New players make for retail disruption in Sydney

New players make for retail disruption in Sydney
New players make for retail disruption in Sydney

Australia’s retail industry is undergoing a period of significant change, as established retailers are forced to evolve in order to survive, according to the latest retail research from Colliers International, Game On: Retail’s new entrants flex muscle as competition grows.  

“Australia’s retail industry has been heavily concentrated and characterised by fierce competition between a few established players,” said Head of Retail at Colliers International, Michael Bate. 

“Our industry is undergoing an unprecendented period of disruption, as these established players have been forced to evolve in order to meet the changing demands of the consumer and revive profitability. 

"These changes are opening up new opportunities for the many emerging brands in Australia, who are looking to gain a foothold in an established and well-heeled market.”

According to the research, two retail segments who have undergone significant disruption are the supermarket and department store sectors.  

“The purchase of David Jones by the South-African based Woolworths chain last year has prompted a period of significant change,” said the report’s author, Daniel Lees, Associate Director of Research at Colliers International. 

“Under their new ownership, David Jones has undergone a transformation, and they are looking ahead at new opportunities, such as fresh food.  At the same time, Myer has been forced to revitalise their offering in order to stay competitive.”

The impact on the retail property sector as a result has been significant. 

Myer has decreased their property footprint in several key areas, such as Top Ryde where they are withdrawing completely.  In other centres they are reducing their footprint.  

“Myer and David Jones have been two of our most significant retail occupiers for decades,” said Mr Bate. 

“They have controlled a huge portion of the most sought-after, highest visibility retail space across the country. 

"With their rationalisation of space, comes a huge opportunity for the emerging brands to establish themselves in well-located retail spaces with good foot traffic and exceptional visibility.”

Aldi, who have been in the Australian market for more than 10 years, have expanded rapidly in recent times as such opportunities have arisen, with a current estimated market share of 11%. 

Likewise, there is speculation that global supermarket giant, Lidl, may enter the Australian market, and sourcing appropriate floor capacity will be crucial to their entry strategy. 

Having taken some of the low hanging fruit to improve sales at David Jones, Woolworths Holdings SA now sees the need to invest substantially more money in the business to build out offerings such as fresh food.

To fund this investment, it’s possible that David Jones could realise significant funds by a rationalisation of its property portfolio in Sydney and Melbourne CBDs, potentially raising up to $1 billion if air rights are fully exploited.

The sale may result in at least a partial leaseback of space from a buyer however this strategy does open up prime availability to new market entrants.  

“Our retail landscape has changed significantly in recent years, but that’s nothing on what we’re going to see in the coming years,” said Mr Bate. 

“The march of international retailers into our country is nothing new, but the second, third and fourth wave of these will continue to come.  Australia’s savvy consumers know these global brands, making their move into the Australian market an easy one.”

Brands such as H&M are only making the move into the Australian market when the right floorspace opportunity comes up. 

H&M’s new Sydney CBD store, in Pitt Street Mall, spans 5,000sqm and has strong visibility in a high traffic area. 

According to Mr Bate, such global retailers will form an important part of the future retail landscape.  

“Only 10 years ago, our major department stores occupied tens of thousands of square metres in our CBDs, limiting the options for other retailers.  These department stores are now savier with their space, and embarking upon multi-channel strategies to appeal to changing consumer needs. 

"This is opening up our retail industry to new players, and providing our consumers with an increased choice.” 

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Commercial Market

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