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IBISWorld reveals the changing nature of Australian shopping centres

  • Written by Shae Courtney

New IBISWorld research indicates frugal consumers and online shopping have reduced foot traffic in shopping centres across Australia, leading centre operators to respond by offering an even greater range of shopping and services to lure patrons back.

 

‘Digital platforms that enhance in-store customer shopping experiences and eliminate the divide between bricks-and-mortar and online operations are also part of retailers’ attempts to increase footfall,’ said Ms Kim Do, IBISWorld Senior Industry Analyst.   

 

IBISWorld research also indicates the crucial Christmas shopping period will be characterised by more bargain hunters, heavy discounting and fierce competition from online retailers.

 

‘An estimated 10.8% of all retail spending occurs in December in the lead up to Christmas Day. This year, festive shopping is expected to remain subdued with annual retail revenue increasing by just 1.9% over the year to December 2017. This means the average Australian will spend about $420 on Christmas gifts this year,’ said Ms Do.

 

‘Trading conditions are forecast to remain challenging across the range of bricks-and-mortar retailing and service industries commonly found in Australian shopping centres, with annualised growth of between 1.0% and 2.2% over the five years through 2022-23,’ added Ms Do. ‘Online shopping, however, is anticipated to enjoy annualised revenue growth of 9.4% over the same period.’

 

Industry

 

Revenue 2017-18 ($ billion)

 

Revenue 2022-23

($ billion)

 

Annualised revenue growth
2013-18

 

Annualised revenue growth
2018-23

 

Employment annualised growth
18-23

 

Shopping Centre Operators

 

8.0

 

8.9

 

2.0%

 

2.2%

 

1.3%

 

Online Shopping

 

20.1

 

31.4

 

13.5%

 

9.4%

 

8.0%

 

Cinemas

 

1.7

 

1.8

 

-0.2%

 

1.3%

 

0.8%

 

Consumer Goods Retailing

 

16.3

 

17.8

 

0.7%

 

1.8%

 

0.7%

 

Supermarkets and Grocery Stores

 

101.1

 

110.5

 

2.8%

 

1.8%

 

-0.3%

 

Fast Food Services

 

19.5

 

20.5

 

3.6%

 

1.0%

 

0.6%

 

Cafes and Coffee Shops

 

8.2

 

8.6

 

4.8%

 

1.0%

 

3.1%

 


The importance of Christmas

 

Christmas is one of the nation’s busiest periods for retail trade. Revenue for retailers has increased on average by a substantial 23.0% from November to December, over the past five years.

 

‘Despite the season’s importance for shopping centres, growth in Christmas spending has slowed over the past five years. More conservative retail spending can largely be attributed to negative consumer sentiment, along with subdued growth in household consumption expenditure and household discretionary income over the same period,’ said Ms Do. ‘Many consumers have opted to shop online as a result of these trends.’

 

Online operators typically have lower fixed costs than traditional bricks-and-mortar stores, which means they can offer consumers lower prices and better discounts. Many international retailers, such as Marks & Spencer, River Island, Next, Nordstrom, and Macy’s, have launched online ordering platforms in Australia in recent years, which has put additional pressure on Australian enterprises, IBISWorld found.

 

‘The convenience of online shopping has also attracted time-poor customers. Online stores provide a broad selection of products, higher stock levels, and allow for easy price comparisons. Customers are also able to avoid the inconveniences of making in-store purchases, such as parking and restricted trading hours,’ said Ms Do.

 

More mixed use malls

 

According to IBISWorld research, as Australian consumers increasingly embrace online platforms, shopping centres will review and innovate their business model to broaden their value proposition for consumers.

 

‘It is likely that shoppers will experience diversifying tenancy mixes at their local shopping centre, which are expected  to include a greater range of lifestyle services, such as health and beauty services, dine-in restaurants, cinemas and bowling alleys. Temporary novelties such as concerts, galleries, pop-up shops, showrooms and concept stores are also expected to become more common in Australia’s shopping centres,’ said Ms Do.

 

Value-added elements and services provide consumers with a range of experiences that cannot be satisfied online and create a community hub for individuals. This strategy is expected to be prevalent during the Christmas holiday period, which often sees an increase in family time, as children are on holidays and most working parents are on leave,’ added Ms Do.

 

According to IBISWorld, the ability of shopping centres to sell themselves as an entertainment destination during the holiday period will be a key factor in increasing shopping centre traffic.

‘Many large shopping centres have already adopted this approach. For example, the first redevelopment stage of Chadstone Shopping Centre in Victoria included a new dine-in restaurant precinct, a renewed cinema and a LEGO Discovery Centre, with future plans including a hotel. Similarly, Highpoint Shopping Centre has announced plans to create a town square with the potential to include a hotel, medical centres and more entertainment spaces,’ said Ms Do.

 

Digital ordering

 

Although online shopping typically presents a threat to shopping centres and traditional retailers, it can also present new opportunities for innovative marketing techniques.

 

‘In addition to expanding tenancy mixes, shopping centre operators are expected to work alongside retailers to enhance customers’ instore shopping experiences through leveraging technology advancements and online platforms,’ said Ms Do.

 

‘Often consumers see retailers’ physical stores as showrooms, although they go on to order products online. As a result, shopping centres and retailers that are able to use their physical presence to complement online offerings and vice versa, will be in a better position to capture consumer spending.’

 

According to IBISWorld, technology will further enable shopping centres to engage and foster relationships with consumers. Some operators, such as Chadstone Shopping Centre, have announced plans to employ GPS and facial recognition within their centres. The new technology will allow operators to know when consumers have entered the centre and alert them of sales or activities as they shop, tailoring experiences based on each individual.

 

‘Social media, smart phone apps and loyalty programs also present new ways for operators to renew excitement for in-store shopping experiences,’ concluded Ms Do.