Small retailers should downsize: ARA

Small retailers should downsize their offline stores as they invest more in their online presence, according to the Australian Retailers Association.

ARA executive director Russell Zimmerman says as online retailing continues to grow, traditional retailers may face less pressure to invest in large spaces and impressive store-outs as they seek to strike a balance between their online and offline operations.

His comments come on the back of an announcement that US retailers such as Sears and Home Depot have started offering empty portions of their stores and parking lots to other companies as they attempt to downsize their bricks-and-mortar stores in response to the growth of online retail.

According to local leasing experts, there are signs the trend is heading for Australia with the emergence of the co-location of complementary retailers within one store, and a general shift towards smaller shop fronts.

Zimmerman agrees there are signs the retail scene is changing, but believes most traditional retailers will continue to need a physical presence.

“For example, shoe shops and clothing stores will always attract mothers and daughters who enjoy shopping together. Similarly, families often view shopping as an outing,” he says.

“Although smaller retailers can establish an international presence on their website, most of them will still want a site in a shopping centre to ensure passing traffic is able to gather that trade.”

“Where you’ll see a change is where retailers become more savvy about their online and offline operations. For instance, they may start to keep the bulk of their stock in much cheaper places than shopping centres and therefore won’t have to pay as much rent.”

Zimmerman says with regard to how large or small a shopfront should be, it depends on the type of items the business is selling.

“The retailer needs to decide whether they’re going to have their full range on display or only their latest releases – that sort of thing,” he says.

“One idea might be to divide the shop by having a display at the front, with the back half of the store used to stock items and tend to the online aspect of the store.”

Zimmerman says smaller retailers may choose to spend less on impressive store fit-outs as their shoppers head online, which would cut costs. He is also hopeful the shift towards smaller shop fronts will see rents come down.

“If landlords can’t fill their shopping centres, they can’t charge the rents they’ve charged in the past,” he says.