Won’t someone think of the poor, greedy shopping malls
Have you ever stopped to think how online competition is so much more efficient than old bricks and mortar competition?
Anyone who has thought about the relentless onslaught of online retailing will know how easy and convenient it is to shop online. No queues at the checkout, no traffic jams to get to the shopping centre, no paid parking and no shortage of choice at the best possible price.
Now spare a thought for the poor old shopping centres. They are built on expensive land, people get cranky battling congested traffic on the way there, and then they have to search for a parking spot and pay for if they stay more than the “free” period.
It gets even tougher for the shopping centres when some of their tenants go out of business or the tenants simply can’t pay some of the retail rents being demanded by some shopping centres. The problem for the poor old shopping centres is that they typically get squeezed by the anchor tenants like Coles and Woolworths who demand very low rents.
The shopping centre then needs to make up any shortfall in revenue by charging the small speciality shops higher rents. The problem with that is that higher shopping centre rents mean that the retail prices in those speciality shops need to go up to cover the higher rent.
But, of course, the higher retail prices in the speciality shops in shopping centres mean that those speciality stores simply can’t compete with cheaper online prices. It then becomes a vicious downward spiral where specialty stores struggle or go out of business thereby putting even more commercial pressure on shopping centres.
Should shopping centres be allowed to open 24 hours to try and compete with online retailing? You be the judge. Would you go to a shopping centre at 3am to do your shopping? Perhaps you would at Christmas, but would you in the middle of winter?
How would you feel if you went down to the shopping centre at 3am only to discover when you got there after a quick check on you smart phone that the particular item you want to buy is cheaper online?
No point being allowed to open longer hours if few people turn up because the overwhelming majority of people are sleeping, partying or simply getting much cheaper prices online.
The harsh reality is that the poor old shopping centres are going to do it even tougher if their tenants can’t compete with online retailing because of high retail rents or labour costs in bricks and mortar stores.
Sure, people may still visit a Coles and Woolworths at the shopping centre, but a shopping centre can’t just rely on the very low rents they get from a Coles or Woolworths, or other anchor tenants.
Shopping centres need the small specialty shops to pay high rents in order for the shopping centre to be economically viable. If the speciality shops continue to struggle because of online retailing, then the speciality stores will want lower rents or they will increasingly go out of business.
That would leave shopping centres looking for new tenants that may be even harder to find because prospective tenants may not want or just can’t afford to pay the high rents demanded by shopping centres.
Of course, a shopping centre may not want to lower retail rents as lower rents would mean a lower valuation for the shopping centre and, in turn, result in lower returns for those investing directly or indirectly in shopping centres.
Ultimately, however, shopping centres may be forced to substantially lower rents, especially if they started to see higher vacancy rates as vacant shops mean that investors make no return on their investment.
Sadly, shopping centres in regional areas may be even harder hit as regional populations shrink because of the lack of government services or the high cost of living in regional areas because of high petrol or electricity prices.
Like all businesses facing new competitive threats, shopping centres need to meet the threat head on. With the online competitive threat the answer for shopping centres and bricks and mortar retailers is simple.
Retail prices at bricks and mortar stores need to fall and that means that retail rents need to also fall and stores need to be smarter in the way they deploy staff so as to deliver better service to customers.
Bricks and mortar stores need to have a strong online presence and they have to deliver cheaper online prices. Traditional bricks and mortar stores like newsagents, book stores and fashion retailers need to rethink their business model as these types of stores will face a growing threat from online retailers.
Traditional book stores will find it harder to compete with the cheap books readily available from online sites such as Amazon. And with the growing availability of books electronically we may find printed books harder to find. Likewise, printed newspapers may one day be a distant memory.
Fashion items may one day be ordered online and delivered to your door as easily as a pizza can now be delivered to your door with a free bottle of coke. Jewellery, sporting goods and pharmacy items could also one day be delivered to your door much cheaper than you could ever buy them at a shopping centre outlet.
So what would happens if the bookstore, newsagent, pharmacist, jeweller, fashion and sporting goods retailer was no longer found at the shopping centre because of the high rent and cost of operating in a centre? Well, you would probably have an empty and unprofitable shopping centre.
You would also have consumers who would be very happy with the lower prices they would be getting online. It would also not be surprising to find consumers calling for all retail prices at bricks and mortar stores to be put online.
Having all retail prices at major bricks and mortar stores online would no doubt empower consumers even more as it would allow consumers to shop around more efficiently to get the best possible price.
Allowing consumers to shop around is so obviously a good thing that if major bricks and mortar stores like Coles and Woolworths are not willing to put their prices online, then the Federal Government should require them to do so in the interests of greater competition and a better deal for consumers.
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