Retail Revamp, Digitisation and Real Job Losses Retail Revamp, Digitisation and Real Job Losses Retail Revamp, Digitisation and Real Job Losses

Retail Revamp, Digitisation and Real Job Losses

Summary:  As the COVID-19 pandemic shuttered the global economy, thousands of retailers worldwide have been forced to shut shop in an effort to contain the spread of COVID-19. However, as lockdowns are lifted and stores reopen, will industry changes be accelerated? What does the post-crisis retail landscape mean for jobs, consumer behaviour and real estate owners and operators?

Clicks > Bricks

The shift away from traditional bricks and mortar retail has been a well-documented phenomenon in recent years. There have been a number of drivers, namely the over-expansion of malls, rising rents, and changes in consumer purchasing habits. The most notable (or notorious) has been the shift online and the rise of e-commerce, or the “Amazon Effect”.

Accelerated Online Shift – The New Consumer

The move to online has been a necessity for consumers whilst entire countries have been in lockdown. The trend was already afoot prior to the global pandemic, but for some consumer cohorts that have been slower to adapt, for example, baby-boomers who traditionally value physical stores more than millennial consumers, the forced online push could see accelerated post-pandemic e-commerce adoption.

For many retailers with both an online and physical store presence the accelerated post COVID-19 shift to online could see increased competition and with restricted scope to reduce labour costs and overheads in existing physical locations, the result is margin compression and reduced profitability. Particularly once, we factor in the impact of widespread job losses and hit to consumer sentiment, via the health and economic crisis that will drag on discretionary spending and aggregate demand long after the lockdowns are lifted. Job insecurity, lost savings and personal safety concerns dampen consumption as consumers choose to save more and spend less, preventing a one-quarter and done impact. In China, the first country to see lockdowns lifted, consumers remain cautious and local governments have resorted to distributing vouchers to shoppers in a bid to get consumer spending again.

Therefore, the labour market recovery will also be crucial to aggregate demand rebound dynamics. Jobs around the world have been lost with frightening speed, we only have to look to US jobless claims to see that in full swing. According to the International Labour Organisation 2.7bn workers worldwide are now affected by lockdown measures, representing around 81 % of the world’s workforce. Employment recoveries are never V-shaped, although it is true that this recession has been “self-inflicted” and therefore the labour market may rebound more quickly than in prior recessions. But, the downturn in itself generates negative externalities and second order implications that cascade making it less likely the labour market can snap back. A clear risk to the assumption that economic activity will bounce back by 2H20.

Coronavirus Australia: Accent Group to close 28 stores nationwide

In Australia, Accent Group — the owner of Sketchers, Platypus, Hype DC and the Athlete’s Foot — said that after shutting down shops for a period of four weeks, they are now re-evaluating off the back of a significant acceleration in digital sales. Accent Group's chief executive says there has been a "seismic and most likely enduring" shift towards online shopping during the COVID-19 lockdowns and the company is trying to capitalise on the trend in the longer term. Initially closing 28 stores nationwide, but this could be increased to 50-100 stores pending negotiations with landlords. Viewed through a micro-economy lense, another indicator that the post virus picture is not one of mean reversion. There will be jobs that are never re-instated, primarily as businesses increase their focus on digitisation.

Aside from the shift away from traditional bricks and mortar stores, it has also been well documented that the millennial cohort have a tendency to prioritize experiences over products. A study by Harris Group found that 72% of millennials would rather spend on experiences than on material items. In addition, another long-term trend set to reshape retail will be the increased focus on sustainability and the circular economy. According to the environmental journal, 75% of millennials are willing to pay extra for sustainable products, being more climate-conscious than their prior generational cohorts, and keen to demonstrate this through their purchasing habits.

Collectively, the result is an acceleration of store closures and retail bankruptcies. Many closures likely coming from those “delaying the inevitable” with the trend accelerated by COVID-19. In addition, for those that survive, a retail re-imagination, adapting physical stores to new consumer preferences will be critical. For example, experiential in-store offerings, premium brands, and aligning with expectations around sustainability etc.

Retail Tenants

Real estate owners across almost every asset sector are considering the effects of the coronavirus outbreak and the industry changes that may arise in the wake of the global pandemic.

As we discussed even prior to the outbreak of COVID-19 consumers purchasing preferences were changing and moving towards e-commerce. For many retailers with physical stores, the business model has long been challenged. This shift will be accelerated post-pandemic, as reluctant consumer cohorts have faced no alternative, thus increasing online penetration and sales. For retail real estate asset owners, a surge of retailers demanding rent reductions, or shutting shop permanently, would deal a blow to an industry that was struggling prior to the pandemic. Even retailers and tenants who remain in a strong position despite the impact of COVID-19 lockdowns are looking to share the pain of lost sales and seeking rent relief from property owners.

Bigger picture, according to US real estate intelligence firm Green Street Advisors, over 50% of department stores in US malls are predicted to close by 2021. This generates a knock on effect as co-tenancy clauses allow struggling retailers to back out of lease agreements or negotiate reduced rents as foot traffic is reduced. In an environment where oversupply has long been an issue, department stores are in decline and online sales are growing fast, thus resetting rents lower, real estate owners and operators cash flows will be impacted significantly. The magnitude will depend on tenant mix (essential/non-essential), how quickly distancing measures are eased, the risk of a second infection wave and how quickly aggregate demand bounces back. 

Retail REITs – in the price?

Listed retail and mall REITs shares are reflecting the stressed liquidity positions and already pricing in rent losses and tenant strains as well as the longer-term structural challenges, in fact retail REITs have been hit as hard as airline stocks in the COVID-19 sell off.

Source: Bloomberg

As is often the case, the changes outlined above are by no means a one size fits all and there will always be winners and losers. Individual companies abilities to weather the COVID-19 storm will depend on how well positioned they are to manage the immediate cash flow hit and reduced demand for space, along with changing consumer preferences. For those higher quality retail REITs, with stronger balance sheets able to withstand the COVID-19 crisis and premium well located assets, once we have more visibility on the scale of the crisis, the selloff may present opportunity. However the longer-term structural challenges remain. 

For other REIT sectors like data centres, self-storage and industrials, these structural changes and accelerated adoption of e-commerce may provide positive tailwinds. For data centres long-term thematics like IoT, increasing enterprise IT spend and digitisation, growing cloud adoption, software as a service and online networking drives demand. In addition, unlike retail, the COVID-19 crisis has seen a huge push to remote working facilities and consequently increased uptake in phone and internet based communications like video conferencing and tele conferencing driving business for data centres. For industrial REITs, notwithstanding the initial hit to consumer spending and aggregate demand, longer-term demand for warehouse space remains robust driven by the accelerated growth of e-commerce. Another positive tailwind may be the trend toward deglobalisation and localisation of supply chains, also set to be accelerated by the COVID-19 crisis. A renewed focus on resiliency of supply chains as opposed to cost minimisation above all else could see manufacturers and retailers hold increased stock levels and on shoring as well as diversifying across several offshore locations.

Trading Interest

  • Macerich
  • Prologis Inc
  • Simon Property Group
  • Terreno Realty Corp
  • Washington Prime Group
  • First Industrial Realty Trust
  • Scentre Group
  • Digital Realty Trust
  • Vicinity Centres
  • Equinix Inc
  • Hammerson PLC
  • CoreSite Realty
  • Unibail-Rodamco-Westfield
  • MercadoLibre

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.