Retail Reckoning: Why Shopping Malls Will Never Be The Same

With social restrictions starting to ease, shoppers are being warned that a trip to the local shopping centre is likely to change forever, with the pandemic forcing an overdue 'retail reckoning'.

It's no secret that most retailers have taken a big hit, and there's been a very  long list of store closures, many of which won't ever come back.

And while some believe this spells the sad demise of retail as we knew it it, for others it is a new -- and much needed-- era for retail.

"Retail has changed forever and the survivors will create a newer, better model. I don't think they will ever see the same level of (human) traffic come back to shopping centres," retail expert and board adviser to several food, fashion and e-commerce companies John Batistich said.

Focus On Cleanliness And Safety

As people return to stores, many will be wary of picking up merchandise that has come in contact with others or punching the buttons on credit-card readers.

"Shoppers will want to know what stores are changing to ensure they are safe, so this will need to be clearly signaled to shoppers," marketing and retail expert from Queensland University of Technology professor Gary Mortimer said.



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This includes removal or phasing out of cash handling, only every second fitting room will be open, dedicated cleaning staff regularly wiping down fixtures and restrictions on how many people can go into the store.

"Unless there is a vaccine this is going to be in the background for some time, changing store design and store operations," Batistich told 10 daily.

The cash economy is going to all but collapse as contactless service  becomes the expectation.

Fewer, But Bigger Stores  

"Plenty of retailers wont make it to the other side, their balance sheets will be depleted if they have high levels of debt, aged inventory and their recovery will be slow, if at all," Batistich said.

But Mortimer thinks many of these closures were inevitable and that COVID-19 merely "right-sized" retail that wasn't profitable or efficient in the first place.

"Those categories like clothing, footwear and fashion accessories are highly exposed and we saw lots of chains start to close even before the virus," he said.

Batistich says this will mean a higher concentration of retailers.

"The strong will get stronger like Bunnings, Officeworks, JB Hi-Fi and Chemistwarehouse, who will increase their market share and even acquire smaller independent retailers," Batistich said.

He is also predicting that Target will merge with Kmart, given they are owned by the same parent company and forecasts that department stores will permanently close as many as half their stores.

Digital But Different

During this pandemic, most retailers have learned lessons on how to survive, as well as lessons from what didn't work.

"Australian retailers always considered themselves to be innovative, adaptive and flexible and invested in digital online platforms, as a result of Covid-19 restrictions it quickly showed we weren't ready and hadn't invested enough and even big retailers like Coles and Woolies were really caught off guard," Mortimer said.

He says good retailers have learned to communicate with their customers in new ways and have optimised the e-commerce channel to serve them more swiftly.

"E-commerce will grow as a significant share of market retail -- we are living and working online and our habits are more formed and entrenched," Batistich said.

Image: Getty Images

From Kmart's virtual queues to Westfield's Click and Collect, both experts agree there will be more --  and improved--  versions of this on offer.

For example, rather than physically lining up in a queue, forward-thinking retailers can offer virtual queue apps, letting their customers know their ‘position in the line’ plus the wait time for entry, based on real-time store traffic.

New Look Shopping Centres Shifting To Services 

Social distancing won’t just affect stores, entire shopping centres will change too.

Both Mortimer and Batistich agree that many shopping centres were overleveraged, overbuilt, and oversprawled.

"If a large proportion of retailers decide to close a portion of their stores, they are most likely going to close those stores in lower traffic malls. So medium to small sized shopping centres that are not that modern or have good service and experience offerings will struggle," Mortimer said.

He believes large and recently renovated shopping centres will fare well as they have already diversified to offer gyms, entertainment and restaurant-like dining experiences.

So what will come of all the empty shop spaces in malls?

"There are going to be new concepts quickly emerge so you will have landlords presented with services around health and well being, like yoga and wellness centres with childcare offerings," Batistich said.

"For landlords there are going to be significant change, rent reversions and higher vacancies and more power in the hands of surviving retailers."

Flagships Stores Become More Important  

"I don't think online shopping will ever overtake physical retail shopping, there is very clearly a social and experience element to shopping in stores," Mortimer said.

As less-performing stores close and digital purchases increase, this means flagship stores need to provide a great in-real-life experience.

"We are going to see fewer tail stores and the flagship, iconic stores that are part of the brand and the experience will become more important than ever as testing grounds," Batistich said.

Image: Getty Images

Spending On Food But Not Fashion

Retail sales rose in February and March but the devil was in the detail, with experts saying the short-term boost was largely a result of panic buying and stockpiling.

The most recent ABS figures show a 24.1 percent rise in food retailing; other retailing 16.6 percent; and household goods retailing 9.1 percent.

"Our spending will  go back to normal level -- we have stockpiled toilet paper and pasta and got our home office set up and some exercise gear so we don't need to spend like that anymore," Mortimer said.

This means discretionary spending will take the biggest hit -- with fashion and department store categories to be the hardest hit.



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Local But More Meaningful 

As people return to stores, not only will customers be seeking out safe spaces, spending is also expected to be geared towards buying from local brands, says Batistich.

"We will be more interested in that local community, local cafes, local shopping strips as we re-build the local communities that we have been missing," he said.

He believes the pandemic has instilled in many consumers a greater interest in shopping local in a bid to support their favorite coffee shops or kids clothing dress boutiques so that they don’t go out of business.

However, Mortimer is not convinced about how long this sentiment, or nostalgia, will last.

"There's always a strong intention to support the little guy and buy locally, but there are always barriers and sometimes they are convenience and sometimes they are financial," Mortimer said.

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