NZ retail faces Amazon’s surge
Online juggernaut’s arrival could result in local shops shrinking or closing
Amazon’s imminent arrival in Australasia could change New Zealand’s retail scene to the point where some shops shut, shrink or need to be repurposed, says an architect.
David Thornton, principal of the New Zealand arm of international architects The Buchan Group, said the online juggernaut could change our retail scene significantly.
“Bigger stores might downsize and we might need to look at ways to repurpose buildings,” Thornton said, forecasting such strong competition that some shops could even shut.
Amazon has only confirmed it will open its first Australian distribution centre in Dandenong South, with a 2.4ha warehouse which it calls a fulfilment centre.
“We’re hearing they’ll sell goods 20 per cent to 30 per cent cheaper than most New Zealand retailers,” Thornton said.
“The plan could be to get it going in Australia and see how it goes before coming to New Zealand.
“But retailers are not as fearful as what people are making out. Retailers who are not going to do well are the ones who are not evolving,” he said.
“Retailing is about constant evolution and change. Retailing as a category is becoming about the experience and you won’t get that on Amazon.”
Thornton has questioned whether fears about the effect of Amazon are overstated.
“The brand is seen as killing bricks and mortar retail. Yes it’s a threat but even with the acquisition of Wholefoods, it still only represents about 5 per cent of retail sales in the United States,” Thornton told the Property Council’s retail conference in July.
Citigroup has estimated Australians already spend about A$700 million ($761m) a year on Amazon but that could rise to A$4 billion if it sold a wider range of goods there.
According to Citigroup, Amazon sees huge potential in Australia because prices of retail goods were too high. If local retailers wanted to retain market share, they would have to respond by cutting prices and profits.
Forsyth Barr has issued a report on the arrival, saying the property sector was likely to be impacted.
“Retailers will still encompass a ‘bricks and clicks’ strategy with a physical retail footprint; however, this will involve smaller stores and a lower number of stores, reducing demand for space,” it said.
“Department stores, particularly discount department stores, and supermarkets will be most impacted by e-commerce in our view.”
Amazon’s arrival would also likely impact on transport and freight, lowering the cost and delivery times.
“Amazon impacts principally on two aspects of the freight supply chain — the last mile for parcels, and warehousing and transfers of freight between facilities,” Forsyth Barr said.
“A key risk to the parcel volume outlook is Amazon’s potential to internalise the last mile as it has done in other countries.”
Buchan’s work is 60 per cent on major retail centres such as Sylvia Park and Westgate’s North-West
“People say architects are threatened,” Thornton said of speculation that Amazon’s arrival would reduce demand for retail design.
However, he questioned that, saying his company worked for some of the largest businesses with retail assets, including NZX-listed Stride Property, Kiwi Property and Tauranga Crossing in the Bay of Plenty.