Major Shopping Centre Results Reflects Trend

Media Release 11 May 2007

MAJOR SHOPPING CENTRE’S RESULTS REFLECT INTERNATIONAL LUXURY-SPENDING TREND

With international retail-watchers pinpointing a major shift towards increased spending on luxury goods, east Auckland’s Botany Town Centre is seeing the trend playing out domestically – somewhat in defiance of complex retail-climate predictions from economists.

A recent luxury consumer survey by US consulting firm Unity Marketing found that in the United States, the average amount spent by affluent households on luxuries rose by 3.8% in 2006, and that middle-income households’ luxury-goods buying increased by a similar percentage.

Desiree Clark, Marketing Manager for Botany Town Centre (which is managed by AMP Capital Shopping Centres) reports that for March 2007, specialty sales increased 4.2% against March last year, with striking surges in the categories of men’s fashion +13.2%, footwear +5.2% and leisure goods +39.9%. The good news continued across all retail in the centre, with a total sales increase of 6.3% against March 2006, and 4.6% compared to the first quarter of 2006.

“Clearly the overall consumer-spending pattern is very positive for us at the moment, but what is most interesting to us, both in terms of hard figures and in feedback from our operators, is how people are spending their money. Jewellery, fashion, home accessories – people are spending more and more in what we consider the ‘specialty’ category. Once we would have expected a natural levelling-off, but currently the growth is unceasing.”

Ms Clark and her management team responded to the upsurge by producing Guide to Winter Time, an aspirational magazine showcasing the centre’s high-end retail offer. Grouped around seasonal ideas such as Comfort Time, Snuggle Time and Inside Time, the Guide features lavish merchandise from more than 150 specialty stores, along with tips for making the most of the cooler months. Also included are draws to win upscale items, such as a luxury jewellery package worth more than $5,000.

Ms Clark believes a key reason for the specialty sector’s boom is a shift in how ‘luxury’ is thought of and defined by consumers. “What people once considered luxury items, such as upmarket bath products or high-tech Swiss watches, are now viewed as necessities – these are our just deserts for working so hard.”

The Unity Marketing surveyors supported this view, in concluding that part of the impetus for increased luxury-item spending was the desire of baby boomers around the world to enrich their lives as they begin to realise that life is short. The first baby boomers turned 60 last year.
The management team was especially pleased by the rise in luxury spending, Ms Clark said, in light of the po-faced forecasts from some economists that consumer confidence would take a battering from the recent interest-rate hikes (the official cash rate was lifted on 8 March and again on 26 April), and the increase in petrol prices, which are up 13 cents/litre on December 2006.
According to a recent business media report, consumers have been tightening their grip on the purse strings, with a late summer prompting weaker than usual trading over the December-January period. Some economists also foresaw challenging retail trading for the rest of 2007 due to the OCR increases.
Furthermore, the Westpac McDermott Miller consumer confidence index fell two points to 117.7 in the March 2007 quarter. However, the survey noted that overall, consumer confidence was resilient, suggesting that other factors, such as the reaccelerating housing market, are at play.
“Our sales have been steadily trending upward, so we’re pleased to have avoided that dip in confidence,” Ms Clark said. “Now we’re looking hard at what else we can do to service that demand for luxury goods.”
The Circle Lounge, the centre’s cinema and dining destination, also posted strong first-quarter results. The popularity of the Circle Lounge – which Ms Clark says particularly appeals to baby boomers – reflects another trend identified in the Unity Marketing survey; a shift towards the experiential, in which people seek heightened or luxurious versions of everyday experiences.

“We’re finding that when people go to see a movie, the standard bucket of popcorn doesn’t cut it anymore,” Ms Clark says, noting that an accompanying glass of wine and plate of tapas are now preferred by many of the centre’s cinemagoers.

The centre serves a diverse and growing community, and Ms Clark believes the broad demographic base partly explains the centre’s current golden period. “The community is growing at one of the fastest rates anywhere in the country – we have everyone from upwardly mobile young families to single professionals and retirees on lifestyle blocks,” she says. “People are looking for a relaxing or entertaining experience when they come here, not just a place to shop.”
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