Jeweller - June, Edition II 2020

THE FUTURE OF RETAIL | Lessons of the Pandemic
Jon Bird
VMLY&R Australia
& New Zealand
Paul Zahra, CEO of the Australian
Retailers Association (ARA), said that
while the retail sector was “shifting
out of crisis towards recovery”, the
economic recession indicated that
“recovery will be slow”. The ARA has
called on the Morrison government to
extend JobKeeper to selected retailers
until February 2021, in order to support
vital pre- and post-Christmas trading.
Speaking to the Australian Financial
Review, Zahra said, “At this stage
we’re facing a cliff and we’d prefer a
slope. Retailers plan to batten down
the hatches anyway, this will give them
some relief to get them through this all
important trading period.”
“The empty shops left by store
closures and the inevitable
retail collapses we’ll see in the
post-COVID-19 environment
will increase the power of
retailers to extract better
deals from landlords”
Indeed, many jewellery retailers have
been among those to access the
JobKeeper program. “We are lucky to
be in Australia – I expected this to be a
lot worse,” said Michael Sobbi of Linda
& Co Designer Jewellers in Sydney.
“I think with the government grants and
strong online sales, we are riding the
wave to normality.”
The importance of having a financial
buffer in place has been noted by a
number of jewellery retailers and
retail experts.
Steven Jansen, owner SS Impressions
Jewellery Design Studio in Perth, advised,
“Always have a rainy day fund – in both
monetary and materials areas – for at
least six months.”
Nikhil Jogia, of Jogia Diamonds
International, also based in Perth, added,
“Businesses, in any industry, that were
struggling with weak balance sheets have
faced the most trouble. Therefore, now
more than ever would be a good time to
build a stronger, more resilient balance
sheet – whether that means lowering
debt or increasing cash levels.”
Meanwhile, Van Belleghem emphasises
flexibility: “Forecasting and predicting
business has become almost impossible.
Today it is important to think in terms
of scenarios. Be ready to reinvent
your business.”
Ben Manning, director Utopian Creations
in Adelaide, said, “We have been working
hard to improve the way our business
functions – from improving our POS
system right through to renovating our
store and adding to our website. It’s an
important opportunity to focus on the
things that will help my business succeed
once the country opens back up.”
One of the most significant expenses
on retail balance sheets is rent and the
COVID-19 pandemic has thrown the longstanding
conflict between retailers and
landlords into even sharper relief.
The charge was led by Premier
Investments chairman Solomon Lew and
CEO Mark McInnes.
As Australia’s largest retail tenant,
Premier – which controls brands
including Peter Alexander and Smiggle,
and operates more than 900 stores
– refused to pay rent during the March-
April lockdown and has since negotiated
to pay only a percentage of gross store
sales, rather than fixed rent.
Other retailers, including fashion chain
City Chic and jewellery retailer Michael
Hill International, have reduced their
store networks as a result of fruitless
landlord negotiations.
While smaller retailers may lack the
leverage of larger tenants to achieve rent
“A lot of change has
been compressed into
an extraordinary amount
of time – a lot of change,
from a behaviour point
of view, which has been
influenced of course by
COVID-19 and the fact
that people have been
locked down in their
homes, remote working,
having to pick up on
digital technologies,
forced to change.”
Paul Zahra
Australian Retailers
Association
“Landlords need
to remember we
are in a recession.
Playing hardball with
tenants during this
unprecedented economic
period is a lose/lose
outcome. It’s a false
economy for landlords to
try to extract rent from
retailers that need their
cash reserves to survive
the COVID winter.”
Dr Philip Lowe
Reserve Bank of Australia
“Even as the recovery gets
under way, there will still
be a shadow cast by the
pandemic. As a country,
we will need to turn
our minds as to how to
move out of this shadow.
A reform agenda that
makes Australia a great
place for businesses to
expand, invest, innovate
and hire people would
certainly help.”
reductions, the Australian Financial Review
recently noted, “The empty shops left by store
closures and the inevitable retail collapses
we’ll see in the post-COVID-19 environment
will increase the power of retailers to extract
better deals from landlords”.
It’s a point that is particularly pertinent in the
case of shopping centres.
“Landlords need to remember we are in
a recession. Playing hardball with tenants
during this unprecedented economic period is
a lose/lose outcome. It’s a false economy for
landlords to try to extract rent from retailers
that need their cash reserves to survive the
COVID winter,” the Sydney Morning Herald
quotes Zahra as saying.
For jewellery retailers, buying groups
can provide assistance in seeking rent
reductions, as well as financial strategies
for managing stock.
Swift shift online
Omnichannel retailing is hardly a new
concept, yet the tactile appeal and large
costs associated with jewellery have seen the
category lag behind others in selling through
digital channels.
“The e-commerce side of many, mostly
independent jewellery businesses is not nearly
at the level of where it should be,” said Jogia.
“I think many jewellers are still stuck in
the 20th Century and think the only selling
channel should be in-store – or they don’t
want to risk competing with long-established
online players.”
Yet perhaps the most notable trend to emerge
from the pandemic was the shift to online
retail, particularly in Australia and the US.
“E-commerce penetration in the States went
from 16 per cent pre-COVID to 27 per cent
post-COVID. In Australia, there was an even
more dramatic up-tick because I think we were
a little slower – 10 per cent pre-COVID, to 24
per cent,” Bird said.
42 | June 2020