The suburbs are the future of post-COVID retail


Gary Mortimer, Queensland University of Technology; Louise Grimmer, University of Tasmania, and Paul J. Maginn, University of Western Australia

The COVID-19 pandemic delivered a body blow to CBD retailers, but it’s just the latest of their challenges in recent years. They were already under pressure from cautious consumer spending, intense competition from online retailing and the growth of suburban “mega-centres”.

Now, declining commuter foot traffic and an increase in people working from home present new challenges for CBD retailers. Lockdowns, changing work practices and the need for social distancing have left some of Australia’s largest city centres at times resembling ghost towns.




Read more:
How COVID all but killed the Australian CBD


Even as restrictions lift and CBDs reopen, it will not be business as normal.

Stores will shrink

Retailers that depend heavily on discretionary spending, for items such as clothing, footwear and accessories, have been hit particularly hard.

The latest Australian Bureau of Statistics figures show clothing, footwear and personal accessory retailing fell 10.5% in August 2020, in seasonally adjusted terms. Department stores were down 8.9%.

Chart showing changes in retail turnover

Retail Trade, Australia, ABS, CC BY

Interestingly, despite an average decline in spending of -0.2% between 2015 and 2020, research by McKinsey in 2019 found clothing and footwear retailers increased their selling space by almost 2%.

Clothing, footwear and department store retailers are now expected to “right-size” their selling space. McKinsey predicts a floor-space reduction of more than 10% between now and 2024.




Read more:
Retail won’t snap back. 3 reasons why COVID has changed the way we shop, perhaps forever


CBD-based department stores have fared worse than those in the suburbs. The Myer Annual Report 2020, for example, highlights the impact of COVID restrictions on CBD store sales. Despite reopening all stores (except Melbourne) by May 27, CBD store sales fell 33%, whereas suburban store sales contracted by only 9%, in the final seven weeks of the financial year. Myer reports: “Low foot traffic in CBDs expected to continue for the foreseeable future.”

Chart showing Myer online, CBD and other sales
The Myer annual report shows a rise in online sales, a large fall in CBD store sales and smaller fall in other store sales compared to the same period a year earlier.
Myer annual report 2020

Online shopping is surging

As COVID shut down cities, Australian shoppers moved online in increasing numbers. The NAB Online Sales Index estimates Australian consumers spent around $39.2 billion in the 12 months to August 2020. Online shopping now accounts for 11.5% of total retail sales in Australia.

Research from Australia Post shows over 8.1 million households shopped online between March and August this year —
900,000 of them for the first time. In cities around Australia, foot traffic has become web traffic.

We can clearly see the impacts of this on physical retailers. A number of major retail chains have closed, including Toys ‘R’ Us, Roger David, Esprit, Ed Harry, TopShop and GAP over the past few years.

CBD workers shift away from commuting

As an increasing share of people work from home and fewer commute to city centres, the long-term future of CBD retailing looks bleak because of the fall in demand.

This shift in behaviour is likely to be substantial, as transport expert David Hensher recently observed:

The evidence reinforces the fact that as we move through and beyond the COVID-19 period, we can expect commuting activity to decline by an average of 25-30% as both employers and employees see value in a work-from-home plan.

The ongoing health and economic crisis caused by the COVID-19 pandemic and the required physical distancing measures will force many firms to introduce telework (working from home) on a large scale.

In Australia, it has been estimated 39% of all jobs in Australia — 41%of full-time and almost 35% of part-time – can be done from home.




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CBD retailing relies on workers and visitors who use public transport. An August 2020 Transurban report found 84% of daily train users (77% of bus users) in Melbourne said they had reduced their use. Many said they did not expect to return to daily use even after the pandemic. Similar numbers were reported in Sydney and Brisbane.

Chart showing current and expected public transport use

Data: Urban Mobility Trends from COVID-19, Transurban

COVID restrictions and declining commuter traffic have also had big impacts on the food and beverage market. According to IBISWorld, Australian restaurant revenue has fallen by 25%, from almost A$20 billion in 2018-19 to just A$15 billion in 2019-20. Cafe owners are equally feeling the impact, with fewer commuters grabbing their morning coffee and fewer coffee meetings happening around town.

Back to the future

With both commercial and residential rents remaining relatively stable outside CBD zones, and more people choosing to work from home, we can expect to see a growth in “localism”.

