Richard Facioni, ALCEON GROUP

titch, Ginger & Smart, Pumpkin Patch) • Chairman, Mosaic Brands Limited • Chairman, Cheap as Chips Discount Variety Stores • Investor, Marlin Brands Do you think the government has done enough to assist the retail industry? If not, what would you like to see happen? I think they have done a pretty good job. I don’t believe in company-specific bailouts and am pretty nervous about industry-specific assistance programs without good reason. While I think they were probably a little slow to move and there have been issues with how the initiatives work, particularly JobKeeper and the Commercial Tenancies Code of Conduct, overall I believe the government has done what the industry needed to get through this. That doesn’t mean, of course, that every retail business will survive – but this isn’t about ensuring the survival of every business. It’s about ensuring the longevity and viability of the retail sector. In your opinion, do you think shopping centre landlords have done enough in assisting retailers, and what has been your experience? It’s actually been quite mixed and there’s a spectrum, which you would expect when you essentially have a series of bilateral negotiations going on. At one end, we have landlords who are sympathetic to the issues we’ve faced as tenants. They have been willing to work with us constructively on payment terms and rental structure, both during the period we may have been forced to close our stores and during the transitionary ramp-up phase that will happen when we start re-opening. Other landlords are taking a tougher stance and are being less sympathetic to the fact we closed our stores, saying it was our decision to do so, notwithstanding government advice to our customers and our teams to stay home for non-essential reasons. The discussions will go on for some time and we will end up with different outcomes with each landlord. But there’s no question this experience and event will permanently change the landlord/tenant relationship and how future leases are written. In what ways can shopping centre landlords assist your business in the recovery phase? There are three distinct phases we need to be thinking about, and discussing with our landlords: 1. The closure phase, being a period during which no or minimal revenue is being generated. We need to agree what constitutes a fair rent during that period; 2. The recovery phase post store re-openings, being the period where revenue rebuilds. We need to ensure rents reflect the ramp-up in foot traffic and revenue over time, noting we believe it will be some time before foot traffic normalises; and 3. The longer term post the recovery phase. We need to address the likely long-term impacts on consumer behaviour resulting from this crisis. The discussions with landlords need to cover all three phases, as they are all linked, and there is clearly a tension between what tenants will view as fair and what landlords will view as fair. Ultimately, however, both sides need to work together to find mutually acceptable commercial outcomes. How important is the company’s online presence and have you experienced an increase in online sales due to COVID-19? We’ve historically had relatively low online penetration across our traditional retail businesses, however, we’ve seen two trends through this period. First, customers have engaged much more with online, for obvious reasons given social restrictions, spending more time at home, store closures, etc. As a result, we’ve seen significant growth in online and I expect much of this increased penetration will continue post COVID-19. So, there has been, I believe, a structural shift to online by the consumer. Second, with stores being closed, a lot of retailers, ours included, have taken the opportunity to accelerate their online growth through further investment in their online platforms, customer acquisition and category/product expansion. We’ve all been forced to become better online retailers in a very short timeframe. So, we’ve seen an acceleration of our customer’s transition to online, and an acceleration of our online growth strategy. Both trends are, I believe, permanent structural shifts. The flipside to this is that most retailers are probably planning to have fewer bricks-and-mortar stores in the future than would have been the case before the crisis. Has the business introduced any new technologies to help communicate with its team members and customers? Definitely, across the board. With teams working from home, we’ve all become pretty adept at video conferencing and virtual meetings, whether it’s Zoom, Teams, etc and using group chats. The positive is, while we can never replace the benefits of physical meetings, we’re all a lot more comfortable using technology to get the job done. We’ve also invested more in our customer communications. We’re upgrading our Electronic Direct Mail (EDM) platforms and using Artificial Intelligence (AI) to better personalise our interactions with our customers. We’ve also seen an increased shift to mobile devices through this period, so we’re also investing in developing mobile apps, so we can better engage with our customers through those devices. How do you think customer spend and shopper habits will change? I think we’re going to see a few changes after this. We will definitely see the increased penetration of online. While it will naturally pull back as physical stores start to re-open, I think it will settle down at a much higher level of penetration than previously. I also think the emotional impact of this event will change consumer behaviour. I think we’ll see consumers with more of a conscience. We’ll see the continuation of the shift away from consumerism and towards sustainability and sourcing – trends that were already well underway before COVID-19. There will also be the economic impacts of what we’ve been through and the aftermath. If we enter a protracted recession and a period of high unemployment, that will have the inevitable effects on consumer behaviour. What lessons have you learned from this experience? Always be ready for the unexpected and be ready for the next crisis. Be match fit, as we like to say. No one saw this crisis coming, especially straight after the terrible bush fire disaster. No one knows what the next crisis will be, nor when it will happen, but we know it will. And we need to be ready. When a crisis does hit, be nimble, be responsive and take fast, decisive action. That’s what we did across all our businesses. That speed to act and decisiveness will allow us to get through this crisis and be better for it. What are some of the positives you can take away from this experience? First, I’ve been amazed watching the teams in each business step up and do what needed to be done. Everyone has worked incredibly long, stressful hours, well beyond what was asked of them. You really get to appreciate the quality of the people you have on your team and I’m truly grateful to all of them. Second, with our stores closed and not having the daily cut and thrust of retail to deal with, it has given us the opportunity to step back and think. Something you rarely get the chance to do in retail. So, we’ve done quite a bit of strategic planning. Now is the time to be thinking, how do we, as a business, best position ourselves for the ‘new world’ once we get through this, knowing that things are going to be different? What do we look like today, what do we need to look like in the future to be successful and what is the pathway to getting there? What is your outlook for the retail economy over the next 12 months? I believe it’s going to be a slow rebuild for a lot of retailers. We know social distancing is going to be a fact of life for some time. That will have a prolonged impact on traffic in shopping centres and how retail stores physically operate, as there will be a lot of restrictions we will need to be mindful of – maximum customers in stores, use of change rooms, enhanced sanitation, etc. The slow rebuild will be exacerbated, I believe, by reduced discretionary spend, due to higher unemployment, the time it takes for the economy to recover. So, I think the next 12 months are going to remain challenging for many retailers. The question everyone is asking, however, is what happens longer term, beyond the next 12 months? Online will continue to benefit from the slow rebuild in physical retail. And I believe retailers selling essential goods like groceries, will be less affected than those selling more discretionary product. https://shoppingcentrenews.com.au/category/shopping-centre-news/retail-outlook/