On commitment to excellence in retailing

Shopping Centre News
Vol 33, Number 3 – 2015

Many years ago I walked in to the office of a managing director of an Australian supermarket chain to speak with him about his business. Hanging on the wall behind his desk, and distracting me as I tried to engage with him, were various placards with pithy sayings about things which were clearly important to him. One of them was the corny old joke about the respective contributions made by the chicken and the pig to the delivery of bacon and eggs breakfast – the chicken has a significant interest in the outcome but the pig has made a real commitment. It was the first time I heard that joke and I must admit I thought it pretty funny at the time.

Sadly, despite the obvious commitment of the then managing director, that supermarket chain no longer exists.

Santana Row Santa Clara

In recent months I had the opportunity to visit a number of cities in the United States, enjoying at leisure some of the iconic and best performed retail developments, from which Australian shopping centres have drawn so much inspiration over the years. Naturally the instinct when viewing retail developments elsewhere, especially in the US, is to think about what one can learn from them; and what might be relevant or instructive to apply at home.

There are of course just as many differences between retail conditions in the US and Australia as there are similarities. The most obvious, and arguably the most important, difference is the sheer size of the US market compared with Australia’s – total retail expenditure in the United States runs at around US$4,200 billion annually, whereas in Australia total annual retail turnover is AUD$280 billion – equivalent to about one-twentieth of the US figure after currency conversion.

The massive difference in market size lies primarily in different population levels (320 million people in the US versus 24 million in Australia) but also in higher levels of retail expenditure per person in the US.

Americana at Brand LA

Other differences apply in terms of the number of retail options that are available in the US as compared with Australia, whether it be anchor store options such as department stores, numbers and types of shopping centres, or the depth and range of both retailers and merchandise that are available in the various specialty categories, in particular apparel.

Yet another difference lies in the respective planning regimes of each country, with the US model generally being more liberal than Australia’s, while another significant difference is the level of wages paid to workers in retailing in the US as compared with Australia – generally much lower in the United States.

There are, on the other hand, also many similarities. The most important is the shopping centre model, which Australia initially borrowed from the US but has then fashioned in its own image over the past 50 years or so, and has arguably perfected for Australian conditions. Certainly it is the case that, pound for pound, Australian shopping centres deliver more sales than their US counterparts on an average basis. To a large degree that can be sheeted home to the fact that the US simply has much more competition than is provided in Australia, and the fierce competitive environment works, as economic theorists would predict, to lower the returns on average of all players.

As I kept trying to sum up in my own mind what were the most instructive lessons I could take and try to apply back in Australia, the word commitment kept coming to the fore. The extraordinary levels of commitment to delivering shopping experiences that made one store or one centre stand apart from the rest.

I saw that commitment at a store level in the amazing array, quality and presentation of fresh produce, meat, fish & bakery of a Whole Foods Market supermarket. The fresh food offer of a Whole Foods Market stands a long way apart from any other supermarket, and is complemented by equally impressive, and equally tempting, ranges of chocolates, cookies, cheese & deli items, and ready-to-go meals.

Desert Hill Premium Outlet LA

Commitment was even more evident in the meticulous (and no doubt costly) design and curated mix of a high quality, open air, lifestyle centre such as Santana Row in San Francisco or Americana at Brand in Los Angeles. The effort and expense put into the design, landscaping and quality of finishes means that those attributes become important reasons for people to visit – they combine to create a real sense of place and beautiful public spaces where just spending time is enjoyable.

Commitment to make a real statement was also clearly evident in the sheer ‘brand clout’ of the offer provided at a completely out of the way but hugely successful premium outlet centre such as Desert Hills, almost two hour’s drive from central Los Angeles and surrounded by nothing other than sparse, uninhabited hills – although located on a freeway, of course. Now, this is what I call a designer outlet centre – Prada, Gucci (2 stores), Ferragamo, Fendi, Versace, D&G, Armani, Canali, Bally, Saint Laurent, and many such others. The sight of a Burberry store on the edge of a freeway, pretty much in the middle of nowhere, is not very common.

Commitment to deliver an offer which stood apart from the rest was also evident in the brand clout of a super-regional centre, South Coast Plaza, one of the stand-out performers in the country, with a store mix that, in addition to five department stores, includes Tiffany & Co, Chanel, Cartier, Hermes, Bally, Bvlgari, Giorgio Armani, Fendi, Valentino, Versace, Louis Vuitton, Burberry, Rolex, Jimmy Choo and many more – despite being located in a relatively basic suburb of outer Los Angeles.

The elegant beauty of the merchandise presented in a Kate Hill fashion accessories store (not a segment with which I claim to be especially familiar) and the gorgeous manner of its presentation said even to me that this was one fashion store which stood apart from the wide range of competitors in the field.

Over recent years, we have heard a lot about many American shopping malls closing or being redeveloped for non-retail uses, and of course there have been many developments throughout the country which have been poorly conceived and/or poorly executed, and which have been found wanting especially post-GFC. However, shopping centre excellence is still readily evident at numerous locations, and much can be learnt by studying these outstanding examples.

I have written before about one of the key strengths of Australian shopping centres being the multi-dimensionality of their offers, particularly the larger centres. In that regard, Australian centres differ significantly from the examples that I have noted above, and in a way which has worked very well in the Australian market.

Kate Spade Santa Monica

I have also noted however that over the years most centres have done broadly similar things, and thus there can be a certain ‘sameness’ about many centres. I think the next phase in the evolution of Australian centres will be to deliver differentiated excellence, in a concerted effort to stand out from the crowd. In seeking to do so, there is still much that can be learnt from examining the level of commitment to delivering excellence of these examples abroad, especially, in my view, in the US.

It is easy to point to all of the differences in the two markets as reasons why exemplar US centres are not relevant to Australian conditions. Such an approach though risks missing the point, which is that the principles behind the achievement of those excellent outcomes still apply, and that a clear vision and single-minded commitment to delivering that vision will count for a great deal under any circumstances.

Having said that, it also struck me as I was wandering around and enjoying these shopping experiences, that Australian centres can offer some lessons to even these fantastic US examples – one aspect in particular being in the food & beverage offer. Despite the fact that the US overall has such an amazingly wide range of food & beverage options available in all of its cities, the offers in shopping centres are often surprisingly limited, certainly as compared with the best examples that we have seen recently delivered, and will see much more of, in Australia. It goes to show that size of market does not need to be a limiting factor in delivering excellence.

Wholefoods Columbus Circle

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MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities.  Contact James Turnbull, National Head of Retail today to discuss your property research requirements.
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