Online retailers are one of the three most significant challenges faced by retail property operators, a new survey from IBISWorld has revealed.
The study, which was published on June 26, also pointed to an oversupply of property and low consumer confidence as other key challenges to watch for.
As consumers increasingly gravitate towards perceived better deals online – and property values continue to remain flat in the wake of the global financial crisis, retail property operators may feel the crunch.
“The main problem currently facing the industry is low demand resulting from weak consumer confidence. This is leading to low retail sales, which subsequently results in low demand for retail space,” said IBISWorld industry analyst Tim Stephen.
He added that some retail property operators are getting around the issue by offering incentives – such as a rent-free period – or reducing rents, but other challenges remain.
Some department stores, for example, are sizing down – and many operators are choosing to forgo short-term profit for long-term gain.
But the study noted that it’s not all bad news for the retail property industry. Mr Stephen anticipates that as confidence returns to the global markets, consumers will have more disposable income – and will therefore be enticed back into stores.
A June 18 IBISWorld report showed that many consumers are currently feeling the crunch when it comes to living expenses – and this could be the reason why many are making cutbacks in other areas, like retail spending.
The average per-person expenditure on clothing and footwear has fallen by $0.80 per week over the past ten years – slipping from $50 per person per week in 2002-03 to $49.20 in 2012-13 – while more competition from overseas markets is thought to have driven prices down.