Clicks and mortar

Clicks and mortar

Total Property - Issue 1 2017

Kiwi retailers need to invest in both “brick and clicks” if they are to compete against the wave international players setting up shop in New Zealand.

Experts have warned that Kiwi retailers can no longer afford to treat their digital business as separate from their brick and mortar sales, arguing that shoppers want a blend of online and offline experiences. Surveys have found that bricks and mortar stores are still where the bulk of New Zealand retailers make their money, and although the influence of e-commerce has resulted in the closure of some traditional format stores, with mid-range clothing outlets seemingly under the greatest pressure, there remains insatiable demand for well-managed prime retail property.

The lower end of Auckland’s Queen Street and Lambton Quay in Wellington are home to an increasing number of high-profile off-shore brands while malls owners are spending up big to lure prized fashion chains. H&M and Zara opened to great fanfare in Sylvia Park late last year, both of which are occupying close to 5,000m2 of space and boosted sales at the mall.

Scentre Group, Australasia’s largest mall group, announced plans last year to spend $500 million expanding its Auckland Westfield malls in Newmarket, St Lukes and Albany, and has promised to bring new international retailers to New Zealand.

The arrival of big international brands will put pressure on local retailers to up their game. Chris Wilkinson, managing director of retail consultancy group First Retail, said Kiwi retailers were lagging in digital sales because they did not have as much online visibility as their overseas competitors, which account for 40 percent of all online spending in New Zealand.

While local retailers had so far been able to survive by simply bolting an online offering onto their existing business, that approach was not sustainable.

Jonathan Elms, associate professor at Massey University and the holder of the Sir Stephen Tindall Chair in Retail Management, said that it international players would seek to dominate digital market. “David Jones, H&M and Zara have all invested in their systems overseas but have yet to offer online sales delivered from New Zealand,” he said. “But it will be coming – they just need time to establish the infrastructure so their online delivery lives up to consumer expectations and doesn’t damage their brands.

“For it to be seamless, New Zealand consumers have to get the same offering that customers in Australia and other key markets are getting. It will take time to get it right but it is safe to say that the impact these international retailers are having on the local market has really just begun.”

Dr Elms said Amazon’s push into the Australian market this year should put New Zealand retailers on notice. The digital giant’s planned new distribution centre just outside of Sydney would offer Kiwi shoppers even easier access to goods on the platform and at more competitive prices.

“New Zealand will be one of the last viable markets,” he said. “If Amazon does come to New Zealand, and I think it will do, it will have even more repercussions than it currently does. It could create real headaches for existing New Zealand retailers.”

He added: “There’ll be fewer stores and properties and they’ll be convenience-orientated in their format. There may be steady decline of big-box retailing, but that all depends on how successful retailers are at maximizing sales space.”

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