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Retailers, landlords could suffer from falling Aussie dollar

Whilst a falling Australian dollar should see a slight reversal in people shopping for products on overseas websites, David Briskin, CEO of fashion brand sass & bide, has conceded that the recent fall in the Australian dollar is actually more of a “hindrance than a help”.

Speaking on Channel Nine’s Financial Review Sunday, Briskin said that whilst the falling Aussie dollar would cause a slight retraction in online shopping, people shop online more for convenience and the product range available, implying that the lower value would not have a drastic effect on online shopping. Meanwhile, as most products are manufactured overseas, retailers’ costs would increase whilst margins would fall.

Shopping centre operators and owners, such as Westfield Group (ASX: WDC), Stockland (ASX: SGP) and GPT Group (ASX: GPT) have already been forced to reduce their rent charges, as retailers have complained they cannot sustain payments. Companies such as Myer (ASX: MYR), David Jones (ASX: DJS) and Harvey Norman (ASX: HVN) have all pressured for lower charges, in which charges for some retailers has been decreased by up to 5% in order to keep their arrangements.

Foolish takeaway

Should conditions continue to get tougher for retailers, landlords could also be faced with problems such as higher vacancy rates and thus, lower profitability. To cope with changing circumstances however, retailers and landlords alike have been closing their least profitable stores to instead focus on their most profitable, which will help the companies enormously in the long run.

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Motley Fool contributor Ryan Newman does not own any of the companies mentioned in this article.

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