h – generates sales per sqm in excess of US$32,000, almost all of it on the back of European and homegrown luxury tenants. Factory outlet centres in the States, once the final refuge for the discards of dull middle-market brands, have in recent years morphed into genuinely high-end shopping venues, sporting just about every upscale designer brand you can think of. In Australia, ‘upscaling’ the tenant mix has also been one of the mantras of the shopping centre industry, not just in mainstream centres, but in factory outlet projects as well, where owners have scrambled to get their centres noticed by more tourists and aspirational domestic shoppers. A crowning factor that seemed to make luxury a good bet for the shopping centre operator is that luxe brands have been torturously slow to move online. Now that’s changing. And there are other threats emerging as well to this hitherto safe retail property bet. These threats emanate from multiple directions, and are structural, not merely cyclical. They go beyond the worldwide slowdown in the growth rate of luxury goods sales observed in the past few years; they involve changes in the way consumers define luxury and status, a change in the way high end brands view e-commerce, and the emergence of platforms that enable re-commerce. Luxury is being redefined Wearing, driving and hotelling in high-end brands was the traditional way of displaying status among the affluent. Luxury has been defined by the use of such brands and for many, it still is. But generational and technological changes are bringing with them profound changes to the way luxury is interpreted, particularly by millennial and Gen Z consumers (collectively, those born since 1980). In fact, a recent report from Fung Global Retail and Technology, a New York-based retail and technology think tank, claimed: “The days of exhibiting wealth via expensive apparel and products may soon be behind us.” The report, Wellness as a luxury, observes the massive growth of five indicators:       Consumers signing up for aspirational fitness classes       Consumption of healthy, often organic foods       Use of digital devices to measure and record health metrics       Wearing high-performance athleisure clothing not just in the gym but in multiple social contexts (sports-inspired clothing sales in the US grew at approximately three times the rate of the whole apparel category in 2016, according to Euromonitor International)       ‘Flaunting’ health and wellness lifestyles on social media. In other words, wellness has become a status symbol among younger people to rival the traditional symbols favoured by previous generations. A change of heart Better late than never, as the saying goes, and that applies to luxury brands selling online. One of the chief stumbling blocks to luxury e-commerce has been the difficulty in creating the kind of online platform that conveys brand heritage and quality. It’s much easier to do it in a physical store where visual merchandising, design elements and service can all be brought to bear on brand image. But now, e-commerce is getting much more attention. First, some luxury brands became over-stored – this situation was aggravated by soaring rental costs, particularly in Asian cities and led to the pruning back of store portfolios by many luxury brands. Brands have looked increasingly to e-commerce to drive growth. Second, third party e-commerce sites such as Yoox Net-A-Porter and Farfetch are providing effective high-end platforms for selling luxury goods. Milan-based Yoox Net-A-Porter, for example, has a multi-brand site and also operates single-brand sites for 41 brands. It ships to 180 countries. Luxury brands that might previously have worried about lack of control over the online selling environment are now becoming more comfortable with it. Moreover, the e-commerce sites are able to provide more effective personalised marketing tools. Third, Chinese consumers, who have been massive buyers of luxury goods sales as tourists, are becoming more comfortable with buying luxury merchandise online, which has focused the attention of luxury brands on upgrading their e-commerce capability. According to McKinsey and Company, e-commerce is the fastest growing channel for luxury goods sales and is forecast to take 18 per cent global market share by 2025. E-commerce itself is not the only channel that might start worrying retail property owners. Online re-commerce, or the resale of used clothing online, is one of the fastest-growing sectors of retail, albeit from a small base. Reselling occurs on dedicated e-commerce sites such as the RealReal, which deals almost exclusively with luxury merchandise, and via easy-to-use peer-to-peer apps. That comes on top of the luxury rental business, which started perhaps most famously with Rent the Runway in America, but is now thriving through a proliferation of sites everywhere. How retail property must respond Broadly speaking, shopping centre operators have adapted well to changing perceptions of luxury so far. Gyms have proliferated as shopping centre anchors, athleisure brands have sprouted in every major centre – and a lot of minor ones too. Health and beauty is a key tenant category at most shopping venues in upscale neighbourhoods. But has property maxed out on traditional luxury brands? A number of indicators suggest that it might be getting close. The general shift in consumer spending patterns away from apparel and accessories, an apparent generational evolution in the definition of luxury itself, and the now rapid growth of luxury e-commerce all suggest that the golden era for luxury goods store development is now behind us. Michael Baker is a Sydney-based retail consultant and former head of research at the International Council of Shopping Centers. michael@mbaker-retail.com