Powerful pull for big store
Cotton On could be an influential property owner, as Catherine Harris reports.
International fashion company Cotton On is embarking on a step change in the way it handles property, a New Zealand retail analyst believes.
Chris Wilkinson of First Retail Group says the Australian-based retailers’ purchase of a shopping centre in Tauranga was a transformational shift in Cotton On’s business.
And it was a strategy which could see the increasingly dominant retailer having a big influence on shopping centres.
Fashion Island in Papamoa has around 20 stores and five of them will carry Cotton On brands.
Cotton On said it was the first time the company had bought a whole shopping block anywhere in the world.
Tauranga’s growing population was a key consideration, chief financial officer Michael Hardwick said.
But Wilkinson said it was a strategy the retailer might well emulate elsewhere.
‘‘Cotton On is, by floorspace, one of the largest occupiers in Australasia’s malls when all its brands are considered.
‘‘As a tenant it has an increasingly dominant and influential position, especially with more vulnerable centres.’’
The Fashion Island move demonstrated how Cotton On could purchase a centre, possibly for less than a new build, then add considerable value simply by adding their store portfolio, Wilkinson said.
Because Cotton On owned several brands, it was possible for the company to get a similar effect as owning a ‘‘mega-store’’ but with each store having separate shopfronts.
‘‘The purchase is a logical step, and mirrors the success of other leading retailers that are as much property owners as shopkeepers, such as Harvey Norman and Rebel/ Briscoes.’’
Wilkinson said other shopping centres in similar positions, such as Montgomery Square in Nelson, could also lend themselves to the same ’’resuscitation’’ method.
The fashion retailer, which spans 18 countries, has stated it wants to roll out many more stores and add 1000 new staff in New Zealand within the next two years.
It also still had a lot of retail categories it could develop further, such as homeware, he said.
‘‘Cotton On has an insatiable appetite currently, exhibited by its continued roll-out programme.
‘‘However in the future the company may see better value in these ‘destination’ and ‘cluster value’ of co-locating brands.’’
With large tracts of vacant retail space in some CBDs, it would be ‘‘interesting to see whether the company looks to develop similar models in urban locations ... such as Upper Hutt, where the company is not yet represented.’’