Ross Greenwood speaks with Head of Retail at Colliers International Michael Bate to discuss how retailers will fare going into Christmas.
Introduction: How are retailers expecting this Christmas to go?
Ross Greenwood: Well, what can I tell you about falling house prices in Melbourne and Sydney? It’s a bit wobbly in Brisbane although not too bad. Canberra is okay at the moment. Hobart’s probably, well, the funny thing is I reckon the best property market in Australia right now is probably Perth. It’s got more prospects than just about anywhere. That’s been a basket case for three years. Then you’ve got well, rising utility bills, electricity.
The latest thing, you’ve got rising petrol prices. That is always the perfect storm for retail, it’s going to Christmas 2017. Let’s try and find out exactly how it looks right now. Michael Bate, he’s Head of Retail at Colliers International. He looks at all of this, leases out the space. Michael, explain to me right now your view as to how retailers are faring going into Christmas.
Interview with: Michael Bate, Colliers International, Retail Expert
Michael Bate: It’s one very simple word, Ross, and it’s called tough, it really is. Everything you just outlined is not a great recipe for this particular Christmas trade.
Ross Greenwood: Is there any feeling of people going online to do their shopping or is it simply a case that they just don’t have the dough that they had a year or two years ago?
Michael Bate: I think there’s two things. There’s no doubt that the online presence is eating into pure sales. There’s anecdotal evidence to suggest that online is having a greater impact on retail sales. The more people explore us, the more people are satisfied with us. But it’s the pressures, it’s the economic pressures that are out there at the moment on the general family household income.
That are just, we’re just going to see people saying, “You know, I won’t spend it this year. I’ll be very cautious about the way I do spend what I have got to spend for Christmas.” The Myer result, the Myer profit warning during the week was of course a litmus test for a lot of retailers in this line.
Ross Greenwood: Well, the other thing also my shares this week down by 16%, that is the real issue. From a consumer’s point of view, from a retailer’s point of view, you do not want to get caught with stock that you can’t move at Christmas time. The question is, “When do the sales start?”. Because that’s always the big thing to watch. Isn’t it? Because if they go early with the sales, in many cases, that’s the tell-tale sign that they’re worried they wouldn’t be able to clear that stock.
Michael Bate: Correct and once, the moment that they start to clear, the moment that they start to go on sales, there goes margin. Once margin is eroded or eaten into, there’s profitability. I think this weekend is a real litmus test right across particularly the big three markets Brisbane, Sydney, and Melbourne. I think a lot of retailers will be sitting back on Monday morning next week saying “Well okay, what was it like? Did we in fact clear? Is it an indicator from the volumes that we do over this weekend that we’re going to have a great week next week and then lead into the weekend before Christmas?”
I think it was, if my memory serves me, I think it was about 2005 maybe 2006 that we saw this particular scenario where Christmas Day fell on a Monday. “Guys, you get two full weekends leading into Christmas” and it was a bumper year and ‘06 was a very very good year. They’ll be sitting back Monday morning, having a look at what happens this weekend and deciding, “Do we push the button early on sales or do we ride it out?”.
Ross Greenwood: Okay. I haven’t talked to you about it since then but the deal that the Lowy family had done the other day in regards to Westfield International. Is that do you think indicative of the mood of retail right now? Because online ultimately is going to make some sort of impact around the place. Question is, from your point of view, is space going to be really as valuable and at the same premium in the future as it is today?
Michael Bate: You know I think that Frank Lowy is one of the shrewdest businessmen I know. I had the pleasure of working with him for many years in my Westfield career and I admire the man greatly. I’m sorry I didn’t keep his shares because you’re holding the shares, that’s another story. But I do think that they’ve picked the market well.
Unibail and Rodamco are great retail owners throughout the globe and they saw a great opportunity to own some of the best retail assets across the globe that had been created by a Sydney-based family. I think that the Westfield story is a great story and I think that yet again, Frank Lowy has picked the market and picked the market very well.
Ross Greenwood: All right, just going back to that whole issue about when the sales will happen. Just a real tell-tale of this will be you yourself. When will you be doing your Christmas shopping, Michael?
Michael Bate: Probably Saturday a week, that’s five o’clock in the afternoon.
Ross Greenwood: And the reason is, because you think the sales are best or simply because you’ve left it that late?
Michael Bate: No, I’ve left it that late and I’m a sucker for leaving it to the last minute.
Ross Greenwood: There you have Michael Bate, he’s Head of Retail at Colliers International. One of the really good things about retail in this country and Michael, we appreciate your time. Have a great Christmas.
Michael Bate: You too, Ross. Cheers.