Page 18 - Retail Pharmacy November/Decemeber 2020

16 BUSINESS THROUGH INNOVATION RETAIL MANAGEMENT STRADING IN A TIME OF TRANSFORMATION truggling Australian retailers Emerging consumer trends Another government initiative is the are seeing some light at the Another trend that has emerged $1.5 billion modern manufacturing end of the tunnel, with Victoria with Covid-19 has been the pace of strategy, which will support six priority beginning to come out of some Australia’s shift to online shopping. areas with an international competitive of the toughest Covid-19 lockdown The pandemic has reset the way advantage: resources technology and conditions in the Western world. Landlords feeling pandemic pain Scentre Group CEO Peter Allen has called for a reduction in the rental relief landlords are required to provide retailers, pointing to the return of shoppers to malls and rebounding retail sales. He notes that such relief from mall landlords amounted to a “quite substantial” $1.6 billion to the end of June, helping tenants to get through a tough lockdown period without government payments, but says this support can’t go on forever. The country’s major office and retail landlords have also implored both the business sector and governments to bring back staff to resume work in offices, to help reignite the economy in city CBDs. The landlords are highlighting the productivity benefits of working collegially in offices and are pushing hard for the return of city workers en masse as a vital step in stimulating surrounding businesses. Darren Steinberg, CEO of commercial property group Dexus, says that without city workers back in office towers, the country’s first recession in three decades will be much more painful than it needs to be in coming years. He adds that he believes fully operational CBDs in the five mainland state capitals generate most of Australia’s GDP. With the multiplier impact of assistance for the small to medium-size businesses that inhabit CBDs, the return of workers to their CBD offices is not happening at a level that suits CBD landlords. Many CBD employees are enjoying working from home, slow and reluctant to get back to their CBD workplaces (even though community transmission of the virus, in NSW for example, is practically negligible). For CBD offices, the workplace culture is allowing for more flexibility now and in the future. The office itself will remain central to fostering company culture, but the strength of the CBD has been forever negatively impacted by Covid-19 as more and more employees have found that they can successfully do their jobs from home. consumers work and play. Such an accelerated shift to online will see the closure of more physical stores. The trend is evident from the increasing number of for-lease signs in the windows of vacant stores. It’s now being forecast that online sales will more than double their share of total retail sales by 2022. Pre-Covid, online sales were about 10 per cent of total retail sales, but potentially the proportion will hit 20 per cent in the next 18 months to two years. Covid-19 has also been the catalyst for the trend of people shopping more in their local communities. Consumers are shopping close to home to support their local businesses. Additionally, people are spending more time at home, investing in homewares, home improvements, food and liquor (but less on fashion, as they haven’t been going to workplaces outside the home, or work events). Government measures and initiatives Retail sales have held up much stronger than expected, due to a combination of federal government stimulus programs such as JobKeeper and JobSeeker, and consumers having been unable to travel or spend on restaurants or events. However, a lot more is now required from the government, which plans to provide new support to grow the jobs, businesses and industries of the future. It intends to accelerate personal tax cuts of some $158 billion for middle and high income earners, along with new tax incentives for business and government infrastructure, such as upgrading the National Broadband Network. There will also be tax cuts for low income earners and pensioners as part of ongoing government stimulus programs. The Morrison government is cushioning the blow for households and business with this transition from Job Keeper and JobSeeker from now until March 2021. There will also be government ‘aggregate demand’ stimulus initiated in a determined effort to keep the unemployment rate to six per cent or below. critical minerals processing, food and beverages, medical products, recycling and clean energy, defence, and space. Opportunities for retail pharmacies The Australian economy will recover in the coming years. With current market conditions, the time remains favourable for pharmacy operators to secure fair and reasonable commercial terms. However, when seeking new leasing deals, they need to understand how their immediate retail precinct has been impacted by Covid-19. If you’re in a CBD location, then your existing commercial lease terms should be significantly reduced. It’s clear that even previously strongly trading, larger shopping centres will have more vacancies and issues in the coming months. Your existing commercial terms should be reduced at a minimum, and perhaps an opportunity may exist for you to get a better location in your retail precinct. This is the right time to take advantage of these challenging economic conditions to secure your long term future. If you feel you don’t have the requisite skill and experience to negotiate the right commercial terms, then engage an independent, experienced retail consultant. References 1. KorporaalG.‘Shifttoonlineshoppingwillbegood for retail’. The Australian, 23/9/20. 2. Maley K. ‘RBA’s next steps to help economy’. AFR, 21/9/20. 3. Schlesinger L. ‘Landlords’ rent relief no longer fair, says Allen’. AFR, 23/9/20. 4. Lenaghan N, Schlesinger L, Bleby M. ‘Walk the talk: property leaders urge CEOs to lead an office return’. AFR, 23/9/20. 5. Kehoe J. ‘Shock therapy’. AFR, 3/10/20. By Bruce Engeman. Professional Property Advocate Engeman Retail Bruce Engeman is an independent, professional property advocate who works exclusively for pharmacy operators. He started Engeman Retail in 2008 and has handled pharmacy negotiations hundreds of times over the past six years. Inquiries: bmengeman@bigpond.com or 0418 470 175. RETAIL PHARMACY • NOV/DEC 2020