What Melbourne’s booming population means for Australian retail

Following a population decline amid Covid-19 restrictions, the Federal Government’s Centre for Population report predicts that Melbourne will overtake Sydney as Australia’s largest city within the next 10 years.

The implications will be felt by every industry, including Melbourne’s retail sector, but how so, and to what extent?

According to The Age, Melbourne’s population size is set to increase by 1.8 per cent over the year to June, and is forecasted to rise by about a million people, to over six million in 2032. 

Contributing factors may include overseas migration, a bigger birth than death rate, and Melbourne’s reputation as a liveable city. According to Melbourne’s Lord Mayor Sally Capp, retail remains one of the key reasons that visitors and workers want to come to the city.

She told Inside Retail that Melbourne continues to provide a highly attractive and competitive retail offering.

“We know that attracting shoppers to the CBD has immense flow-on effects. Not only do these shoppers support our traders, they also go on to make the most of our hospitality and entertainment offerings before and after their shopping trips,” Capp said.

“Major employers, such as the Clemenger Group and Mecca, are [also] choosing Melbourne as their preferred flagship locations.”

According to Dr Kevin Johnson, co-founder and managing director of Geografia, a social and economic planning and spatial analysis firm, Victoria’s population is expected to rebound, but not necessarily in the CBD. Rather, most population growth will likely occur in the outer suburbs.

“The most significant change [in foot traffic] has been outside of work hours. It seems the CBD has become more of a shopping, than working destination,” Johnson said.

“Population growth is largely driven by younger age groups, who embrace online sales. So we expect further growth [but] it should plateau as a share of total spending at some point.”

He added that click-and-collect is expected to change the pattern of movement, and that retail spaces are evolving as places to evaluate and pick up products.

Consulting economic geographer and urban economics advisor Tim Nott said that, the Covid-19 period aside, Melbourne has been growing slightly faster than Sydney for a couple of decades. He explained that growth is occurring in the inner and middle suburbs, as well as in the urban growth areas on the fringe.

He added that the development of new retail centres and spaces will need to continue in order to provide equitable access to goods and services for people in these locations.

“I don’t think population growth is driving changes in consumer preferences. These changes are more likely being driven by the possibilities generated by new technologies and techniques, and the contradictory desires to possess more stuff as well as a sustainable lifestyle,” Nott said.

“The main challenge for retailers is continuing to roll out the vital network in growth areas while responding to changes in preferences – being flexible while continuing to deliver the necessary services.”

Flexible planning

According to Lord Mayor Sally Capp, the City of Melbourne is preparing for the population boom.

She pointed to major infrastructure projects including the Fisherman’s Bend Urban Renewal, and its Affordable Housing Strategy.

Johnson isn’t expecting significant development and construction of new retail spaces. 

Rather, he said that warehousing can be done cheaply in the outer suburbs, and can support online retail, which is a major growth area. 

There is scope to redevelop existing spaces to cater for different formats, such as click-and-collect, and mixing dining and entertainment spaces with discretionary shopping items.

Johnson added that there’s already been a proliferation of mixed stores, such as cafes that are adjoined with barbers, florists or clothing stores.  

Meanwhile, Nott is predicting the continued rollout of retail centres and spaces in line with population growth, as has happened over the past couple of decades.

However, he said there needs to be a capacity to adapt to changes in consumer and policy preferences, particularly with regards to environmental sustainability.

“This may require an alteration in the preferred size of shops such as supermarkets so that, for example, neighbourhood shopping centres can be located within walking distance of nearly every household,” he said.

Investing in the future

According to Johnson, a potential challenge for independent retailers amid a growing population is that a greater market share will be captured by larger firms, which can dominate online and other sales.

While there is tension between maximising the level of service and reducing the travel time to the nearest centre, Nott said that the hierarchy of retail centres in Melbourne’s growth area partly resolves this, as the most frequently purchased items, such as food and groceries, are available at all centres.

However, as the population increases, there will likely be pressure to 

increase the number of smaller centres in order to provide less travel-intensive access to goods and services. He added that some larger centres may decline as online shopping takes more of their role.

For Capp, the arrival of more residents and workers in coming years acts as a vote of confidence for Melbourne’s retailers.

“They can continue investing in their future in Melbourne knowing that demand will continue to increase as we welcome more people to our city,” she said.

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