Online shopping climbs - but storefronts still valid choice

By Susan Edmunds

Renata Harper sells jewellery wholesale in Christchurch. Photo / APN
Renata Harper sells jewellery wholesale in Christchurch. Photo / APN

Auckland retailers aren't giving up their shops as fast as their counterparts around the country, statistics show.

Figures from commercial real estate firm Colliers International show 11 per cent of office space in Auckland is vacant, but there is only about 5 per cent of empty retail space, a level that has been steady since 2009.

Auckland's commercial property market is much stronger than Wellington's, where there is now 8.6 per cent of empty retail space, up from 4.9 per cent in December 2010.

By contrast, Rotorua's retail vacancy rate is 14.5 per cent, up from 10.2 per cent in 2010.

Christchurch's market data is skewed because there is effectively no vacant space since the earthquake.

Massey University professor Claire Massey says retail is at a tipping point and the internet is completely changing the industry.

"Look at the book trade. Buying online has totally changed the way they do business."

But Alan McMahon, Colliers' national director of consulting and research, says the idea that retailers are moving away from a physical, streetfront presence is not true, yet. He says smaller, independent retailers often do not have the capital to compete in the online market with bigger retailers that have more cost-effective and sophisticated supply chains.

"Small, independent retailers tend to sell things the customer wants to see first and therefore they need shops," says McMahon. "That's the general rule. The big chains have an online and a physical store strategy designed to complement each other. Their property strategy will change. For example, smaller stores and bigger warehouses as they sell more online, but there is no sign yet that the bigger chains are abandoning the high street."

In many cases, they are opting for smaller shops or showroom-style stores, backed up by a web presence. But he says he expects that could change over the coming years.

"New Zealand has a low rate of online sales. That will no doubt increase in line with the US and Britain."

John Albertson, of the Retailers Association, says it is premature to say retailers are moving away from bricks and mortar, despite high-profile closures such as Origin Interiors moving their focus to the web. Only about 6 per cent of sales are done online.

"Online is relatively small but growing at a far quicker rate."

He does not think New Zealand will see a glut of empty shops, although landlords have had to reassess rents during the downturn. He says they are more negotiable than they used to be and there is more choice for retailers than three or four years ago.

McMahon says sometimes the drive to online works in reverse. Topshop, a UK fashion chain, opened a store in Sydney on the back of strong online demand from Australians.

Kiwi Property Income Trust, New Zealand's largest listed property business, says retail sales in its centres, such as Sylvia Park, are forecast to grow 2 to 4 per cent.

CBRE statistics show prime CBD retail sites in Auckland are 2.7 per cent empty, and regional shopping centres 1 per cent.

Albertson says location is one of the most important considerations for retailers. They need to be where customers can easily and comfortably find them.

But, while retail vacancy rates are reasonably steady, sales of commercial properties have almost completely dried up.

In the regional centres, Colliers reported only eight sales in the year to May, compared to 65 last year. In the main centres, there were 29 sales to May, compared to 250 last year.

McMahon says that is because investors are more cautious and there are fewer properties on the market.

Quake shakes up tactics

Christchurch bridal jeweller Renata Harper says the city's devastating earthquakes have completely changed the way she does business.

Her shop, in New Regent St, is still part of the city's red zone.

After more than a year without access to it, she got together with her sister to look at their options for the future.

"We thought about moving to Riccarton but we couldn't find anything like it. But after 10 years, I couldn't just close the doors and forget about it."

They decided to become jewellery wholesalers, with a workshop instead of a shop, and supply stores around the country with their range of jewellery.

So far, they have nine stores on board and more are making contact.

They also sell items via a website.

"We're really excited about what we're doing," Harper says. "It's a totally different service."

Profits are up because costs are down, and Harper is putting more money into marketing.

"I wouldn't have done this without the earthquake." Susan Edmunds

- Herald on Sunday

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