The Blacktown (retail competition) amendment; the way forward for a competitive Australian small retail sector…..?

The RETAiL Alert Group supports the thrust of the Blacktown amendment in its intent in the absence of Creeping Acquisitions and Obligation to Divest Competition ant-trust powers for the ACCC; the Blacktown amendment provides for some bridging competition mechanism providing a fair and reasonable free market trading competition conditions for the small retail business sector.

This week’s push by CALTEX makes this even more urgent.

Our focus is retailing.

• Free retail property markets clustered around strong strips, High Streets and CBD retailing has been largely replaced by a network of closed market Shopping Centres which have the removed free property environment choice which was available pre the 1970’s for all retailers.

• It is that change which has created the power of the duopoly retailers and created two classes of retailers’; major retailers with preferential occupancy costs and occupation terms and conditions within Shopping Centres and the vast majority of disadvantaged specialty chain, medium and SME retailers with onerous occupancy costs and unreasonable lease terms and conditions.

• The major target of the Blacktown amendment should be the giant multi category Supermarkets whose move into areas such as liquor, fuel are causing unhealthy market domination; proposed moves into organics, the background push into pharmacy and financial services and the domination of the farm gate is the main competition ongoing concern.

• Supermarkets is the category that has had over thirty years of preferential competition challenging occupancy costs and lease terms in Shopping Centres or provided by default to property developers; multi category discount department and conventional department stores have also had thirty years of preferential small retail competition challenging occupancy costs and lease terms in Shopping Centres or applied by default to property developers.

• Compounding the Australian retail market imbalance the major duopoly of Woolworths and Wesfarmers also has ‘octopus control’ of associated products in clothing, hard goods, Manchester, toys, games, electronics which are spreading into Supermarket ranging.

The following two tables taken from The RETAiL Alert Group submission on ‘Creeping Acquisitions’ and ‘Obligation to Divest’ clearly show the effects of a market shift from a free market property environment serviced by numerous independent landlords prior to the 1970’s to the 2009 closed market Shopping Centre environment.

The second table shows the emasculation of High Street retail lease protection terms and conditions High Street / Strips vs. Shopping Centre lease terms and conditions for Australian specialty chain, medium and SME retailers.

Reference 1.

Australian Retail Property Time Period - Occupancy Competition Status

Reference 2.

Strips vs. Shopping Centres Terms and Conditions for consideration

Small Retailer / Specialty Retailer Retail Lease Choices – Strip vs. Shopping Centres

(Summary Only)
 

When applying the Blacktown amendment it is important to recognise that the concentration should be on Major space using multi category retailers who have preferential Shopping Centre cost and lease terms and conditions.

• It is the Major space using multi category supermarket and department stores with privileged Shopping Centre occupancy and lease terms and conditions that should be the target of the Blacktown amendment.

• Major space using multi category supermarkets and department stores have grown in power over the last thirty years by investing profits derived from low occupancy cost shopping centre arrangements into growing market share at the expense of disadvantaged single category specialty chain, medium and SME retailers with onerous occupancy costs and unreasonable lease terms and conditions.

• Single category specialty chain, medium and SME small sector retailers should be excluded from the Blacktown amendment as within a Shopping Centre there is an open competitive market between single category specialty fashion, jewellery, food and other category retailers within a shopping centre or a retail catchment.

At this level the free retail market should be allowed to flourish unimpeded.

a)     Spot specials, taking on a new competitor for short term promotions to compete against strong opening sales or competitor closing down sales, quitting odds and ends of slow selling ranges in store, centre court sales specific to location are part and parcel of the retail market dynamics for a single category specialty chain.

b)     Driving the dynamics of a single specialty store business by location is core in a free retail market place; all retail chains started with one outlet, single category specialty chains develop by progressive single owner retailers challenging competitors including national chains.

c)     The vast majority of single category specialty chains started in business this way and continue to commence in business today despite the massive occupancy cost and lease terms and conditions applied to single category retailers compared with their multi category large space competitors.

