Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

Michael Baker
Smarter Writer

Michael Baker is a retail consultant and vice-chair of the ICSC's Asia-Pacific Research Council

What does it mean for local stores when shopping centres build spaces for international brands to establish a presence in Australia? How do these mega-malls fit into the overall Sydney Retail ecosystem?

h&m retail staff

Domestic retailers are in for a fight

Macquarie's expansion follows global fashion retailers populating every major state capital CBD since 2011. Trophy shopping centres like Westfield Bondi Junction in Sydney and Chadstone in Melbourne have been breached already. Soon, Pacific Fair on the Gold Coast and Garden City in Perth will also succumb. Others will follow in quick succession. But expansions like those at Macquarie do not just involve global retailers. David Jones and Myer both opened new department stores in the redeveloped centre. Approximately 100 home-grown specialty stores also opened, many of them Aussie fashion designers.

So the excitement of the moment masked an underlying anxiety: Much is at stake for the global retailers but arguably even more is on the line for those domestic retailers who choose to come along for the ride. As one of the team from AMP Capital Shopping Centres, which owns Macquarie Centre, said to me amid the fanfare and congratulatory din: “We’ve done everything we can. Now these guys have got to trade.”

Trade or perish

But no matter how well the expanded centre goes, some of the retailers will not make it. Most likely these unfortunates will consist of domestic retailers who had hoped to benefit from the immense foot traffic that the global retailers will generate. More broadly, fashion retailers not close to developments like Macquarie Centre will be worried about the potential impacts on their businesses.

Are they worried over nothing? Importantly, the competitive impacts of global retailers to any given retail business have less and less to do with geographic proximity. As there are more of them, Australians will have easier access to them. You don’t even have to live near them – many people work near them.

More pertinent questions to retailers, other than closeness to the population, should be:

  1. Are you competing directly on price?
  2. Are you competing directly on assortment?
  3. Is your positioning in the middle market?
  4. Are you a slow technology adopter?
 

If retailers answer ‘yes’ to all of these questions or even three of them then I have some bad news: You won’t win. That goes equally for fashion chains and independents. If, on the other hand, you are offering something the global retailers are not, and you also have an established and loyal local following, your chances are significantly better.

To-Do List for Small Retailers

It’s estimated at the beginning of this year that the global players would be generating approximately $600 million in sales by the end of 2015 and $1.15 billion by 2020, for a share of just under six per cent of the Australian apparel market. In other words, a bunch of domestic retailers are collectively on their way to coughing up six per cent of the clothing market between now and the end of the decade.

If you have a fashion retail business you will want no part of this six per cent.

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