Retail takes a dive in NSW

NSW has fallen victim to the two-speed economy, suffering a collapse in retail sales in a year in which the rest of Australia inched ahead.

Retail figures published yesterday show Australian sales rose a meagre 2.6 per cent during 2010-11 - the worst result for half a century, since the 1961-62 recession.

When adjusted for inflation, national sales barely grew, rising 0.6 per cent, much less than the rate of population growth.

But in NSW spending sank. Unpublished Bureau of Statistics figures made available to the Herald show the volume of food bought in NSW over the year fell about 1 per cent, the volume of clothes and shoes fell 6 per cent and the use of cafes and restaurants fell 8 per cent.

Only in one of the six categories identified by the bureau did the volume of goods bought rise - a miscellaneous category known as "other retailing".

Yet in Victoria the volume of goods bought climbed in four of the six categories.

"The two-speed economy is reasserting itself," said an ANZ economist, Katie Dean. "With the possible exception of Victoria, it's the mining states versus the rest."

So bad were the national figures that the futures market began aggressively pricing in an interest rate cut one day after the Reserve Bank said it was considering pushing rates up.

By late yesterday the market had priced in a 62 per cent chance of a rate cut at the bank's September 6 board meeting, up from a 28 per cent chance a day earlier.

The odds of two cuts by December rose to 100 per cent, compared with 5 per cent the day before.
Westpac's chief economist, Bill Evans, who publicly predicted rate cuts a month ago, took no joy from finding the market had caught up with him.

‘‘I don’t treat it as being particularly encouraging that our view is being justified;  it can disappear tomorrow,” he said.

The Treasurer, Wayne Swan, blamed overseas developments, saying that “one of the reasons consumers are cautious is we are still living with the aftershocks, if you like, of the global financial crisis”.
The sharemarket fell to its lowest point in almost a year. The S&P/ASX200 index fell 100.8 points or 2.27 per cent to 4332.8. This followed the Dow Jones index dropping 2.2 per cent on news that personal spending in the US had fallen for the first time since its recession. The Australian dollar fell US1.5¢.
The Productivity Commission is today expected to recommend a broad range of long-term measures to try to reinvigorate the retail sector.

The Assistant Treasurer, Bill Shorten, asked the commission to inquire into the future of Australian retail in December. The inquiry was prompted by complaints by large retailers that goods bought over the internet from overseas and worth less than $1000 were GST-free.

The retailers wanted the GST threshhold lowered but the government refused, saying it had no intention of increasing prices for shoppers.

The opposition was also unsympathetic.

Lowering the threshold to apply the GST would not be enough to level the playing field between retail and online sales.

It is understood that the Productivity Commission also endorses the view that if the threshold were lowered, the cost of customs officers opening thousands of packages sent from overseas would outweigh any revenue benefit from collecting extra GST.

The commission’s final report is  due in November.

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Battle of the Retail Brands

Shoppers in Sydney should get ready as a plethora of high-profile international retailers including Topshop from Britain and Uniqlo from Japan are preparing to open up new stores.
Amid the high anticipation of the Spanish Zara brand opening in Westfield Sydney, Pitt Street Mall, next Wednesday, leasing directors from other overseas retailers are in Australia looking for sites.
But given the distance from their head offices in Spain, Britain and the US, these big hitters will not just want to open one or two stores.
Depending on demand, they will seek out sites in all the major cities and shopping malls.
Already GAP is in Sydney and Melbourne's Chadstone Shopping centre and is said to be looking at Brisbane and Perth.
Although the prices of some items may be higher than overseas, having these big names in the city is putting Australia on the international fashion map.
And with the new entrants, it is also giving exposure to the rest of the Australian retailers, as international tourists visit all the stores.
What we can expect to see is a "battle of the brands", Knight Frank's associate director, Alex Alamsyah, said.
"It is understood that Topshop has secured a new local partnership with Next Athleisure and would like to open their first flagship store in Sydney CBD in 2012," Mr Alamsyah said.
"Forever 21 from the US has recently met major shopping centre owners to discuss takeover of some stores of embattled bookstore chain Borders in Australia."
It is understood that US retailer Abercrombie & Fitch and Uniqlo are also both seriously considering the Sydney CBD for their first marquee stores in Australia.
The Swedish H&M group is still talking to some major Australian shopping centre owners and retail leasing agents, but there is no concrete commitment yet.
"There is strong activity in the Sydney CBD," Mr Alamsyah said.
"These heavyweight global brands, seeking roughly 1000 to 4000 square metres, are flocking to the Sydney CBD. The order appears to be Zara next week, Topshop next year with F21 and Abercrombie & Fitch likely to arrive in 2012/2013, while Uniqlo and H&M may follow in 2013/2014.
"Zara, Topshop and F21 will not come to Australia from as far away as Spain, UK and the US just to open one or two stores in Australia. They will open more and more, including outside the CBD in well-to-do suburbs.
"Fashion fans like to see great showdowns of highly anticipated and long-speculated battles of heavyweight brands in prime Sydney CBD locations. They like to see a face-off between Zara and Topshop, F21 and H&M, and A&F and Uniqlo."
In the middleweight class (stores between 500 and 1000 square metres), Specialty Fashion Group is talking to Victoria's Secret and will perhaps open a 500-square-metre flagship store in the Sydney CBD.
Brand Republic has opened its first GAP store in Westfield Sydney and is potentially in search for 600 square metres for Banana Republic.
Billabong is fitting out its 500-square-metre flagship store in Sydney Arcade, while both Quiksilver and Kathmandu are still looking for 500-1000 square metres for their next showcase stores in Sydney CBD.
Mr Alamsyah said that, in the lightweight class (stores of between 200 and 400 square metres) Patagonia from the US has secured its first 300-square-metre Sydney CBD store and will open in July, setting up a heated contest with North Face.
"In addition, Paul Smith, CH, Marc by Marc Jacobs, Thomas Pink and Class Roberto Cavalli are all looking for prime sites in the Sydney CBD," he said.
"Talk that Sydney City retail leasing has been lacklustre seems to be off the mark and there's been plenty of action from big names in retail.
"Louis Vuitton will open its super flagship store at the corner of King and George streets in November and Christian Dior will take over the current Louis Vuitton store at the corner of King and Castlereagh streets."
In other moves, Hermes has expanded its store by taking over the ex-Swarovski store in Market Street; Tiffany&Co was looking to expand to the Escada store in Castlereagh Street; Burberry has moved to a larger store of about 800 square metres in Martin Place; Omega has also moved to a larger store of about 250 square metres in MLC Castlereagh Street.
The Mont Blanc retailer has renewed its store in King Street, Longines has opened its first flagship store on the corner of Pitt and King streets, and Porche Design has opened its first flagship store in ex-IM Lingerie's King Street store.
Carolyn Cummins is the Herald's Commercial Property Editor.
Carolyn Cummins
April 14, 2011 - 2:02PMSydney Morning Herald