Traditional Australian retailers are struggling against high rent, increased competition and pure-online rivals whose products are often much cheaper.
There are also a number of major overseas brands which are pushing into the Australian market, who are big enough to set up flagship retail stores despite doing a bulk of their trade on the internet.
It does not help that the dollar was, and still is high against the USD which means buying online is often a bargain, and that digital competitors are improving their offerings with fast delivery-and-return services.
And now, according to one property expert, Australian retail landlords are basically being forced to sign leases which overseas brands are prepared to pay, to make sure they have draw-cards for foot traffic through their malls.
From an article in the Australian Financial Review, CBRE’s regional director of retail services, Josh Loudoun, explains that landlords are having their hands forced by big brand expectations.
According to the report, most Australian discretionary retailers pay rent costs of between 20% to 22% of sales, with base rents and annual increments based on sales growth and inflation, which is what the overseas brands are saying is “unacceptable”.
“They [international brands] say that’s unacceptable – with these groups if it pushes above 10 per cent they’re just not interested in being there,” Mr Loudoun told the briefing.
“The power is sitting with those brands at the moment. The landlords know that if they want to get these retailers they have to do the types of deals they have to do.”
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