Australian Shopping Malls Under Threat

The Australian retail sector was recently described as a ‘perfect storm’ by Brian Walker, a consultant from The Retail Doctor. Speaking to the ABC he said the two major components creating this storm are: international e-commerce businesses as well as the “weakened” consumer.

The underlying economics explains its all – consumers have been lowering their spending over the past six months, partially due to low wage, unemployment growth and the rising of cost of living, which includes record levels of household debt.

To simplify, households now have less money to spend, and this has translated to fewer people visiting shopping malls with clicks online also seeing a downturn.

A recent report from Credit Suisse analysts said that the arrival of e-commerce giant Amazon in Australia and new players like TK Maxx would heavily threaten some retailers this year, including the big players like Myer, David Jones, Harvey Norman and JB Hi-Fi.

At a conference earlier this year, Peter Birtles, Super Retail Group CEO, said that half of Super Cheap Auto’s top selling merchandise was already online at Amazon, while an unsettling 80 percent of products sold at Rebel Sport were available online at Amazon.

Getting back – so what does all of this mean for our shopping malls? Well, it’s unlikely that they will ever be redundant altogether, but the big name retailers that make these malls what they are, are under threat, even if that threat is in the “not knowing”.

When we think back to the days when digital disruption led to the closure of many Blockbuster stores around the country, which eventually led to it filing for bankruptcy – while DVDs rentals were threatened, other franchises adapted and now we also have offerings like Netflix and Redbox.

I think the question in what will be the evolution of shopping malls as we know it today, lies in how far will Amazon go with regards to its online shopping experience, that will lead to customers preferring to shop online and turning their back on in-store. It’s the smart retailers who already have these answers in their strategy – how to keep the customer coming back to them, and approaching customer loyalty in more innovative ways.

If you like a bit of retail therapy every now and again like myself, I suspect shopping malls will remain, but with a whole lot more to keep me wanting to stay.

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