Shopping mall owners have invested heavily in refurbishing and increasing the floor space of their centres to provide retail, hospitality, entertainment, leisure and recreation activities under one roof. Somewhat ironically, these refurbished malls have even appropriated design elements of traditional high streets.

With many more people working from home during the pandemic there has been something of a retail inversion with more people shopping locally. There are clear signs of a resurgence in local shopping villages and high street retailing. There even appears to be a corner store revival of sorts.




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More than milk and bread: corner store revival can rebuild neighbourhood ties


CBD-based retail is at a crossroads, especially in Melbourne and Sydney. Despite restrictions being lifted, the data indicate CDBs may never return to the “bustling metropolises” they once were.

The precarious state of the national economy, government plans to reduce subsidy payments, more people working from home, shopping locally and online, all point to a bumpy road ahead for CBD retailers.

Major questions are being raised about the future character and function of the CBD and, ultimately, about the structure of Australian cities more broadly.The Conversation

Gary Mortimer, Professor of Marketing and Consumer Behaviour, Queensland University of Technology; Louise Grimmer, Senior Lecturer in Marketing, University of Tasmania, and Paul J. Maginn, Associate Professor of Urban/Regional Planning, University of Western Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

COVID-19 has changed the future of retail: there’s plenty more automation in store



Shutterstock

Gary Mortimer, Queensland University of Technology; Jana Bowden, Macquarie University; Jason Pallant, Swinburne University of Technology; Louise Grimmer, University of Tasmania, and Martin Grimmer, University of Tasmania

Australian supermarket giant Woolworths has announced its single biggest investment in logistics infrastructure, spending A$780 million to replace up to 1,300 workers with robots.

It plans to build one semi-automated and one fully automated distribution centre in south-west Sydney. About 650 jobs will be created at the new centres, to open in 2024. Three existing centres (two in Sydney, one in Melbourne) will close as a result.

Woolworths’ chief supply chain officer, Paul Graham, emphasised the safety benefits of automation:

Cutting-edge automation will build tailored pallets for specific aisles in individual stores – helping us improve on-shelf product availability with faster restocking, reducing congestion in stores, and enabling a safer work environment for our teams with less manual handling.

In these COVID-conscious times that’s the obvious spin.

But it’s true this is a response to the changes being wrought on the retail sector by COVID-19.

The principal change is a matter of pace. COVID-19 has turbocharged the shift to online shopping. Even as social-distancing rules ease, this trend will consolidate. Many bricks-and-mortar shops are in trouble, particularly those in shopping centres.

Retail will also be shaped by how COVID-19 has changed our shopping behaviour, with thrift and value being important.

Shopping online is the new norm

In April, 5.2 million Australians shopped online, according to Australia Post’s 2020 eCommerce Industry Report. The Australian Bureau of Statistics estimates those sales were worth A$2.7 billion, 11.1% of all physical retail sales, compared with 7.1% in March 2019.

This sharp hike in demand exposed weaknesses in retailers’ online capabilities. For example, crushing online demand meant both Woolworths and major rival Coles temporarily suspended their online shopping services.

More automated fulfilment centres are part of meeting these online demands. Of course, such investments were already on the radar.

In March 2019, Coles announced an exclusive deal to use the “end-to-end online grocery shopping solution” developed by Ocado, a British online supermarket chain that has no stores, only warehouses. Its technology spans the online shopping experience, automated fulfilment and home delivery.

An Ocado warehouse in Wimbledon, southwest London.
Willy Barton/Shutterstock

The Coles plan included two new “highly automated” customer fulfilment centres in Melbourne and Sydney, to be ready in 2023. Coles also announced plans for two new automated distribution centres in Queensland and NSW, costing A$700 million, in October 2018.

Woolworths itself has already opened the Melbourne South Regional Distribution Centre, whose automated features are hyped in the following promotional video.

So these latest moves are part of a trend, albeit one unexpectedly accelerated by COVID-19. And once consumers try new channels, studies show, they are likely to stick with them.

The future is dark

At the other end of the supply chain, the shift to online shopping has created demand for “dark stores” – essentially, stores without customers. These smaller, decentralised facilities, located in suburbs rather than industrial parks, are designed to pick and dispatch online orders quickly.

