Tony Dimasi is MacroPlan’s Managing Director – Retail. Since 1982 Tony has undertaken independent research on behalf of retailers, shopping centre owners and managers, property developers, government and statutory authorities, as well as a wide range of other clients. The research includes both supply and demand analysis, as well as extensive customer research, investigating customer behaviour, motivations and preferences with regard to shopping and activity centre uses. Tony has worked across all parts of Australia and New Zealand, and has provided advice in relation to virtually every significant activity centre location in both countries. The range of projects has included BD properties, super regional centres, regional and sub-regional centres, district and neighbourhood centres, homemaker retail facilities, freestanding stores, and all other retail formats, as well as commercial and industrial precincts. You recently mentioned that we are currently experiencing the best trading conditions since before the GFC. Can you explain why?
It is not, by any means, a bed of roses for the retail sector, and retail trading conditions are still a bit patchy, both across geographies and across the categories. However, in the eight years following the GFC, retail sales growth in Australia has averaged a healthy 4% annually – and that result has been achieved in an environment of almost no retail inflation. One of the positives emerging over recent months has been the renewed growth in two key non-food categories – apparel and household goods – which suffered the most following the GFC. The growth in those two categories, especially given the levels of deflation in apparel over recent years, is particularly heartening for the larger shopping centres in Australia.
What makes Victoria an appealing destination for retail property investment? Victoria has enjoyed strong economic growth and particularly strong population growth, relative to other Australian states, for an extended period of time. While over the past few years NSW has re-emerged as the leading state in terms of economic performance, Victoria had been running a close second. In terms of population growth, Melbourne has long been the fastest growing major metropolitan area in Australia (in number terms).
Do you expect new supermarket retailers to enter the Australian marketplace (e.g. Lidl), in the near future? After taking quite a number of years (at least 7 or 8) to reach critical mass, Aldi in Australia is now powering along, with a market share of some 10% in packaged food and groceries, and expectations of double digit growth in sales for the foreseeable future. That sort of performance must be very enticing to a potential new supermarket operator such as Lidl, and I think it is almost certain that we will see such a new entrant. However, Aldi is likely to feel the heat most, in my view, if such a new entrant establishes in Australia.
We’ve had the rise of the food category… what do you think will be the next trend for shopping centres to focus on? Along with greatly improved and extended food & beverage retailing, much of the emphasis in the major expansions of Australia’s biggest centres in recent times has been on the creation of a ‘sense of place’ e.g. by producing fantastic new town squares, piazzas, even ‘beaches’ in the right environment. Coupled with these initiatives, is the increasing focus on leisure and entertainment as a reason for visiting these centres, over and above pure shopping. That package in turn goes hand in hand with the greatly improved food & beverage offers that have also been critical in delivering the latest round of major centre expansions.
Has the impact of technology seen an increase in sales within the retail sector? If anything, I think the impact of technology has tended to dampen total retail sales, largely because of the continuing deflation in a number of key retail categories, such as apparel and homewares. Approximately 6% of total Australian retail sales are now conducted electronically, and the growth in electronic retailing has certainly been disruptive to bricks & mortar retailing. However, the greatest disruption has occurred not so much from the fact that we have online retailers (since the bulk of online retailing is actually now directed to traditional bricks & mortar retailers, via their online channels) but rather in the enormous increase in bargaining power that has been transferred to the customer, as a result of almost perfect information. A retailer seeking to hoodwink customers, e.g. with higher prices or lower value for money offers, simply cannot get away with it in this age of almost instantaneous information available to everybody.
What do you think will happen with existing Masters stores? Or DA approved stores? It appears that there is still some chance, albeit small, of a new owner being found for the business, e.g. private equity. The more likely outcome I suspect is that the various properties will be sold off and put to a variety of uses, e.g. a few might be picked up by Bunnings, say, others might be converted to bigger box type retailing such as Harvey Norman, and others might be sub-divided into a range of smaller, though still ‘big box’ type uses.
Do you expect to see any new department stores or discount players enter the Australian marketplace in the near future (e.g. Mr Price, TJ Maxx)? The latest international department store apparently coming to Australia is UK based John Lewis, which is proposing a physical presence in Australia before the end of this year, with a homewares concept to be rolled-out in the new Myer store in Westfield Warringah Mall. The reality is that international department stores have not covered themselves in glory in Australia in the past – Japanese operators Daimaru and Takashimaya, both now long gone – are two examples of failed initiatives. At this point, we do not have any successful examples of international department store operators that we can point to in this country. My general expectation is that this pattern of lacklustre performance by international department store operators, if they enter Australia, is likely to continue.
Who do you predict will make the AFL Grand Final on 1 October and who will be crowned champions? Hawthorn v Geelong, with the Cats hopefully getting revenge for 2008 and 1989.
About MacroPlan: MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities. Contact James Turnbull, National Head of Retail today to discuss your property research requirements.