The Retail Traitors

There is a misguided belief that unless one supports and talks up bricks and mortar retail, that one is a traitor to the ‘real’ retail cause.

Look at this absolute pearler which I read recently and which reminded me of an ostrich.

“Bricks over clicks – Physical retail rules the world and please don’t let anyone tell you otherwise”.

The myth that ostriches bury their heads in the sand stems from the belief that they are so stupid that they believe burying their heads will make them invisible to predators. In other words, if they can’t see the predators, then the predators can’t see them!

Each year there is a list of retailers who go to the wall in January having waited for the Christmas peak.

Here are a few examples of recent bricks and mortar fatalities and comments:

  • Footwear, clothing and accessories label Diana Ferrari has announced it is closing all of its stores, though will maintain an online presence. This news shows that well-known brands are surrendering to the mounting pressure faced by traditional bricks and mortar operations
    • We predict that we haven’t seen the worst of retail woes and that 2018 will unfortunately see many more home grown brands go into insolvency.
    • Plus-size retailer Maggie T has entered administration after being in business for over 35 years.
    • US department store chain Sears will close another 103 stores, as the retailer looks to “right size” the business.
    • H&M looks to e-commerce, announces store closures. In order to respond even quicker to customers’ fast-changing behaviour the company’s ongoing transformation journey is being accelerated. Among other things, this includes continued integration of the physical and digital stores, and intensifying the optimisation of the H&M brand’s store portfolio – leading to more store closures and fewer openings.
    • Australian department stores are facing an uncertain future with sales and revenue predicted to shrink over the next five years.

And yet there are the believers:

  • The future of online retail lies in bricks and mortar stores. That’s the belief of European shopping centre giant Unibail-Rodamco’s chief executive Christophe Cuvillier, which recently bought Frank Lowy’s Westfield Corporation for $US24.7 billion. Cuvillier says there will always be a place for shopping centres despite the threat of online shopping, which has contributed to fewer shoppers at malls, particularly in the US.
  • And Mastercard has this to say – brick and mortar retailers fight back.

And then there are the disbelievers.

  • The growth of online shopping means that many physical retailers as well as consumers, are no longer solely dependent on shopping centres and malls. This has resulted in the closure of many of the traditional anchor stores in large shopping centres.
    • Most obviously, department stores are suffering a prolonged and rather painful decline.
    • Clearly, shopping centres cannot compete with the huge product range and convenience of online shopping.

There are few Australians alive with a better understanding of retail than Frank, Peter and Steven Lowy. The fact that they are moving out of physical store development to invest in innovative retail technology and big data should be of significant interest to those pondering the future direction of retail. The sale of Westfield shows where retail could be headed next.

Westfield has been at the heart of Australian retail innovation and development since Frank Lowy and Jeno Schwarcz formed a partnership in the mid-1950s. Both holocaust survivors, they arrived in Australia with next to nothing and built an empire.

Lowy was born in Czechoslovakia and was forced to live in a ghetto in Hungary during World War II. He made his way to Israel and in 1952 he left Israel and joined his family, who had left Europe for Australia and started a business delivering small goods.

The rest is history.

So if “Physical retail rules the world” why would the Lowy family divest after building a huge empire over almost 70 years?

The answer is really quite simple.

People like Frank Lowy are a rare breed. They are intuitive. They can read history. But above all, their timing is usually perfect. They are futurists and can see what is around the corner long before you and I can.

Lowy knows that bricks and mortar is dying a slow death. There is no future in bricks and mortar stores Mr. Cuvillier. Unibail-Rodamco has been sold a pup.

And it is high time that commentators descend from their pulpits and confront reality.

 

 

Article by Stuart Bennie -Retail Consultant at Impact Retailing

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