By Aimee Chanthadavong
The retail market is starting to show signs of recovery amongst changing customer behaviour and after four years of tough retail conditions, according to the AMP Capital Shopping Centres’ latest Recommended Retail Practice Report.
The report, titled The New Consumer Paradigm: Embracing the Evolving Retail Landscape, revealed there are five major structural shifts that are influencing and shaping retail from a macro level: globalisation, urbanisation, technology and innovation, consumer behaviour and generational evolution.
Bryan Hynes, AMP Capital Shopping Centres managing director, said retailers are gearing up for change.
“Retail is of fundamental importance to the Australian economy and while consumer confidence has suffered since the Global Financial Crisis, the report has found Australian consumers are ready and willing to spend if the product and experience are right,” he said.
AMP Capital’s head of investment strategy and chief economist Shane Oliver agreed, predicting retail sales growth will pick to around 4 to 5 per cent next year, following four years of tough conditions.
“The average retail growth last year was 2.7 per cent, which was barely enough to keep up with inflation, which indicated it has been a tough environment. This is compared to growth rates in the previous decade (before 2010) where the retail growth rate was 6.1 per cent. So it now sits at less than half.
“What has dampened that? Consumer attitudes with Aussies being a lot more cautious and so they started to pay down more debt and spending went out of fashion. But most are now revealing consumers are becoming a little less worried, which is a sign that consumer confidence is improving.”
In a panel discussion – involving Michael Baker, principal of Baker Consulting; Tony Dimasi, managing director of Retail of MacroPlan Dimasi, Gavin Duane, founder of Location IQ; Anders Sorman-Nilsson, futurist and innovation strategist; and Amantha Imber, founder of innovation consultancy company Inventium – it was established consumers now hold the power and it is retailers’ responsibility to cater to their needs whether that’s through their bricks and mortar, online store or any other touchpoint they have with their customers.
“It’s the power of the people now. What you have to do as a retailer is think of how you can embrace that by giving them that power and to not be scared of the process,” Imber said, who draws on the example of allowing consumers to choose their own individual shopping journey.
Sorman-Nilsson concurs believing it’s the “end of the information asymmetry” and technology needs to be used to enhance the shopping experience.
“What we’re seeing is the rational decision making in the economic minds of the Aussie consumer is becoming increasingly digitised,” he said.
“We are doing our due diligence digitally and it involves shopping overseas but I think the opportunity at the same time for Aussie retailers is to realise they have to provide better informational value to our digitised minds but raise the level at which you provide the experiences through our enduringly analogue hearts, which means in the bricks and mortar environments.”
One example that was presented showing how retailers can integrate technology into their traditional operation was Ikea. The company had digitised its catalogues – a very traditional marketing tool – by integrating QR codes.
But retailers need to remember it’s not just the younger generations who are digitally connected. Dimasi warns retailers cannot stereotype who and who are not connected.
“Technology is obviously more important for some generation cohorts than others and some are better at it than others,” he said.
“But we find with online shopping it’s remarkably even across the generations. Certainly Gen Y is doing a little bit more than others but baby boomers are not a long way behind.”
While technology is a key driver for all these changes, globalisation is also playing a role where international retailers are increasingly entering the Australian market. But it’s not new news that they are because high end retailers have been doing it for year, Baker said, it’s more the influx of international retailers who are targeting the mass middle market.
“It’s unprecedented challenge not just for domestic retailers but also for the incoming foreign retailers who have some really serious constraints,” he said.
“All the obstruction that is going with Japanese and North American retailers moving on to each other’s turfs is a pretty massive distraction for a global retailer.”
According to Sorman-Nilsson Australia, the reason behind is international retailers see Australia like a “treasure island” of opportunities after having “cut their teeth in all of their major cities like London, Paris, New York and Stockholm…they see Australia as an opportunity.”
Duane also notes when retailers are considering the real estate of their stores, their decisions are being influenced by the increasingly urbanised Australian population on their retail needs.
“We’re going by 300,000 people a year, 180,000 of that are new immigrants who come from Asia and Europe who are use to density,” he said.
“So in terms of the great Aussie dream of having a big block of land has changed dramatically. The growth of Australia now is about greater density and with that comes a change of consumers with a greater focus on Asian products, Asian trading, late night shopping and late night eating.”
Commenting on these changes, AMP Capital’s MD Hynes emphasised the company will plays a crucial role as a landlord in helping retailers deliver some of these demands to consumers.
“As a landlord we want to create a place for people who want to live, work and play,” he said.
“Our current development of the Macquarie Centre in Sydney is a great example. It won’t just be a shopping centre; it’ll be a town centre with a residential high rise, a student accommodation, a hotel. And that’s the shift you’re seeing in the Australian industry.”