Online sales growth cools

12:13 PM Friday July 25, 2014 Anne Gibson

Bricks still rule over clicks and will for a while, expert tells property conference.

Online retail sales growth is slowing and 19 out of every 20 New Zealand purchases are still made in a shop, says an expert who raised questions about digital influence over shopping centres.

Chris Dibble, national research manager at Colliers International, told yesterday's Property Council retail conference in Auckland how bricks still ruled over clicks and he did not see that changing in a hurry, with record lows in retail vacancies in Auckland and landlords struggling to get enough space for tenants.

"One in 20 sales in New Zealand are online or 19 are in bricks and mortar shops. While online sales growth is rising, the rate of growth is slowing," Dibble said.

Online sales won't overtake in-shop retailing and studies completed in Australia show the potential saturation point is around 20 per cent, but over a long period of time, he said.

"And while US statistics [show] the hang-up on showrooming, whereby people go into a retail shop and then buy the product online, is a significant occurrence, so is web-rooming, whereby people check products out online and then buy in the shop," he said.

People still loved the experience of physically shopping.

"It's not always about the products, but the experience," he told about 350 delegates, the largest gathering at the national conference at SkyCity's Convention Centre.

Retail real estate vacancies remain extremely low, under 5 per cent in Auckland's CBD and less than 1 per cent in shopping centres. "It is likely there will continue to be positive stories from landlords of shopping centres, especially those surrounded by strong catchment demographics," he said.

Yet retailing was tough and last year, one out of every 10 businesses failed, he said citing Statistics NZ data.

People aged 25-35 are busiest online (71 per cent of that demographic bought online in the last year), followed by those aged 34-44 (68 per cent), 45-54 (58 per cent), 15-24 (52 per cent) 55-64 (49 per cent), 65-74 (33 per cent) and 75+ (10 per cent), Dibble said.

New Zealand is now in a protracted retail spending recovery, he said.

Campbell Barbour, NZ Retail Property Group general manager, said $1 billion being spent in West Auckland, where 250,000sq m of new retail space was being developed at Westgate, "which on a New Zealand scale was enormous".

The cost of new roads and parks were included in that figure, he said, and DNZ Property Group had started on the new 30,000sq m mall which is 55 per cent pre-leased. NZRPG has begun its new large-format stores, leased to Harvey Norman, Briscoes, Warehouse Stationery and others.

All this was to cater for unsatisfied demand in the area for new retail and commercial buildings, because Auckland's northwest had always been underserviced. Around 30,000 residences could be built in the area in the next 20 years and 9000 Special Housing Area residences had consent, he said.

Asked about wastewater provision, Barbour said infrastructure providers had not kept pace with demand "but I'm confident they will".

Auckland councillor Cameron Brewer criticised a "critical" shortage of land for business development, saying the city was suffering and some within the council were worried.

Auckland's retail space was forecast to grow from 3.9 million sq m to 5.7 million sq m by 2041 to keep pace with population growth, when an extra 700,000 people would have arrived, Brewer said, yet he questioned where land existed for this degree of growth.

But Connal Townsend, Property Council chief, still saw online issues ahead. He pointed to a Deloitte report on the future of US retailing which showed over the next 15 years, one in every three stores in the US would close. "It doesn't matter what we plan for, the internet is changing all the way we do business."

Shopping the the future

• Retail spending will follow house price growth.

• Possible brake could be flat wage growth.

• Shortage of business/retail land and buildings.

The numbers

• 19 out of every 20 purchases made in a shop.

• 20% possible saturation point for online shopping.

• 5.7 million sq m Auckland retail space by 2041, up 46%.g in the future

[Sources: Chris Dibble, Cameron Brewer, Campbell Barbour]

-NZ Herald