2017 CEO Outlook

Mark Kirkland, AMP Capital Shopping Centres

In 2016 AMP Capital Shopping Centres (AMPCSC) reached some major milestones. We completed the $670-million redevelopment of Pacific Fair, which was many years in the making, transforming it into a world-class shopping and leisure destination, and we continued to progress the design, planning approvals, and early leasing of the redevelopments of Garden City and Karrinyup shopping centres in Western Australia, with construction due to start within the year.

Following such a big year, and stepping into a new role as Managing Director, I’m looking at the year ahead with excitement and optimism over the many opportunities we still have before us at AMPCSC. Starting a new role at the beginning of the year is always a ‘feel good’ moment; it’s a fresh start for me and I’m confident that, with over 24 years of experience in managing retail and property development projects, I can bring a different perspective to the role, put my knowledge and expertise to good use, and lead the group to even more successful milestones over the years to come.

In 2017, experiences will be key, and in our role as a shopping centre landlord, we’ll continue to look at opportunities throughout our portfolio of centres where we can provide a valuable experience for our consumers, build stronger relationships with our retailers and reiterate to shoppers that they are appreciated. For us this is about continuing our focus on placemaking which is demonstrated so well in the product we have delivered at Pacific Fair.

Economic update

There is no doubt that the current global economic and political climate is turbulent. In 2016, we saw volatility in confidence and economic conditions due to major political changes that took place throughout the year including Brexit, Donald Trump’s victory in the US Presidential election, and even in our own Federal election in Australia.

However, despite fears of a financial doomsday, by the end of 2016 many of these concerns proved to be ill-founded, with global economic growth sitting just above 3.2%, while Australia’s economy saw 2.5% growth.

The Australian property market has experienced upward shifts throughout 2016, although it is expected to slow down in the coming year. Residential property price gains are expected to slow down to around 3 to 4% in capital cities as heavy demand in Sydney and Melbourne eases. This could create a vulnerable housing market as apartment supply surges while housing construction slows down, though this could benefit household finances and potential first home buyers.
To help offset the gap left by slowing housing investment, continued state capital spending in large-scale infrastructure projects, attraction to the higher education sector and the boosted tourism sector will all come into play as a result of the lower Australian dollar.

With most economic commentators forecasting the Australian dollar to range somewhere between 65-75 cents to the US dollar, this should underpin continued growth for tourism and education as major drivers of GDP growth this year and next. For AMPCSC, the visitor economy is of ever increasing importance, and has contributed enormously to our placemaking and development strategy. The high levels of disposable income of visiting tourists present sales opportunities for local and international brands in our shopping centres, as well as supporting the ongoing growth in the food and beverage category.

In addition, Australian shares are also likely to have solid returns as the resource sector’s profits surge following the rebound in bulk commodity prices. Commercial property and infrastructure are likely to continue benefiting from investors’ ongoing search for yield; however, it’s important to bear in mind that this demand will wane as bond yields trend higher.
Over the next few weeks and months, the eyes of the world will be focused on the US Government, thanks to the uncertainties around the Trump Administration’s controversial policy-making approach. Economists are divided as to whether he will take a pragmatist or populist approach on the policy front, which of course will play a massive role in influencing the global markets.

Switching on with shoppers

In 2017, achieving success in the retail industry goes far beyond the goods you sell. Developing and managing successful shopping centres is about more than just creating and maintaining a marketplace. More than ever it requires a deep understanding of the shifting spending habits of our customers, and the ability to identify where and how they’re spending their disposable income and spare time, and why.

Today’s consumers are busy individuals, with competition for their share of wallet and valuable time constantly on the increase. For retail centres to be successful in this competitive environment, retailers and landlords alike have to continually raise the standard of our offers to provide a compelling proposition, not just in terms of the retail transaction, but the experiences that go with it, including curating environments that facilitate connection with family and friends.

Successful retailers are realising that, in order to engage with the consumer and maximise sales in-store, they need to provide something that consumers can exclusively experience in-store. Retailers must understand what makes their shoppers come in-store to physically engage with their brand, in order to continue to grow, innovate, and stay relevant. Collectively we need to continually evolve the way we engage with customers to develop stronger relationships. How we engage digitally is a key factor in this. Physical & online platforms must operate in unison as a seamless proposition connecting consumer needs and wants with retailer goods and services. In the US, 26 of the leading 30 online retailers are also the leading bricks-and-mortar retailers. Essentially, the in-store experience needs to be more compelling than online. We need to understand that Australian shoppers have become more discretional in their spending habits; that no shopper is the same, and luxe-brand advocates could even be the Aldi-devotee too!

