Shopping centres are putting an unfair rent squeeze on retailers, at a time when Australian businesses should be helping each other, argues jeweller Toby Bensimon,
Retail is suffering. There’s been a lot of talk about supporting the sector, which is facing its toughest times in decades. A series of campaigns have been developed to support the sector but some fundamental dangers remain unaddressed.
Slower spending is having a wide reaching impact with more than 900 Australian businesses entering administration in the month of June. More than 10 per cent of all companies that collapsed last financial year were retailers, victims of poor cash flow as consumers saved and prepared for the worst. That’s 2500 retail companies alone. The figures are startling.
Rent is the second-highest ongoing cost and the pinch from landlords is being felt acutely across the sector. Rents are usually based on retail turnover but also an annual increase based on general price rises as measured by the CPI. So while retail sales have risen only 1.6 per cent over the past five years, broader price levels have grown more than 10 per cent.
Retailers continue to pay more and more, year in and year out, while their own revenue falls by the wayside. The case for retailers in shopping centres is worse. Centre rentals are massively higher than their international counterparts and, to add insult to injury, the jewellery sector is slapped with rents that are 20 per cent to 50 per cent higher than other retailers – singled out as cash cows by landlords who have failed to recognise the changes in the sector’s landscape over the past decade.
Jewellers are also struggling with the sharp increase in gold prices. Gold was only $US300 an ounce in 2000 and is now averaging $US1300 an ounce. That fourfold increase impacts one sector significantly: jewellers, who have little way around charging more, or absorbing a higher cost as consumers shy away from spending.
With many shopping centres still in the hands of Australian companies, it begs the question – when did locals stop supporting locals? For Australian retailers to remain viable in the current landscape companies who have the ability to make a difference should be doing exactly that.
To keep Australian businesses open we need to support each other. In turning a blind eye to drastically altered trading conditions, landlords are not taking responsibility for the very people who justify their existence.
The jewellery sector alone employs 27,000 people. Not only are these jobs at risk if landlords continue to seek profit in an unviable industry, but shopping centres also face losing their essential appeal with the potential loss of jewellery stores, and these stores are deemed key drivers of business to shopping centres due to their high investment in marketing.
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It’s not just the owner operated jewellery stores that face extinction, but the bigger chain stores are also facing insurmountable pressure. These jewellery names may go the same way as many in the United States where jewellers have bought their own buildings and become free standing destination stores, taking much of the dazzle out of shopping centres.
Some centres are starting to adapt to current conditions. Westfield is expected to drop retail rents by 10 per cent for new tenants after seeing rivals GTP Group and Stockland drop theirs, but this falls short of helping existing, loyal tenants.
It’s time for those who can make a difference to step up and do that, before we lose Australian jobs and elements of the Australian shopping experience which are currently taken for granted.
Toby Bensimon is managing director of Shiels Jewellers.
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