seen as global brand advertisements and market positioning. Visibility amongst a cosmopolitan audience of residents, domestic visitors and international tourists helps propel brands and drives downstream sales. This has seen recent leasings with square metre rates amongst the highest in Australasia. For mass-market retailers the equation is very different. Stores need to be productive and profitable – driven by tightly managed rent-to-turnover ratios – and that often make the difference between profit and loss. High occupation costs have helped propel continued growth of vertical chains – at the expense of independent stores. Increasingly, only businesses with hefty margins afforded by owning the supply chain can win in expensive rental environments. Chains come with their own challenges for central cities. Cookie-cutter stores serve up a sameness that consumers can find in any mall or town across Australasia. This is a key reason that shoppers have been disconnecting from the store experience as they seek differentiation from online channels. In progressive cities like Wellington guardianship programmes such as Our CBD are charged with ensuring independent and artisan traders can grow, flourish and pitch it against the chains, while also making sure all inner city businesses have a successful environment to trade in. Wellington City Council has been actively developing laneways and encouraging the adventurous use of buildings that create spaces for emerging and entrepreneurial new ideas. This has seen the growth in ‘provenance’ businesses like Fix & Fogg, Three Barrel Soda and others whose brands are now represented across New Zealand. These laneways have been so successful that well-known names are clamouring to be part of the action. Al Brown’s Best Ugly Bagel has just opened in Swan Lane off Cuba Street in Wellington’s distinctly bohemian quarter. Summary Retail is in its most dynamic state ever. Opportunities continue to unfold for many, while businesses that don’t interpret change will fall rapidly by the wayside. To succeed, businesses, towns, cities and major property owners need to have an agile retail strategy that guides key decisions, interprets opportunity, drives performance and manages risk. These are the elements prospective tenants want – and their funders are increasingly looking for certainty around performance before committing to investment and leases. Retailing will continue to evolve, but the road ahead is becoming clearer as brick and mortar stores find their rightful place in consumer lifestyles and the new digital landscape Retail is in its most dynamic state ever. Opportunities continue to unfold for many, while businesses that don’t interpret change will fall rapidly by the wayside. PROPERTY PROFESSIONAL  |  SPRING 2016  13