What a disgrace. Those of you not living in Auckland must think the city is a joke. What we are referring to is the Queens Wharf debacle. This week we had a representative of the media come to us about our thoughts on retail, Auckland etc. Inevitably the question of the Rugby World cup came up. Here’s what we think.
In 13 months (maximum), all must be ready for the RWC, any timing less than that will seriously affect the impact. Numbers relative to the conversion of Queens Wharf into Party Central (what does that mean?) have been considered from $10 to $20 million.
Whatever sum allowed, the spend has to occur in 13 months!! The timetable needs to identify and confirm the format for the chosen facility. We emphasise this, it’s not a matter of an Architect carrying out a design, but rather the need to provide a facility that is functional and captures the intention through to the end user.
Most observers of the Queens Wharf conversion believe that it will be a party environment for RWC patrons. In principal that seems the intention. Imagine a large party on a wharf, that has one entry point and other than that is totally surrounded by water?
Attendees could end up in the tide as the night progresses. More to the point is who will operate whatever is put on the wharf? By this we refer to the operators of the food and beverage and retail (yes there must be some retail here) facilities, and will they be competitive to the existing retailers, restaurateurs and bar operators who have faithfully operated their business and paid their rates in the nearby CBD or Ponsonby?
To our knowledge not one advocate has raised any of these issues. So in our view it’s a disgrace, and the realisation that time is of the essence has bypassed the politicians and bureaucrats that believe they can procrastinate while Auckland burns!!
Back to reality. From a retail perspective, we have observed that Kmart have reduced their offerings and removed pretty much a large range of entertainment and leisure type merchandise. The brand is effectively a soft goods/apparel/gifts/toys offering with some food thrown in.
This is a risk for the brand that apparently is looking to expand its store numbers. The Apparel retailing environment is competitive at the best of times, and Kmart now seems determined to eliminate any interest from male shoppers.
Competitors such as The Warehouse, Farmers and Harvey Norman must be pleased with this change. Kmart is a sister company of Bunning’s and one must wonder is there is a mission in place for the holding company to differentiate the brands?
Do we really know where companies are heading today with their respective strategies? Retail is particularly confusing, and it seems that most retail companies are frozen in a time zone of a “do nothing” approach.
This applies across the board. Getting decisions is perilously difficult, even in situations where an opportunity really exists. Remember when people who worked in offices were called “pen pushers”? We believe that we now have a group called “computer watchers”.
All this group do is wait for an email to arrive, the days of getting out into the market seem to have eroded, and opportunities as such pass them by. We have a list of these groups and will watch them with interest in the next few months.
There is also a tendency for new arrival stores to come in under the radar. The Good Guys stores have arrived here and are being effective in the market with a discount offering for appliances that is different to the norm (you may have seen those television adverts). With the low margins that are achieved from this merchandise category it seems strange that a gap exists in the NZ market, however they are here and a competitive signal to others.
At RCG, we have recently been very active in the food and leisure business. We have some interesting clients who will open in the next few months with a new food offering and new stores for existing food retailers who are expanding their respective brands.
Food into department stores is also emerging which RCG have been promoting for some time. It seems that Department Store operators have been coy about introducing a real range of food into their stores, but a “store within a store” concept works and those that don’t take advantage of it will ultimately feel the effects in sales lost.
We must realise that consumers are drawn to food, a good offering will attract consumers and exposure from this pedestrian traffic to other merchandise is a traditional and effective merchandising and sales tool, its called “retail planning”. Why NZ department stores have been reluctant to pursue this in the past is beyond comprehension, and we believe a frustration to consumers.
We were pleased to note that DNZ Property Fund Limited have achieved a satisfactory outcome to their property/management issues with shareholders agreeing to capital raising of $35 million. This should enable the fund to get quickly back to business.
Auckland Airport buying into Queenstown is a good move. The future growth of Queenstown is certain and flow on effects for travel are assured. The fact that Westfield cut $200 million from its property portfolio is neither here nor there and simply a reflection of the market conditions. Values will return with time and the shopping centre business is here to stay.
Retail Group Share Prices 2008-2010
Retail Food Group is a franchise company that has operations Australia, New Zealand and China. It has 19 Brumbies, 5 Michel’s patisserie and 21 bb’s café in New Zealand.
Earlier on this year, they reported an 18% profit increase to $12.5 million. Their share prices had hit rock bottom early 2009 to under a dollar, but have since then recovered to the $2.50 levels. Retail Food Group was hard hit by the recession, having to close 28 outlets, but are hoping to open 20 outlets in 2010 and expand into Papua New Guinea and further into China.