Woolworths opened its first dark store in Sydney in 2014. Coles opened its first in Melbourne in 2016. Existing stores are also being repurposed as dark stores. In April 2020, Australia’s Kmart temporarily converted three stores to use as fulfilment centres.

Such moves may become permanent, as shoppers demand faster delivery times and physical store assets become less viable as “traditional” retail businesses.

Existing stores are also being adapted to respond to customer demands for faster, more efficient online shopping. In January 2020, Woolworths began building its first “eStore” – an automated facility adjoining its supermarket in Carrum Downs, Melbourne.

Fewer, smaller stores

As online shopping increasingly provides greater revenue streams for retailers, more physical store closures are also on the cards.

In May, Kmart’s owner, Wesfarmers, announced it would shut 75 of its Target stores (and convert the rest to Kmart stores). Also looking to downsize are Australian department store icons Myer and David Jones, which have accelerated their plans to reduce floor space 20% by 2025.




Read more:
Don’t blame COVID-19: Target’s decline is part of a deeper trend


Footwear giant Accent Group – which owns more than a dozen shoe brands and has more than 500 stores in Australia and New Zealand – is planning to close 28 stores and focus more on online sales.

As online revenues grow, expect more “right-sizing” and closures.

Repurposing shopping centres

All these closures will add to the woes of shopping centres.

Though crowds reportedly surged back to centres when “lockdown” restrictions were eased, growing awareness that the pandemic is not over and social distancing protocols continue to create consumer anxiety.




Read more:
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Until people feel safe shopping, dining and gathering in crowded public places, consumer aversion will remain.

In response to these COVID-conscious times, shopping centres will endeavour to enhance those aspects of the shopping experience, such as sensory elements and entertainment, which the online shopping experience can’t provide.

The retail mix will change: fewer fashion and general merchandise shops, and more services such as medical centres, offices and childcare centres.

Opportunities for smaller retailers

One bright spot may be for local and independent shops.

Smaller retailers can often adapt faster than larger ones. Smaller community pharmacies, for example, implemented social distancing and hygiene measures more easily than larger retailers, due mainly to their smaller size and having less traffic.




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There are opportunities to leverage shoppers’ desire to support local shopkeepers, producers and growers. Locally made goods and services are also less likely to have long supply chains that will impede overseas deliveries while COVID-19 is uncontained.

But they’ll still need to sort out their online shopping experience.The Conversation

Gary Mortimer, Professor of Marketing and Consumer Behaviour, Queensland University of Technology; Jana Bowden, Associate Professor of Marketing and Consumer Behaviour, Macquarie University; Jason Pallant, Lecturer of Marketing, Swinburne University of Technology; Louise Grimmer, Senior Lecturer in Marketing, University of Tasmania, and Martin Grimmer, Professor of Marketing, University of Tasmania

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Retail won’t snap back. 3 reasons why COVID has changed the way we shop, perhaps forever


John Daley, Grattan Institute

It’s wrong to expect a “snap-back” at shopping centres, food courts, cinemas and other places where people used to gather to spend money.

We’ve identified three reasons why spending in physical stores on goods like clothes is likely to remain much lower than it was for a long time.

1. Fear, much of it age-based

First, even when governments relax restrictions, lots of people will still be worried and will go out less. Unless there are zero cases for several weeks in a state or city, many people will remain reluctant to go out.

This is why we have previously argued that there is a big dividend in eliminating COVID-19 in the style of New Zealand, the Northern Territory, and South Australia, rather than bumping along with “suppression” – and several new locally-acquired cases a day – as Victoria is still doing.

This reluctance to go out and spend, irrespective of government restrictions, could be seen in Australia before government restrictions were imposed, as shown on the “Consumers and mobility” tab of the Grattan Econ Tracker.




Read more:
New Zealand hits zero active coronavirus cases. Here are 5 measures to keep it that way


The effects of fear shouldn’t be underestimated.

Spending in Sweden has fallen almost as much as in Denmark, even when Denmark was in lockdown and Sweden had minimal restrictions. Swedes are afraid to go out, particularly if they are old.

Spending by people aged 70+ has fallen further in Sweden than in Denmark, and 60-69 year-olds have cut their spending by about the same amount in both countries.

This isn’t surprising. COVID-19 is much more deadly for older people.

