AUSTRALIAN retailers need to catch up and learn from successful players by offering an experiential experience to woo customers and be “Amazon proof”, as research shows that contrary to preconceptions, millennials shoppers prefer to shop in physical stores.
The Australian Property Institute and Real Estate Institute of Victoria’s 2018 State of the Market was launched by newly appointed API CEO Amelia Hodge, who introduced the speakers.
Presenting at the event, CBRE senior associate director Zelman Ainsworth said the growing influence of millennials in the retail scene cannot be underestimated.
Based on data collected from 13,000 millennials globally including 1,000 Australians – those born between 1982 and 2001 – CBRE found a staggering 70% make their purchases in-store and 20% suggested they want to increase their spending on food and beverage and entertainment over the next three years.
One in four millenials see shopping as a way to socialise with friends and family, and on average they spend 9.7 days per month dining out and going to live entertainment.
Contrary to preconceptions, “I like to see the products” was nominated by around 56% of millennials to be the most common reason why consumers continued to visit physical stores. That was followed by being able to get the product “there and then” (~49%), and “I want to try the items on” (~43%).
“I enjoy shopping as a leisure activity” was next with ~29%, followed by “it’s easier to shop in store (~26%), using time to shopping to socialize and more choice in store (~21%), better prices in store (~17%) and wanting personal service in store (~12%).
Ainsworth cited international examples including Dr Martens, Nike, Reebok which created stores where customers can experience their products before purchasing.
“It is all about customer experience and empowerment. Every good and bad customer experience becomes an ambassador for your brand and now the public have platforms to communicate through Facebook, Instagram and alike,”
Ainsworth said the industry is entering a period of slower growth in which tenancy mix is vital.
CBRE’s research showed luxury stores can generally pay 20% of their sales on rent – clearly the most comfortable margin of any category.
Fashion was next, at around 12%, followed by cafés at 7%, restaurants at 5%, and supermarkets with 4%.
“It is important to understand the differences between retail categories as this will affect their profitability and viability.
“If a luxury store is turning over $1 million in sales each year, they can afford to pay $200,000 a year, however a supermarket earning the same amount only has the capacity to pay $40,000,” he added.
As their name might suggest, mid-range fashion retailers have indeed found themselves caught in the middle. CBRE’s numbers showed they accounted for far more retailer administrations and exits over the past three years (15) than other category, well-clear of homewares (four), and luxury and business, and value and denim (three each), which were next in line.
“Retailers that weren’t able to adapt to changing consumer behaviours and tastes have had to bear the brunt of a more customer-driven demanding retail environment, as they weren’t able to remain financially feasible in the face of stiff competition and pricing,” Ainsworth said. “Most of these – 44% – were mid-range fashion retailers, the worst hit of all categories due to the introduction of fast-fashion international retailers such as H&M & Uniqlo.”
“Food and beverage has been a stand-out retail performer due to its more defensive nature against online shopping,” Ainsworth said.
Melbourne retail strips with a higher proportion of food and beverage were performing better than those without. Services such as hairdressers and nail salons are also becoming increasingly important as locations try to “Amazon proof” themselves, while fashion and apparel are less desirable, as millennials are more likely to visit the CBD or a centre to go shopping.
Australian Property Journal