Posts Tagged ‘entry barrier’

Bye bye barrier

September 18, 2009

Today’s announcement that the two big Aussie supermarkets can no longer negotiate exclusive or restrictive tenancy agreements with shopping centres is long overdue.

barriers entry fall jenga stackSo many shopping centres being locked up by Woolworths or Coles has previously served as a very considerable barrier to new entrants in this market. It has helped to protect the profits of these two giants and limited consumer choices.

Greater access should assist German entrant Aldi considerably, and may lure other international players down under. Of course, there will be considerable late mover disadvantages to overcome in terms of economies of scale etc.

One interested aspect will be to see how the dominant mall operator Westfield deals with all this.

Will it reduce their revenues from the supermarket chains? Presumably there was some premium for exclusivity, but this may have been traded off against the certainty of income streams from long-term anchor tenant agreements (with said income used to fund expansions and upgrades of the centres).

Or will they now be able to ratchet up supermarket rents on the threat of offering spaces to rivals (incumbent or new)?