Despite a growing awareness of the e-commerce challenge, the majority of retail spending still takes place in physical stores (82% in the UK, almost 85% in Germany, around 90% in France and more than 95% in Poland as of 2017).
In a new report on Q1 of EMEA retail, advisor Colliers said that Gfk estimates that turnover of physical retail grew 2.1% in the EU28 in 2018.
The number of alliances between traditional retailers and web-based players is on the rise, and the number of pure-play online retailers opening their first physical store is also growing, as retail increasingly becomes omni-channel.
It has also been claimed that future ‘millennial generations’ favour the digital rather than the physical economy. However, recent survey results published by the International Council of Shopping Centres (ICSC) shows that nearly two-thirds of Millennial on-line shoppers say that the presence of a local store is very important or somewhat important, to support and drive their online shopping activity.
It is also received wisdom that the ‘experience economy’ will increasingly threaten physical retail, as younger shoppers prioritise leisure and travel over goods. But Colliers said in The Retail Rollercoaster, only 16% of discretionary spending is currently being used in this way.
Physical stores will remain a cornerstone of retail, but shops are no longer just shops. Retailers that focus on creating the holy grail for customers via a distinct experience, using innovative shop formats that integrate seamlessly with e-commerce and new technology will emerge victorious.
RPA Perspective Developers in shopping centres are devising new ways to curate their tenant mix: F&B and entertainment are an increasingly important component, and some landlords are offering smaller units to co-working start-ups and retail incubators, to improve the attractiveness of the space to diverse demographics including Gen Z shoppers.
The agility to adapt to the ‘uberisation’ of retail will be critical for landlords. Many retailers want to enjoy the advantages of a physical location, but not the inherent inflexibility. Landlords can capitalise on the desire of these retailers to be mobile and better target their customer demographic. For example, finding the best available units for pop-up shops during key dates and events.
The future of retail real estate will be tightly linked with the mixed-use sector, and unwanted retail space is increasingly being converted to complementary uses for the leisure/F&B/experience economy. As part of this trend, investors have been converting retail properties into residential space and undertaking retail park conversions to residential space with F&B and grocery retail on the ground floor for instance.
The current uncertainty in the retail sector is presenting opportunities for a number of retailers, many from the US, on an offensive to expand their European footprint. The ability to sign new leases during a time when landlords are likelier to offer more incentives is encouraging leasing activity.
“Equally, our headline review of retailer news shows that there are a large number of retailers looking to expand their European presence/ footprint, ahead of the raft of bad news stories which has tended to dominate press headlines,” said Colliers.