Creating experiences

Australian shoppers work hard every week, with workplace participation rates for both genders high, and more people working longer hours. Today, full-time employees work 50 hours a week on average, most likely in an indoor environment. This means that it is important for us to provide refreshing experiences and make shopping as easy as possible, maximising their leisure time as much as we can. Our research shows our customers want to see the outdoors brought indoors – think light, water and greenery. If we can also utilise outdoor spaces such as rooftops and laneways to create great experiences, we will increase the time customers spend in-centre.
At Pacific Fair, we successfully implemented this Placemaking approach with the curation of The Resort, an unrivalled open-air retail precinct which at times doesn’t even feel like a shopping centre! The inclusion of secluded cabanas, palm trees and running water creates a sense of place that is uniquely Gold Coast and resonates with the consumer, whether they are local or visitors. This expands the way shoppers engage with the centre – it’s become a place to relax, a place for the kids to run around, a place to catch up with friends with waterside restaurants and bars, making shopping trips to the centre more enjoyable and unique for everyone.

Food and beverage is playing an increasing role in creating experiences and new destinations for people to relax. With the rise of social media, food photography, and reality TV shows, food is the new black. Last year AMPCSC hosted a successful Talking Shop Retailer Engagement workshop with some of Australia’s leading food services and brands to discuss the changing way Australians want to experience their food. From the presenters we learnt that food is like fashion – driven by trends, seasonality and hype.

Today, the consumer is looking to access the ‘five layers of food’ in the one destination. In Sydney, Macquarie Centre manages to do just that – offering two levels of substantial fast food offerings, a fresh-food district, highly popular cafes situated by our leading department stores and finally the introduction of high-profile restaurants such as Chef’s Gallery, Neil Perry’s Burger Project and Adriano Zumbo’s Zumbo Patisserie. There are food outlets for every type of customer, and we’re very pleased to see that it’s become a local hub for surrounding businesses and the neighbouring university.

Urbis Shopping Centre Benchmarks 2016 found that food and beverage sales in large regional centres grew by more than 3.6%, while specialty apparel turnover grew by just 1.3%, overall. This tells us that there is a shift in consumer demands and what shoppers are looking for in a retail environment. In the past 20 years, food and beverage as a percentage of retail has increased by 20%. We also know from the research that Australian shopping centres are well and truly underdone when it comes to food and beverage offer compared to our international counterparts, so we should expect more to come in the next few years. Leading regional centres are seeing F&B sales approaching $80 million, or 10-12% of total retail turnover, acting as a key pillar to drive customer traffic.

Quantium research found that in ‘mission shops’, those that include a stop in a cafe often result in more cross shopping, longer time spend in the centre, and overall more spend. They actually found that with every $1 spent at the cafe, a further 50 cents is spent on retail. On average, spend increases from $72 to $108 just from having a coffee stop – who would have thought!

Another focus on maximising sales is through extended trading hours. We have been seeing this trend for years internationally. The night-time economy has seen massive growth rates as a result of the changing lifestyles of Australians. It’s become a new opportunity for retailers and brands to engage with new audiences. As our customers become more and more time poor, offering trading hours that suit their lifestyles will help us meet consumer demand and capture more sales. We also need to consider that our international visitors have an expectation that they can dine, shop and be entertained well into the evening – like they do at home.
Engaging with the night-time economy isn’t difficult provided you remember that the local shopping centres are community hubs; they’re the heart and soul of the community and provide opportunities for community groups to meet. Australians are becoming the ‘want it now’ consumer; where if they want a new experience, they’ll find it themselves, and will find a way to make it suit their needs. If we can tap into this want by creating experiences, we can be one step ahead of the game. Garden City’s Sunset Supper Club for instance hosts food trucks on Friday nights. On its initial launch, foot traffic at the centre increased 6.2% with 80% of food trucks selling out.

Final thoughts

Competition for the share of the consumer wallet and share of their time will continue to increase and we need to be prepared for this. Our customers are discerning, with their product awareness and understanding of value increasing, which will only become more pronounced with the potential arrival of new competition. For bricks and mortar to continue to be successful in this environment, the in-store transaction needs to be as easy (or easier) than online. But not only this, we need to add the unique ingredients online cannot replicate – distinctive products and experiences from retailers, creating a space for people to connect, whether through food and dining or unique experiences, and making the space a space they want to spend time in.

We look forward to continuing to tackle these opportunities as we move into another exciting year at AMP Capital Shopping Centres in 2017.

About the author

Mark Kirkland

Add Comment

Click here to post a comment