 Key Retail Trends for 2010
(New Zealand) - January 2010
With the global recession ebbing, retailers everywhere will soon be focused on expansion rather than simply keeping their heads above water. Michael Baker, a global retail consultant and former research director for the New York-based International Council of Shopping Centres, recently outlined the key retail trends for 2010, in Melbourne newspaper The Age.
According to Baker, retailers who survived the recession will begin to reap the rewards, such as market share and real estate coughed-up by competitors who didn’t make it – provided the recovery stays on course.
“Ironically, not having suffered as deep a downturn in consumer spending as their overseas counterparts, the Australian retail industry is at a disadvantage coming out of it. The cleansing process in Australia has been relatively minor, resulting in the continued survival of a whole legion of superannuated brands,” he says.
“Since shopping centre occupancy has not been hit so hard by retailer bankruptcies as it has in the U.S, U.K and elsewhere, less high-quality real estate has been freed up. This, in turn, means that many small, fresh and innovative retailers still can’t bust their way into Australian shopping centres.
“Even so, some of the most important expansion strategies that will play out around the globe in 2010 are still highly germane to Australian retailers, particularly those with ambition to sell overseas.”
Mobile Commerce
“Presently web-enabled mobile phones account for only a tiny fraction of internet sales, but mobile commerce is on the cusp of a rapid growth spurt as an increasing number of smart phones enter circulation. High-profile retailers including Ralph Lauren, Victoria’s Secret, Yoox, Sears, Net-A-Porter and Galeries Lafayette are among those who have recently entered the mobile commerce fray, offering full online shopping capability formatted for small screens,” says Baker.
Internet Channels
Baker expects to see increased investment in the internet channel in 2010, both for direct sales and market testing. “U.S e-commerce sales are continuing to take market share from stores and reached US$221 billion in 2008, [which was equivalent to Australia’s total retail sales across all formats]. However, retailers can also use geographic data from their internet sales to help determine new store locations. The internet channel enables brands to build exposure in both domestic and overseas markets while reducing real estate risk.”
High Quality Retail Space
“Many retailers continue to be wiped out by the recession in the U.S and Europe particularly. In the U.S, the retail vacancy rate is now pushing 10 per cent and will go higher. In the U.K, things may be even worse,” says Baker. According to a survey conducted by British research firm, Local Data Company, one in 10 British retail stores closed between January and September of 2009. “The carnage has left rich real estate pickings for retailers better positioned for growth. For good Australian retailers setting their sights overseas, the time has rarely been better to strike a deal.”
Secondary Lines
Secondary lines have provided a lifeline for many designer brands during the recession. “This more moderately priced expansion vehicle hedges against depressed spending on their core labels. Valentino, Missoni, Moschino, Alexander McQueen, Versace, Marc Jacobs – the list goes on. Expect these lines to multiply and take more space in the better shopping centres and High Streets around the world.”
Own Store Networks
“Designer brands will focus on building out their own-store networks to reduce reliance on struggling wholesale segments,” says Baker. For example, Esprit reported 10 per cent growth in retail sales in its latest fiscal year, while wholesale revenues fell by 8 per cent. “Generally, throughout the recession, designer brands with a greater dependence on their own retailing operations have outperformed those with more reliance on wholesale.”
Niche Speciality Concepts
“Many high-profile retail chains such as Gap, Abercrombie & Fitch and Pacific Sunwear have quietly abandoned niche concepts over the past couple of the years as the need to conserve cash and the difficulties of segmenting consumer markets have made them focus more on shoring up their primary nameplates. This trend is likely to be short-lived as the impetus for growth and the lure of splintered consumer markets once again become irresistible.”
China and Other Emerging Markets
“Investment in stores in emerging markets will continue to gather steam, with China being a major focus,” says Baker. “The recession applied a soft brake to this process but it is sure to accelerate again as opportunities shrink in mature markets.”
Urban Formats
“There will be few limits on the kinds of retailers attempting to shoehorn themselves into urban infill locations as these become more attractive, relative to suburban greenfields. Expect the trend to accelerate as urban governments try to generate local employment and sales taxes as a motor of economic recovery.”
Factory Outlets
Baker says factory outlets have been one of the few bright spots in discretionary retail in 2008-2009. “Occupancy has been relatively stable and sales trends stronger than for "full-priced" formats in many countries. The massive shakeout of the sector that occurred in the first half of this decade is over and an era of more sustainable growth has begun as retailers seek ways of smoothing sales volatility.”
Michael Baker can be contacted at mbakerconsult@gmail.com
Picture: www.dreamstime.com
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