Shopping centres must change before it’s too late
Have you ever thought about what consumers want from their shopping experience?
Well, identifying what consumers are looking for every time they go shopping is not as easy as it sounds. In fact, different consumers may want different things from their shopping experience.
Why would you shop at a bricks and mortar store or a shopping centre when you can buy the same product at a much lower price online? And online retailers don’t just have a considerable price advantage over bricks and mortar stores. Online retailers can offer a much broader range of products.
Have you ever gone into a Dymocks bookstore only to find that the book you are looking for is not there? Have you ever done an online search on your iPhone while at a Dymocks store only to find that the book is available online and you can get free delivery if you buy online?
So is it any wonder why bricks and mortar stores in a shopping centre are finding it increasingly difficult to compete with online retailers and are looking for lower rents or are simply going out of business?
Putting this all into perspective, it’s clear that bricks and mortar stores, as well as shopping centres, need to go back to basic business principles when seeking to compete with online retailers.
First, bricks and mortar stores need to look at their retail prices. There’s no doubt that “price” is a key issue for consumers. The worst thing for any retailer is for the consumer to feel ripped off. Consumers definitely don’t like to be ripped off and they will certainly feel that way if they buy a product at a bricks and mortar store only to find that the product is cheaper online.
And it’s getting much easier for consumers to find out if they are being ripped off. These days a consumer can, for example, be standing in a JB Hi-Fi store and do a quick search on their iPhone to find if the DVD, CD or computer is cheaper online. Not surprisingly, overseas DVD titles can be up to 50 per cent cheaper online from an overseas online retailer than they are in the JB Hi-Fi store.
The saving from buying online from overseas websites is so big that you would be silly not to think about buying online. And it’s likely to make very little or no difference if GST was imposed on overseas purchases under $1,000 which are currently GST-free.
Here, Australian retailers who think that imposing GST on overseas purchases under $1,000 will lead to a boost in local purchases at bricks and mortar stores are clutching at straws.
Certainly we can talk about seeking a level playing field and trying to impose a 10% GST on all overseas purchases, but that will make no difference if the overseas purchases are up to 50% cheaper than the same product sold at from bricks and mortar store in an Australian shopping centre.
Let’s also not forget the potential huge cost to the Australian taxpayer of the Federal Government trying to collect any GST on overseas online purchases.
Then, of course, we have the fact that Aussies consumers are so savvy that they can now go to Hawaii or South East Asia on cheap flights to buy all those designer labels at a fraction of what they can buy them at a Myer, David Jones or boutique retailer in an Australian shopping centre.
Next, Australian bricks and mortar retailers and shopping centres need to look seriously at their product range. Consumers are generally looking for a wide product range and are likely to be disappointed by the limited range offered by many bricks and mortar stores and shopping centres.
We know that a Dymocks book store will have a limited range because of limited floor space. So again, going online means that consumers have instant access to an almost limitless range of books. The same goes for products at, for example, a JB Hi-Fi, Myer or David Jones store in a shopping centre.
Clearly, bricks and mortar stores need to be very clever in not only delivering a wider product range but in getting loyal customers to keep returning to the store. Why don’t bricks and mortar retailers get together with their shopping centre landlord to offer all day free parking for consumers that spend more than say $100 at those centres having paid parking?
Why don’t bricks and mortar retailers or shopping centres offer their big spending in-store consumers a voucher for an amount of up to say $100 that can only be redeemed on their online website?
That would allow consumers access to a wider online product range, but it would make the retailer’s or shopping centre’s website more price competitive with other online retailers. It would also allow the physical store to become linked with the retailer’s or shopping centre’s online presence.
Of course, such measures are only temporary as we know that retail rents need to come down across abroad to try and keep bricks and mortar stores in the game. If retail rents stay as high as they have been, then bricks and mortar stores will continue to bleed and shopping centres will increasingly come under financial pressure.
Finally, there is the issue of convenience with consumers being able to shop whenever they want. We know that consumers can shop online at any time, but what about shopping centres?
Should shopping centres be allowed to stay open as long as their tenants want them to? That’s a simple question as in a truly competitive market it’s the traders or tenants who decide when to open their doors. So the trading hours issue is ultimately really one about what the tenants want as they will generally be the best judge of what their customers want.
In that regard, the matter of additional trading hours could simply be resolved by having a secret vote of all tenants in shopping centres conducted by the State or Territory Electoral Commission.
Once these independent results were known we would then know whether or not State or Territory Governments need to further extend trading hours for shopping centres in their State or Territory.
In the meantime, the harsh reality for bricks and mortar retailers, and shopping centres, is that what they offer consumers is negatively affected by the higher retail prices they have to charge consumers and by the limited range they are able to offer consumers.
Even before a bricks and mortar retailer opens their doors they are hit with rents from retail landlords and shopping centres. That means that the retail prices at bricks and mortar stores will obviously be inflated by the retail rent that they have to pay to the landlord or shopping centre.
In contrast, the online retailer is likely to pay a tiny fraction of the rent that the bricks and mortar stores have to pay and that means the online retailer can offer much lower retail prices to consumers when they shop online.
Clearly, online retailers have an enormous price advantage over bricks and mortar stores as the online retailers don’t have to pay to the ever increasing or inflated rents at a shopping centre. And that’s why shopping centres can’t keep their heads in the sand forever.
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