This is second in a series of articles where I explore on-demand delivery. I’ll look at the current landscape, emerging players and discuss the best strategies & opportunities for success.
Location, location, location. It’s everything right?
Not exactly. Retail is changing right now. It’s about to change 10X. In Australia, companies like DoorDash and UBER are moving fast to deliver — everything! Last mile will become first mile and it all has to do with one thing — density.
Local commerce is a radius. In that radius are your customers, merchants, and drivers. These nodes determine your unit economics and overall opportunity. The relational tightness between nodes creates efficiencies and makes you incredibly resilient. As a network, the more nodes you have, the more dense your mass. If you have a dense network of merchants, drivers and customers, you can extend dayparts (breakfast, lunch and dinner) by accessing new merchant nodes through “New Verticals”. After all, it’s much easier to deliver a charger cable than a hot meal or frozen dessert. But the real benefits are expanding peak hours and route density.
What is the adjacency of food?
Looking at a 5km delivery radius, density increases where there are groups of shops such as shopping centres. Now I know what you’re thinking. Shopping centres are a terrible idea. Considering accessibility, parking, technological adeptness, staffing, multi-locations … yes, I agree. Not all shopping centres are created equal. It turns out that there are ten classifications of shopping centres: City Centre (CBD); Super Regional; Major Regional; Regional; Sub Regional; Neighbourhood; Bulky Goods; Themed; Markets; and Outlets.
One attractive cohort is “Bulky Goods” or homemakers centres.
Made up of medium to large, box/factory/warehouse sized stores. While the name specifies “bulky” furniture items, the majority of tenants are non-cubic & deliverable. Opportunities exist across major consumer categories: electronics; computers; small appliances and white goods; containers & kitchenware; linen; arts & crafts; office supply; outdoor & sporting goods; food; baby & kids; and pets. They are the easiest of the ten segments to access with frontal & adjacent parking, higher staff counts and lower wait times. Unlike regional centres that see 25% of stores devoted to personal services, homemakers have 80%+ occupancy by national retailers.
According to the Shopping Centre Council of Australia, there are 129 bulky goods sites. Looking at the 129, 20 (16%) are under single asset management by Aventus Group. These large format retail centres spread across five Australian states with 92% of locations on the east coast. 592 retail stores occupy the 20 sites and 87% of stores are national retailers. Of the 20, all 20 sites are currently addressable by both UBER and DoorDash. This is 564,945m² gross lettable area (GLA) with 14,109 total parking spaces (705 avg.). Total reported population catchment of 5.8m with an average distance from a CBD of 58km.
This is suburban gold.
It is also a symbiotic push and pull opportunity.
On-demand delivery companies can deploy a fast scaling merchant acquisition strategy across national retail groups — driving massive customer retention and new acquisition. Easier and more scalable that 1:1 onboarding with fantastic halo effects. National retailers may be more sluggish on prioritisation and resourcing across their e-commerce roadmap but, they are omni-channel savvy and have ERP systems ready to push data. They also have budgets to meet and COVID-19 growth to comp.
National retail chains should be beating down the doors of white label and on-demand delivery companies like Sherpa, DoorDash and UBER to make “30-minute delivery” part of their core retail investment strategies. The next marketplace opportunities e.g. Catch, Kogan, and Amazon exist on on-demand platforms for which Australians have become increasingly comfortable with shopping on. One key takeaway from my research is Amazon and Amazon Flex.
Amazon Flex will need to rapidly expand to more than delivering packages for Amazon.com.au if it is to compete in the on-demand economy. They have a platform where people shop by product vs. brand and that is a crucial element in a sell everything model. A migration is needed from the everything store to the everything “delivered” in 30-minutes store. That is something we’ll need to see DoorDash and UBER do as they currently offer a “Shop by Store” UX.
What are the “New Verticals” in the Bulky Goods sites?
Looking at the top 100 Aventus Group retailers that occupy 215 total stores and span 20+ compatible verticals. Of these “New Verticals”, the respective store counts are: Bedding (35); Electronics & Appliances (26); Sporting Goods (19); Automotive (17); Lighting (16); Food (15); Pets (15); Fabric & Crafts (9); Vacuums (8); Office Supply (7); Discount (6); Homewares (5); Kitchenware (5); Storage (5); Baby & Kids (4); Cafe (4); Hardware & DIY (4); Pharmacy (4); Apparel (3); Computers (2); Electronics (2); Grocery (2); and Toys (2).
Those stores serve 5.8m people. Additionally, as national chains exist in all 129+ bulk goods centres nationwide, the near remainder of the Australian population would also be served. Largely suburban and outside of the CBDs — a key factor in on-demand delivery success.
A group acquisition strategy could address national retailers and total store counts. Autobarn (130); Baby Bunting (53); Bed Bath ’N’ Table (160); Bunnings (267+); Godfreys (200); Harvey Norman (195); Howards Storage World (85+); Lincraft (60); Nutrition Warehouse (80); Officeworks (168); Petbarn (156); Repco (400).
Other key national retailers are groups — Super Retail Group (590): BCF (130); Rebel Sport (160); Supercheap Auto (300). JB Hi-Fi (301): JB Hi-Fi (200); The Good Guys (101). Spotlight Retail Group (223): Spotlight (120); Anaconda (60); Harris Scarfe (43) lead the mix.
What about the other nine shopping centre segments? Opportunities exist albeit very strategically different. Superficially, major centres like Scentre Group’s Westfield would be opportune to do a deal directly with white label delivery services providers (DSPs). One way to regain above-the-threshold percentage rents. It’s also a massive incremental benefit to retailers leveraging their micro-warehouses aka retail stores. One thing is for certain, if you are a retailer and are not working on a local commerce “store-to-door” strategy, then you will miss out on a massive chunk of future retail.
“Overthinking is a problem. Underthinking is a bigger problem. I feel for people who get stuck in analysis paralysis. I worry about people who don’t do the analysis in the first place. It’s better to embrace the discomfort of doubt than to live with the regret of overconfidence.” — Adam Grant
As a merchant, strategy and operations guy I find this all incredibly fascinating. The rest of the world is so much farther along than we are in Australia. But, we have a ton of USPs in our local retail sector — one is the mix. I’ll explore “The Mix” and especially anchor supermarkets that make Australian shopping centres very unique amongst global retail in my next instalment.