Consumer drivers: Mainstreets vs Big Box
Mainstreets & Retail Committee SA
Main Street and Big Box will continue to operate that way it has in the past 18 months albeit the adjustment retail has made due to the covid pandemic. Long-term e-commerce cannot serve as a replacement for what humans need and crave: connection to people, place, and products that speak to their individualistic nature. You still require the physical store to try that new jacket on, feel those shoes on or smell that lunchtime Banh mi roll, as long as the physical store can adapt to the digital world.
In a recent presentation “Retail Outlook” October 2021 supplied and presented by Gavin Duane from Location IQ he discussed the historical trend from the beginning of the pandemic until October 2021 with respect to 7 day moving average of visitations to different Shopping Centre Types.
From the graph below we can see when the major outbreak across Australia occurred (March/April 2020) and the dramatic effect it had on retail in the way physical visitations were applied to each Shopping Centre Type. The City Centres (various mainstreet retail) took the biggest hit and still today is down on Jan 2020 figures whilst Neighborhood Shopping Centres have remained steady with visitations but sales for all major supermarkets has been very strong.
Once things start to open and return to normal I would think the city centres and outlets will start to return to previous visitation numbers albeit the consumer has become used to ordering online.
If we look at the Big Box retail and in particular major Supermarkets, sales for the 1st quarter of FY22 (released 27 Oct 2021) showed Woolworths was up by 3.9% in grocery sales as compared to same time last year, yet digital sales were up 53.1% and Coles (released 28 Oct 2021) has reported 1.8% up in grocery sales and 47.6% growth in digital sales which clearly shows consumers are preferring their groceries to be bought online. The major retailers are adapting physical changes to their outlets to adapt to their customers preference with the assistance and understanding of their Landlords.
Digital doesn’t come without its challenges with respect to Big Box retailing an article sourced from AFR by Sue Mitchell 2/7/21
”The capital intensity is increasing,” said DNR Capital analyst Chris Tynan. ”We’re going into a phase where incremental investment is pretty specific to current consumer trends in e-commerce, not just the traditional warehouse, logistics and store refurbishment cycles,” he told The Australian Financial Review. ”There is a significant build-out on systems and infrastructure to facilitate the growth of online grocery. There is risk around achieving an acceptable return on e-commerce-related investments, where the model is still evolving and it’s difficult to make money on. ”In the past with a lot of these investments you could identify a reasonable tangible return, with costs coming out over time. The problem is e-commerce for supermarkets is more complicated and expensive than other retail formats, so most incremental sales will be at a lower margin if not loss-making.”
Mainstreet retailers who can offer the experience / the goods and also have the digital arm of their business will prevail above other mainstreet retailers who don’t. To remain relevant in a rapidly changing environment, mainstreet retailers need to adopt a similar approach to Big Box retailers and reimagine an omnichannel presence, which will create a distinctive customer experience and satisfaction. Consumers are still eager to spend money in physical stores, as long as the retail experience is well-designed, entertaining, and integrated into our lifestyles.
Councils have a very big part to play in supporting local mainstreets with respect to all design aspects and customer access via available carparking and loading facilities. Focus for councils to assist Landlords and retailers needs to be applied to short term carparking for quick customer pick ups but also the local Uber eats / Menulog / Deliveroo, Doordash and many more startups delivery services entering this space.
Councils need to assist Landlords and Retailers in providing very convenient and flexible zones for customer transport vehicles (Bikes, Scooters, Cars and now Drones) for all mainstreet retail. Councils need to lobby or engage with State and Federal governments to ensure transport routes, bus and train services drive the customer to the mainstreet doorstop, then it’s up to the retailer to sell their product or sell their experience.
It is pivotal for council to further assist landlords and retailers to market the attractiveness of mainstreets in order to appeal to consumers, attract patronage and ensure retailers in the precinct can continue to contribute to the economic health of suburbs and cities. Retailing is an essential social, economic, and cultural activity, and a strong retail sector makes a significant contribution to local communities and to local, state, and national economies.
Landlords who listen to their retailers about changing customer needs and adapting the physical premises of their property to suit the retailers request, have a happy tenant.
Those Landlords who are reluctant to change / alter and assist their tenants have either a vacant premises or an unhappy tenant. In saying this, it also applies to the retailer, if they choose not to adapt to the changing digital environment they will get left behind.
Mainstreet Landlords and Big Box Landlords now more than ever need to listen to the retailers customers and adapt their properties to suit.