Age-based fear is a challenge for retailers because older households now spend significantly more than younger households. 25 years ago it was the other way around.

2. Time to form new habits

Second, we are likely to keep spending on different things, and using different channels, even after restrictions are lifted.

Habits tend to form when behaviour changes consistently. They strengthen over time, and are particularly sticky once behaviour has been consistent for a period of months – and we’ve been living with lockdown for that long in Australia.

Once formed, the new habits can persist unless there is another shock.




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Australia’s drive-ins: where you can wear slippers, crack peanuts, and knit ‘to your heart’s content’


Australians have become used to doing more of their purchasing online. They have become used to spending more on living comfortably at home, and less on clothes for the office and to go out.

After the shutdown, people are likely to continue to work from home more often.

The habits of shopping remotely, and spending more on home furnishings and less on clothes, are likely to continue, and they would be likely to continue even if COVID-19 vanished tomorrow.

3. Global recession

Third, irrespective of COVID-19 regulations and behaviours, we are heading into an “old-fashioned”, globally synchronised, deep recession.

For the moment, JobKeeper, the temporarily-boosted JobSeeker payment, and a recent bounceback, have resulted in spending on credit and debit cards a bit more than this time last year.

But unemployment jumped to 7.1% on Thursday. That official rate understates how bad things are.

In May an extra 227,700 Australians lost their jobs (on top of 607,400 in April).

But only 85,000 of them were counted as unemployed. When and if the bulk of those people look for work, the unemployment rate will climb further.


Employed Australians, total

Includes Australians regarded as still employed because they are on JobKeeper.
ABS 6202.0

After JobKeeper ends in September (or is phased out as a result of the government’s review) many of the three million people on it will also become counted as unemployed.

Australians who have lost their jobs are likely to spend less than they did before.

After each of the previous two recessions it took years for employment to recover.

Spending need not recover after COVID

These three factors – fear, new habits, and recession – are present in countries and regions that seem to be well clear of coronavirus.

Much of China has been free of most government restrictions for months. Manufacturing and infrastructure spending has largely returned to pre-COVID levels.

But consumer activity is still below pre-COVID levels, and it is inching up only slowly.




Read more:
The economy in 7 graphs. How a tightening of wallets pushed Australia into recession


Australia might well see an “opening party” on the day each particular COVID-19 restriction is lifted.

But after that, the best guess is that consumer spending will remain very subdued and refocused for a long time.

For those in the hardest-hit sectors and regions – particularly arts and recreation, hospitality, and clothing – the pain will continue long after the restrictions are lifted.The Conversation

John Daley, Chief Executive Officer, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

New Christmas tree design will remind of the real Christmas


Boss Creations, a new holiday décor company, has introduced the new "CHRIST-mas" Tree™, featuring the unique trait of a trunk in the shape of a wooden cross. Company owner Marsha Boggs says the tree was specifically designed to counter the "war on Christmas," reports Boss Creations in its press release.

"When I became a Christian a few years ago," says Boggs, "I was appalled by the secularization of the Christmas holiday. When retail stores started substituting ‘Happy Holidays’ for ‘Merry Christmas,’ and schools began calling their Christmas programs ‘Winter Plays,’ it all seemed ridiculous to me. That’s why we have created products that remind people what the Christmas season is really all about – the birth of Christ."

The "CHRIST-mas" Tree™ is size adjustable up to 7.5 foot tall to accommodate various ceiling sizes. Additionally, the company offers ornaments, wreaths and gift items all with Christian-based themes.

Legal fights over Christmas symbolism continue to create headlines such as a recent ban on religious songs in a New Jersey school district where the federal appeal judges noted "such songs were once common in public schools, but times have changed." Lawsuits regarding Christmas trees being taken down from public buildings have sparked anger across the country. Boggs says Boss Creations’ mission is to uphold the traditional meaning of the Christmas season, and from their sales, the company will be supporting two non-profit organizations that work as advocates for religious freedom.

A portion of the proceeds of all "CHRIST-mas" Tree™ sales will go to support the American Center of Law & Justice, an organization recently hailed by BusinessWeek as "the leading advocacy group for religious freedom," as well as to the Liberty Counsel, a nonprofit litigation, education and policy organization dedicated to advancing religious freedom, the sanctity of human life and the traditional family.

Report from the Christian Telegraph