By Bob Dey
Carol Schwartz, president of Australia's Property Council, came to New Zealand this month to reveal her strategy on how to combat the impact of internet shopping.
Schwartz is also general manager of the Sussan Property Group, established by her family, and owner of a Melbourne shopping centre, so it
is in her interests to have an effective survival strategy.
But Carol Schwartz became a net buff a year or so ago and sees "massive opportunities" in using the internet for sales. Although she wanted to be positive about the survival prospects of shopping centres when she addressed the Property Council of New Zealand's conference, from her address it was easier to see a strong future in internet trade than for any of the traditional forms of retailing.
"Many see the net as the death of bricks and mortar, with shopping centres the early victims," she said.
Schwartz quoted Westfield director David Lowy as one person in the industry who had found a way to advance his retailing cause through the internet - and a glance at the various Westfield stock prices would have to make you wonder at the likelihood of shopping centres turning into ghost towns overnight.
The Westfield stocks - and, in New Zealand, the Westfield-controlled St Lukes Group - carry high premiums, based largely on the premise that these shopping centre developers and managers know how to make far better than even money out of their investments.
Schwartz says many commentaries she has read on the subject of the internet and retailing deal with defensive strategies, and fear of the impact of the net is certainly great - "71 per cent of hardened property owners in a recent international survey would not invest their grandmothers' money in a shopping centre".
Schwartz agrees the basic proposition is powerful, that the web will deliver anything to anyone, offering more convenience and better value. The shopping centres' response will be to become lifestyle centres, she argues.
Her other key point is that shopping centres have to become community-friendly, no longer just the place to buy your groceries but integral to society through relationships built up with schools and local councils, possibly working together to provide things like libraries and swimming pools.
She says it is important to take into account the impact of internet sales on different retail categories, with books, travel, compact discs, cars, banking and broking at the top of the list of categories moving to net transactions.
The immediate reaction is that taking these items out of shopping centres amounts to cannibalisation, but Schwartz says there are opportunities in the suppliers' needs.
"Amazon has announced $US300 million of property acquisitions for distribution, not retail space. Levi's was not prepared for one-off orders. [Its] just-in-time system couldn't cope, [it] needs distribution."
Schwartz predicts that "the first wave of dot.com businesses will disappear before shopping centres do. It will be challenged by a new breed of software - acses.com. is an example, web butlers who will introduce you to new deals."
She suggests there will be fewer shopping centres, which the industry has been moving to anyway as bigger malls take over from the small neighbourhood centres which first competed with city-centre shopping strips.
"The corner store with limited shelf space and high margins will disappear. Inventory shopping will be the death of neighbourhood centres. Larger centres that rely on traditional franchising will suffer.
"The survivors will offer more than shopping. Shoppers will buy by bundles, which combines trusted brand names with convenience.
"The web makes the marketplace richer in alternatives and options and that creates new niches and a demand for intermediaries. Many older niches will be replaced."
Shopping centre owners have spent the past couple of decades creating villages packaging everything you need, but Schwartz says consumers are advancing from one-off internet purchases and using the new medium for that "bundle" buying.
"The shopping centre lease package will need to change - how do percentage rent clauses deal with sales generated through a web site, where the centre is used as a pick-up point or customer complaints desk?"
David Lowy believes the internet will add to the pie, says Schwartz. "Westfield is developing a strong entertainment and leisure theme. It will do everything to ensure the web becomes a marketing tool."
Lowy says that for every person who buys online, there are two who have done their research on the net, then gone to a shop to buy the product.
Schwartz says the shopping centre of the future will need to host lots of community activities which reinforce loyalty and return visits.
"Shopping centres need strategic alliances and to use the physical centre to manage buying, developing a distribution and delivery network for the entire centre, not just individual shops doing their own thing."
She urges centre owners to remove the "prison-like aisles" from their centres and to convince their tenants to do the same, to focus on branding centres as community institutions and integrate their marketing strategies.
Schwartz says in her own shopping centre in Melbourne "we have a very strong focus on operating with the community, a close relationship with the local council. We have a youth worker in our centre who works with the schools, we're working with local government to create an aquatic centre, we've positioned ourselves to be an integral part of the community. Even though the shopping is online, they're still going to have a plaza or piazza to go to."
Paul Keane, a director of Retail Consulting Group, says fundamental changes to retailing start with a change in population makeup - Auckland's European population will fall from 70 per cent in 1991 to 55 per cent in 2011.
Increasing the number of couples and single people in the population reduces the ratio of people per dwelling and means more apartments, and the time is not far off where no one income group will dominate the consumer market.
He says internet commerce is down the list of retailers' concerns, behind the performance of their competitors and mergers or takeovers among competitors.
Keane says more money is being spent on cafes and leisure, less on fashion shops and more in funeral homes.
By Bob Dey
Carol Schwartz, president of Australia's Property Council, came to New Zealand this month to reveal her strategy on how to combat the impact of internet shopping.
Schwartz is also general manager of the Sussan Property Group, established by her family, and owner of a Melbourne shopping centre, so it
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