The state of retail 2020

It’s been a while since my last piece, we have been busy trying to launch our startup Pop up on demand and as any business owner knows you just don’t have enough hours in the day.

I wanted to write about how I think retail is going to play out for the rest of 2020, this was spurred on by my recent trip to Melbourne for Pause fest.

The trip to Melbourne was different this time as we were walking around the city, we noticed it was eerily quiet all around especially the shopping centres.

Australian bricks and mortar retail has been facing some difficult times recently from the bush fires, coronavirus, low wage growth, online spending, property prices etc

Granted some retailers (JB Hifi) are doing better than others (Bardot, Jeanswest) and will no doubt be able to weather the storm.

It makes me wonder about all the retailers that won’t be able to weather the storm and what is retail going to look like in the future as we witness the changes happening to retail.

Here are my takeaways

Stores will continue to close as we make this transition from old retail to new retail. As new brands both online and offline move in, we will see older brands get squeezed out. Unfortunately, the market isn’t big enough for everyone to succeed and we have too much retail sqm per capita (Third highest in the world with only 25 million people)

Brands that don’t transition to the new generation of shoppers will be left behind. I once asked a young business owner to meet at Michel’s Patisserie to which she replied “Where?” and had no idea what I was talking about even though they have over 300 locations in Australia.

Leasing managers and Landlord will struggle to fill vacant spaces unless they change their minds about leases and rent, this is going to be more extreme in tier 2 centres. How many businesses are lining up to sign multiyear leases and spend hundreds of thousands of dollars on furniture and fit-outs? Just look at what happened to most high street retail in Australia

DTC or online only brands will continue to pop up and experiment with physical retail. Landlords will need to adapt their offerings to attract these type of tenants. The key here is to offer them short term opportunities with furniture included and allow them to test their concept before talking to them about a longer-term lease.

It needs to be as easy and as fast as possible for them to do. Remember businesses can set up an online store in a day with a couple of hundred dollars. Why would they bother if it is going to take them months to do and cost them tens of thousands of dollars?

Runaway the label took a 12-week pop up at Robina Town Centre to test their concept and now are looking at extending.

2020 is going to be a rough year for physical retail and most of the brands that we grew up with may not be around.

There was an interesting point made by Paul Bassat (Square Peg) at Pause fest when speaking about innovation.

If you look at the top companies in USA (Facebook, Amazon, Apple, Microsoft) these are fairly new companies and dominated by tech which their sole purpose is to be innovative.

Now look at the top companies in Australia which is dominated by banks and resources companies which one could argue isn’t as innovative as their USA counterparts.

What I am trying to say is that all the doom and gloom media coverage about legacy retailers closing might not be a bad thing in the short term provided that everyone (landlords, councils, retailers etc) bands together and create an innovative, sustainable and supportive ecosystem for the next generation of retailers to succeed because the old way of doing things isn’t working.

Who knows maybe out of the ashes we may find the next Facebook of brick and mortar retail.

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