The operational landscape for retailers in Australia is becoming increasingly challenging, leading many to close physical stores and shift their focus online. Retail expert Gary Mortimer highlights that the rising costs associated with doing business, including higher rents, salaries, energy prices, and service fees, are squeezing profit margins. Consequently, retailers are reviewing their need for traditional brick-and-mortar establishments and some are opting for a hybrid retail model that combines online sales with limited physical presence.
Mortimer points out that the fashion industry has witnessed a significant shift, with 25 to 30 per cent of revenue now generated through online channels. This suggests that retailers could potentially close a quarter of their physical locations without suffering a drop in overall revenue. He likens the situation facing businesses to the ongoing cost-of-living crisis impacting households across Australia, where everyday expenses are on the rise.
The retail landscape has seen brands like Country Road adapt to these challenges. The company recently shut its iconic store in the Queen Victoria Building in Sydney, aiming to realign its retail strategy to better serve customer needs. Despite closures, Country Road is also investing in its future, with plans to open or refurbish ten stores by the year’s end, including a new flagship store in Brisbane and additional locations in Chatswood.
Mortimer cautions that the cost of maintaining flagship stores is becoming unsustainable for many Australian retailers, as such ventures are typically more viable for global brands that can support the overheads with sales from diverse markets. Local fashion brands, lacking a global financial cushion, find it increasingly difficult to justify the expenses associated with prime real estate.
For Australian retailers to thrive amidst these pressures, Mortimer advocates for continuous evolution and expansion of product offerings to attract a wider range of consumers. He cites RM Williams as an example of a brand that successfully adjusted its target demographics to appeal to a younger audience in response to shifting market demands.
In summary, the current retail climate in Australia necessitates that businesses adapt to the rising costs and changing consumer behaviours, focusing on innovative models and strategies to ensure sustained success.