Page 26 - Demo

24 BUSINESS THROUGH INNOVATION RETAIL MANAGEMENT THE ECONOMIC OUTLOOK FOR 2021 1. Global economic outlook 2020 was a year in which human spirit and resilience have helped to get everybody through a world wide pandemic. Corporations in this time have also displayed incredible social responsibility in times of crises. Our Governments and central banks have also helped to steer our economies out of the deepest global recession since World War II. The high Covid-19 case numbers in the US and Europe have made it difficult to envision a quick return to normal. Yet even though the pandemic has dragged on the global economy has proven to be remarkably resilient. Following a steep decline in early 2020 the world economy rode a rebound that began in May and remains on track to surpass pre-pandemic GDP levels by the end of this year. This gets the stage for strong post recovery growth in 2021. In their 2021 outlook, the economics team at Morgan Stanley Research says the V shaped recovery that was forecast in the middle of 2020 is new entering a self-sustaining phase which will deliver 6.4 per cent GDP growth in 2021. 2. Australian economic outlook Australia has controlled the virus outbreak better than most other countries and we as a country are poised to be the beneficiary from the post-vaccine global recovery. The Federal Government is committed to deficit spending until the unemployment is below six per cent (which will not happen until 2022 as per the government forecasts). The 2021 economic market looks to have further economic improvement with expectations that the market will reach its pre-pandemic level of output by the middle of 2021. The government will continue to spend with a background of record low interest rates and pent-up consumer demand. These conditions with an exceptionally high level of excess savings provide a very good platform for growth, even if some Covid-19 concerns linger into the first half of 2021. In the housing market prices are recovering quickly and lending indicators for housing construction are showing an imminent rebound. Retail spending has remained surprisingly robust despite weakening in Victoria and across many services. The landlords will continue to be on the back foot for all of the 2021 calendar year. The online companies have had an enormous advantage over bricks and mortar retailers because they have been able to build direct relationships with customers during the pandemic. Companies like Kogan.com is one of the success stores of the pandemic, with market capitalisation of the company rising by about $ 1.5 billion since its shares hit a low of $ 3.79 in March. The stock price has been over $18 in recent weeks. 3. The outlook for pharmacy owners The fact that landlords have lost business and customers to online retailers means that they are going to find trading for most of 2021 to be a challenge. Vacancies and poor sales with a number of retailers means that retailers will be insisting on reduced commercial terms with landlords. Landlords will continue to push hard for rental growth with pharmacyowners. Pharmacy owners must take time to do a retail audit of their trading area to really understand how they have been impacted by the pandemic. Have your sales improved and what about the performance of other retailers in your immediate area. location within your building or shopping centre caused by the poor trading of for instance a fashion retailer? Pharmacy owners as essential retailers in the Covid-19 crisis are now more desirable for landlords. However, that doesn’t mean that they should be paying higher occupancy costs. Pharmacy owners must understand their micro and macro retail environment to control their occupancy costs and to plan for the future. In 2021 you must take charge to ensure that you have the best possible commercial terms in what is becoming an increasingly more competitive market forpharmacy owners. References 1. Tony Boyd, “Covid-19 Changed Everyghing”, AFR, 8/12/2020. 2. Jun Bei Liu, “Bring on 2021, earnings expectations are rising”, AFR, 14/12/2020. 3. Morgan Stanly, “2021 Global Economic Outlook: The Next Phase of the V. 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 • JAN/FEB 2021 Can you secure a more prominent