By: Retail Examiner  05-Apr-2012

Most of us, more often than not, spend more time at restaurants and cafes than we ever did previously. In fact there is a belief that the Baby Boomers tend to spend more than most, due to the fact that they are retired or approaching retirement and they want to enjoy recreational activities. Cafes and restaurants benefit from this very affluent demographic. So, baby boomers expect a little more than some cafes and resturants offer.

The trend is for a significant number of cafes to be franchised. Names such as BB’s, Columbus, Robert Harris, and Muffin Break all have multiple outlets throughout the country. How are they performing? Most or all of these outlets are franchised, and with that comes a level of operator that simply is not up to it. A recent review of some of these cafes indicates standards that are simply deplorable. Poor operators with staff who are scruffy and badly attired, and food that is represented as coming up to the brand’s standard, but instead the offering is well below these standards. Time, we believe, for a serious review by the franchisors to ensure that the operators are performing; if not, we will see a decline in patronage and as a result closures. Simply put, time for a wakeup call.

The same can be said for some restaurants that charge exorbitant sums for unscrewing a bottle of BYO wine. The average punter will not continue to stand for this. If it’s a BYO then why not charge a sum that reflects that position? Anything above $5 is over the top! Agree?

“Standards” set the scene for performance. Some shopping centre owners also need a wakeup call. Some centres are looking tired and in need of simple repairs and maintenance, and if standards are not maintained then watch out for a decline in patronage. By contrast, Westfield, the largest owner of shopping centres in New Zealand and Australia, has standards that retailers have to aspire to. This reflects the image that this company demands of itself and its retailers. If you don’t perform then you’re out. Seldom do you see a Westfield centre looking scruffy or in need of repair. One can also expect to get decent food and beverage in a Westfield centre. The same can be said of Kiwi Income Property Trust, who also sets and maintains standards. Sylvia Park in Auckland and Northlands in Christchurch are part of that stable, and both reflect a level of standards that are obviously adhered to. The recent results published by both companies demonstrate the fact that if you maintain standards in both good and bad economic times then the results will be encouraging. Retail sales across Westfield’s portfolio grew by 4.1% for the year to December 2011, while the increase was even bigger for KIPT’s portfolio, up 8.8%.

In the News in Brief two weeks ago, Share Watch looked at Westfield Group and the specialty sales performance of individual Westfield centres in New Zealand. Some clarification is warranted over Westfield Chartwell, where we reported that sales were down 16%. This figure, it turns out, refers to per-square-metre sales rather than total sales. As such, it was affected by the centre redevelopment, completed in February 2011, which enlarged the Farmers department store significantly and added a number of new specialty stores. This increased the centre’s retail space by around 40% or 7,000 square metres. Given this, and the tendency of department stores such as Farmers to trade at lower sales-per-square-metre levels than specialty stores, it is unsurprising that the centre’s overall sales per square metre fell. However, total sales for the centre rose by just 3.4% for the year, to $125.5 million. Given the size of the expansion, we expect that Westfield would not be happy with this result, although it occurred against a backdrop of a fairly flat retail market and new competition in Hamilton from the Te Awa mall at The Base. Nonetheless, Westfield is a company who is not afraid to invest in its properties and the refurbished Westfield Chartwell delivers a much better shopping experience for consumers. This will ensure its success in the long run.

Returning to our theme of retail standards, we think it’s time for a shake-up. We are over the worst of the GFC, and it’s time to get our acts together and give the public what they pay for. If shopping centre owners and F&B operators – or any retailers for that matter – don’t do this then it is inevitable that survival will not be easy.


DNZ Property Fund owns more than $600 million of property across New Zealand, including more than $200 million of retail property. DNZ’s retail assets include a number of bulk retail properties across the country, including Progressive and Foodstuffs supermarkets, and Mitre 10 Mega, Bunnings and The Warehouse stores. The company also owns the Mt Wellington Shopping Centre in Auckland and the Hamilton Central Shopping Centre, and manages (but does not own) Remarkables Park in Queenstown and Pukekohe Mega Centre in rural Auckland. Finally, DNZ has a 50% share in Wellington’s Johnsonville Shopping Centre, a mall that was given resource consent for a major ($100 million or more) expansion in late 2009.

DNZ has come a long way since early 2010, when its shares were trading on the Unlisted platform for around 60 cents. The company internalised its management, listed on the NZX, and shares are now trading at over $1.30, with steady dividend payments. However, the level of dividends mean that very little money is being retained for new investments, and the question of how DNZ is going to fund the Johnsonville Shopping Centre expansion still hangs in the air.



Carl’s Jr up-sizes to 30 outlets
Manukau, Henderson, Pukekohe, Tauranga, Rotorua, and Hamilton are in lined up to receive a new American style fast-food restaurant chain from Carl’s Jr in a $120 million New Zealand expansion drive. Ian Letele, a New Zealander of Samoan ancestry who is Carl’s Jr’s Singapore-based Asia Pacific vice-president, was recently searching for properties as part of a campaign for 30 new outlets.
(Source: NZ Herald)

Sofitel hotel makes for Auckland’s Viaduct
Auckland’s ex-Westin Hotel on the cusp of the Wynyard Quarter is to be rebranded Sofitel Auckland Viaduct Harbour. Accor, the world’s biggest hotel chain, recently announced it was altering the 173-room waterfront hotel to become a Sofitel.
(Source: NZ Herald)

Saks bows out of retail race
Newmarket retailing institution Saks is shutting down after delivering 33 years of pinnacle men’s tailoring. The clothing store’s principal, Julian Reynolds, 71, jokingly told the Herald yesterday there were still six weeks until “execution day”.
(Source: NZ Herald)

Rebrand dishes Woolworths a larger  market share
Woolworths, which controls approximately 40 per cent of New Zealand’s supermarket sales, has widened its margins and recorded growth in both revenue and earnings in a first-half characterised by the rebranding of all its outlets as Countdown.
(Source: NZ Herald)

The information in this article was current at 27 Mar 2012

Other news and updates from Retail Examiner



McDonald’s re-opens Georgie Pie cold case Fast food giant McDonalds is considering integrating aspects of Georgie Pie into its business, but is cautious of living up to the nations Georgie Pie nostalgia. Not good in a city where restaurants are plentiful and repeat business is generated by service and satisfaction, and more customers are driven by “word of mouth”.



The value of employees and the relevance of reward is topical this week, due to the public release of incomes for Chief Executives of companies and those working in the public sector. However online shopping is growing and more people are using the online format, and as we have illustrated previously certain retail sectors are at a greater risk than others. We believe that either path will produce rewards that we should be satisfied with.



Last week Westfield sponsored an early morning weekday conference in Auckland, with addresses from individuals who spoke on the evolving JCPenney department stores in the USA, and then the evolving online retail market. All very interesting, particularly the methods adopted by JCPenney to recapture customers with an offer of price reliability, and a “no coupons” approach but rather a “just fair and square” approach to retailing.