d)     The thought that all specialty chains have outlet stores to quit slow moving stock is not correct; also the thinking that it is cost effective to transfer small quantities of stock around for many single category specialty stores is cost and time effective, it is not; time is of the essence to react to pockets of slow moving merchandise in fashion and similarly constructed categories.

e)     To try to apply narrow, semi fixed range multi category Supermarket distance price control to single category specialty stores with the continual change dynamics of size, colour, range and season is not a practical solution, will not work and will be resisted.

f)       Many single category specialty stores have substantially larger numbers of SKU’s (stock keeping units) to manage in small space trading units compared with the limited, semi fixed SKU’s carried by large space Supermarkets.

g)     The difference in market dynamics between a semi fixed range low SKU supermarket and a dynamic single category specialty fashion store with a large number of continually changing SKU’s needs to be understood; ‘oils ain’t oils’; ‘retailing ain’t retailing’; it is not all the same.

• The targets of the Blacktown amendment should be multi category large space using supermarkets, discount department stores and department stores who are using their preferential Shopping Centre occupancy costs terms and conditions; growing market share at the expense of Australian disadvantaged single category specialty chain, medium and SME retailers with onerous occupancy costs and unreasonable lease terms and conditions.

• It is the ability of multi category retailers’ using their preferential Shopping Centre occupancy costs terms and conditions to use individual categories as predatory loss leader categories against the vulnerable single category small retail sector within a catchment is the key competition issue for the Blacktown amendment.

• In the absence of ‘Creeping Acquisitions’ and ‘Obligation to Divest’ anti-trust powers for the ACCC we want to see the Blacktown amendment enacted on behalf of Australian disadvantaged single category specialty chain, medium and SME retailers with onerous occupancy costs and unreasonable lease terms and conditions.

• In the first instance we support concentrating on the core retail market imbalance Major space using multi category supermarkets and department stores which have grown in power over the last thirty years by investing profits derived from low occupancy cost shopping centre arrangements to grow market domination; growing market share domination at the expense of disadvantaged single category specialty chain, medium and SME retailers with onerous occupancy costs and unreasonable lease terms and conditions.

• Taking all matters into consideration The RETAiL Alert Group is supportive of some form of distance price structure management for multi category Supermarket and Department Store retail entities with a retail footprint over 1,500 square meters.

• Leaving a free market for single category retailers to compete in the market openly is the solution to bring the Blacktown amendment into being quickly as the first step to rebalance the Australia retail sector against the uncompetitive market domination of the Australian market sector by privileged major retailers.

As previously indicated in step with the Blacktown amendment there is the urgent need to deliver new council and State retail space to market in a similar manner to that which applied in the free property market place prior to the establishment of Shopping Centres.

There is an opportunity for retailers’ to support the New South Wales Government PROMOTING ECONOMIC GROWTH AND COMPETITION THROUGH THE (Retail) PLANNING SYSTEM   email planningreview@dpc.nsw.gov.au  initiative to rebalance lease and cost terms for Australian retailers in New South Wales.

We have asked that the all the States through the established COAG Retail Tenancy Reform Group undertake similar reviews and changes.  

The RETAiL Alert Group congratulates and commends the initiatives of Senators Barnaby Joyce and Nick Xenophon on proposing the Blacktown amendment; we commend the continuing untiring support given to rebalancing competition within the Australian retail sector by Professor Frank Zumbo and Craig Kelly.

The RETAiL Alert Group encourages the ARA, the NRA and the QRSTA to provide support to Senators Barnaby Joyce and Nick Xenophon as they endeavour to promote this important retail sector competition reform through the Senate.

We would welcome comment on this important retail sector reform; email Blacktown amendment

Tony Standley

Principal
The RETAiL Alert Group (Australia)

Mobile +61 (0)41 924 0497
e-mail info@adsass.com.au
Fax +61 (0)2 9987 0633
Website http://www.retailalert.com.au