Retail rents and e-commerce frenzy
The AFR reported that leading retailers like Premier Investments are threatening an avalanche of store closures unless landlords reduce rents as $2 billion a year in sales shift from bricks and mortar to online. Rents for specialty retailers are still rising an average 4% a year, while same-store sales are growing by less than 2%, increasing margin pressure on retailers. Consequently, major retailers including Premier Investments, Myer, Wesfarmers' Target, Lorna Jane, David Jones, and the Country Road Group are reviewing store networks and stepping up investment in e-commerce. On the other hand, while rents are still rising and vacancy rates remain low, behind the scenes landlords are striking off-lease deals, offering rental concessions and temporary abatements to avoid rows of empty shops. What we are witnessing is not the demise of stores, but a temporary moment of e-commerce frenzy. Huge capital investments are being allocated to online while stores are left to rot. This will level out as stores are here to stay for a plethora of reasons. In our experience: stay frugal and have the right stock, at the right price, in the right location – if you do, you will do exceptionally well.