Spotlight aims to open 150 stores in five years and develop $2bn property sites

Almost 50 years since the first Spotlight store opened and annual sales reaching $2.6bn, its billionaire owners now have bold plans to develop a property empire with hotels and units.

Zac Fried has just opened the biggest ever Spotlight the company has ever built in Maroochydore on the Sunshine Coast. Picture: Lyndon Mechielsen.

Zac Fried calls it the biggest and best project he has ever done.

The billionaire executive deputy chairman and co-owner of the giant Spotlight retail chain, one of Australia’s largest privately-owned retailers, is talking about the new $45m development the group opened this week at the fringe of the Maroochydore CBD on Queensland’s Sunshine Coast.

The project features the biggest ever haberdashery-focused Spotlight store at over 6000sq m, ­anchoring a superstore of camping and outdoor brand Anaconda and a homewares-centred Harris ­Scarfe that both also owned by the wider Spotlight Group.

Yet it is what the project will go on to eventually be that shows how it also serves as a blueprint for the group owned by the billionaire Fried and Fraid families, and how it is undergoing some seemingly subtle yet eventually transformative changes.

Fried can barely contain his excitement about Maroochydore.

“This is the best development we have ever done, I’m completely blown away,” he tells The Weekend Australian. “It’s a benchmark. It is not the standard boring, big box [retail] at all.

“And what is amazing is that other tenants or retailers who have driven past in the last three weeks have run and asked ‘have you got any room for us’.”

Fraid explains just how project encapsulates the changes happening at one of Australia’s storeyed retail chains, which traces it roots back to Mr Fried’s late father Ruben and uncle Morry Fraid, the group’s executive chairman, working at their family stall at the South Melbourne Markets before opening the first Spotlight in suburban Melbourne in 1973.

Almost 50 years later, the Maroochydore opening is only the first stage of what will eventually be a $250m three-part project.

That interest from prospective tenants means plans for stage two have been brought forward, with work on what will include retail and upscale commercial space to begin within 12 months.

After that will come stage three, incorporating two towers that will house either a hotel or residential apartments or more office space.

It is a big change for a group that has cut its teeth on retail for almost five decades.

In a rare and wide-ranging interview, Fried, who runs Spotlight with his uncle, reveals their plans for the group to transform from a pure retailer selling bed linen, curtains, haberdashery and other homemaking products to also be one of Australia’s more prolific property developers over the next decade and more.

Fried says the Spotlight Group will always have a retail element at its heart, and that he has noticed a definite and entrenched shift back to bricks and mortar purchasing by customers as pandemic restrictions ease.

But his group will also soon build hotels, apartments and mixed-use property projects all over the east coast of Australia, while continuing the relentless expansion of its core businesses.

Spotlight’s owners have about $2bn worth of property on their books amassed over several years, underpinning a retail business that now has 11,500 employees and annual sales of $2.6bn.

Many of the outlets have Spotlight, Anaconda or Harris Scarfe stores already on them, but the group has 21 large vacant sites around the country they intend to develop on.

Some are former Masters sites, where the ill-fated former hardware outlets once sat and where Spotlight outlets will anchor new projects typically worth $40-80m.

Other plans are even more ambitious. There’s a $500m project in Sydney’s Castle Hills earmarked for a two-level retail centre, a 30,000sq m office building and 165-room hotel, and at Frankston in Melbourne’s southeast Spotlight wants to build a new $425m development incorporating a new train station, hotel and conference centre, supermarket, medical centre and eight-storey tower.

Fried is also putting the finishing touches on plans on Melbourne’s swanky Chapel Street for a five-star hotel, office and retail project that he hopes will be ready by 2025.

Spotlight has already built apartments in a joint venture with residential builders in Fremantle and will also build apartment towers in Newcastle.

When asked if Spotlight is a retailer or property developer these days, Fried says: “We’re retailers; we’ve been opening quite a lot of stores for the three main brands.

“[But] I think we are both now to be honest. We are also a [property] investor and fund manager, so we have grown those skills over the last six or seven years. It is quite diverse now but retail is obviously the key component with the four brands, which I’m including Mountain Design in.”

Fried says Spotlight is on track to open 150 new stores across its three main brands over the next five years, having opened or moved 24 outlets in the past 12 months despite Covid disruptions.

There are plans for 28 more stores to open this year and another 15 are already approved for 2023. The group will also open its third store in Singapore later this year and is looking at two new sites in New Zealand.

One of its more ambitious plans is for a massive Anaconda store over 8500sq m at Brendale in Brisbane’s northwest, where there will also be an outdoor bike and scooter track, water play area and outdoor caravan and camping display.

The key, Fried says, is to avoid locations too close to CBDs where workers are still not returning to offices and build something convenient but also worth visiting for customers.

“We don’t want CBD areas for property or retail, we stick to out of the centre. With Maroochydore, [billionaire property developer] Lang Walker has got his $2.5bn CBD and residential project and we are on the fringe of that. It is a perfect example of where we play in the marketplace.

“If you look at shoppers’ habits, it is that large format or out of centre development that is working a lot better than I would have imagined during the pandemic. There’s carparking out the front usually so it makes it easy and convenient for customers to get in and out.”

Like most other retailers, Spotlight has been hit over the past two years by various government Covid-mandated lockdown measures. Fried says the group has improved its online offering as a result, but says he has noted a strong comeback of customers in-store when outlets reopen.

“Covid was meant to draw that line in the sand in that you had to go online. But I think people have realised that while they thought it was good, maybe it‘s not that good. They like to be out and like to interact and see what they are buying.

“For us before, online was 10-15 per cent of sales; now it is 15-20 per cent. It has doubled since pre Covid. But that means 80-85 per cent still comes through the front door. So it is about satisfying your customers’ needs and wants, and that’s what they want.”

Fried says given customers’ average spend with Spotlight is less than $100 per transaction, the business should hold up reasonably well when interest rates rise. But he does admit to keeping a close eye on how the property market will perform given items like bed linen and curtains are big sellers when residential subdivisions are built or home renovations are undertaken.

He also has had to cope with some setbacks, including a major retail project at Noosa being rejected by the local council and a subsequent court of appeal.

Shipping and logistics costs are also rising. “Supply chains are getting better, but our Newcastle store just got its Christmas stock order for example. It will be alright, but that’s probably the biggest challenge for retailers, costs are coming up to be quite high.”

Fried also reveals Spotlight is scouring the market for more acquisition opportunities, two years after paying a reported $50m for the struggling but historic Harris Scarfe chain that it is now in the midst of turning around and expanding.

“It has been a good investment for us, now it is about making it sustainable for the long term. We’re also looking at other brands to add to the stable, looking at other retailers to potentially acquire. We will do some more deals.”