Ten years ago I was asked by the City of Greater Geelong to speak at a forum about the state of the retail economy. There was concern regarding the number of vacant shops in the city and a need to hear a voice from outside the region to discuss the facts. At the time, I was Deputy Executive Director of the Australian Retailers Association (ARA) and was able to provide national and international data and trends to help inform the local situation.
Back then, there was a lot of fear about the impact of online retail and a post GFC consumer. Ten years on, and the impact of the global economy on local retail sales is clear. When I was at the ARA, the online trade levels were estimated at 2-4 per cent of all retail sales. According to the NAB Online Retail Sales Index, it is estimated that in the 12 months to September 2019, Australians spent $29.53 billion on online retail, a level that is around 9.1% of the traditional bricks and mortar retail sector (August 2019, Australian Bureau of Statistics), and about 9.7% higher than the 12 months to September 2018.
The old model of in-store retail strictly focused on products being sold. However, consumers have slowly but surely been moving away from strictly shopping for products, instead seeking a more engaging experience in the physical environment.
The impact of online retail means that consumers are able to purchase anytime, anywhere and deliveries are door-to-door. No one needs to try a book or music purchase on for size and technology now allows immediate downloads of a range of content. As a result, we have seen a plethora of music and book stores close. The challenge for bricks and mortar retail was, and is clear. Consumers have changed their buying habits and are also far more discerning in terms of the experiences they demand in-store.
But there have been other impacts. Australia is also facing slow wage growth and a more cautious and socially-conscious consumer. This has all combined to create a slow retail environment with Target facing store closures, Big W announcing in April it would shut 30 stores and David Jones revealing a $437 million write-down.
Chief Executive of Wesfarmers Rob Scott also suggested Target could pivot to a more online-focus. E-commerce and click-and-collect are becoming a “big part” of Target’s strategy with e-commerce sales representing “a very significant proportion of Target’s total sales.” (Sydney Morning Herald, 28 August 2019)
In March 2019, the Geelong Advertiser reported that almost one in 10 shops in Geelong’s CBD were vacant, with the most empty number of shops hosted on Moorabool Street at 17.7 per cent unoccupied. (Geelong Advertiser 11 March 2019)
So, what’s the answer?
The Australian has reported that Carmel Hourigan, global head of property for AMP Capital, has highlighted the need for retail to “keep evolving”. They can do this by becoming “social infrastructure-style businesses” and “community hubs rather than traditional shopping points”.
The function and purpose of central Geelong needs to be defined, and businesses and property owners need to consider the new consumer and their demand for experiences. Consumers are shopping with their emotions instead of their wallets. This is reflected in the demand for socially-conscious brands and knowing the provenance of the product.
The Committee for Geelong’s new strategic framework sees the central Geelong area as a vital component of our future whilst our population grows to 500,000 in 2041. The central area of Geelong needs to have a strong residential population, a series of defined commercial precincts that are investment-ready, an eclectic shopping experience and a vibrant, diverse nightlife offering.
The work of Revitalising Central Geelong will help create the necessary infrastructure and street scape to make our CBD functional and attractive, but it is up to private investment to make this public investment come to life. In 2020, the Committee will be working on an approach to help define the commercial and retail investment opportunities in Geelong as part of designing our best future. We need to accept the new retail environment and meet the challenge.