The retail sector is changing as the integration between physical stores and online outlets continues, delegates heard at PropertyEU’s European Retail Investment Briefing, which was held on Friday at Savills’ headquarters in Central London.
E-commerce used to be seen as just a threat, but retailers have managed to turn it into an advantage by creating ‘destination stores’ designed to enhance brand recognition, improve the customer experience and increase online sales. Increasingly, customers visit the store and then buy online using their mobile phones.
‘Retailers are being extremely successful at integrating their online business with physical stores and really understanding their customers’ needs and habits,’ said Herman Kok, head of research at Meyer Bergman. But, he added: ‘The property business still has a long way to go’.
Retailers are totally up to speed, using mobile phone, credit card and consumer data to drive their strategy, but landlords still need to catch up and make full use of the available technology, said Hans Vrensen, European head of research & strategy at AEW.
‘Stores are the trigger for a lot of online sales,’ he said. ‘Landlords should exploit that, but it is not happening yet. At the moment retailers are way ahead and landlords need to catch up in order to negotiate better leases.’ Many retail landlords get a percentage of the sales of the stores they own, but what they get does not reflect the crucial role that the shops have in increasing online sales.
Physical presence is crucial
A physical presence in the high street is increasingly seen as crucial even by brands that until now were online only or had a presence in out-of-town shopping centres. ‘Microsoft is opening a store on Oxford Street in London next year, and Amazon may well follow,’ said Anthony Selwyn, head of Central London retail at Savills. Ikea has opened the first city centre concept store in Madrid, while online fashion brands Missguided and Boden are opening their first central London stores.
As the focus shifts to destination stores, investors and retailers are becoming more selective and opting for fewer but larger shops in the best locations. ‘The polarisation between prime and secondary locations will continue,’ said Kok.
‘There is a bifurcation in the market but it does not mean that secondary shopping centres are not a good investment,’ said Vrensen. ‘A lot of them were neglected after the crisis, but now the owners are investing in them to bring them up. Active asset management is the key to success.’ The US phenomenon of ‘dead malls’ is unlikely to be replicated in Europe.
Urbanisation trend is changing the retail mix
The urbanisation trend is leading to changes in the retail mix which will make mixed-use developments more attractive in European cities, panellists agreed. Retail can be successfully combined with last-mile logistics, with offices and with residential, as more young professionals want to live in city centres and have convenience stores nearby.
‘Investors used to be concerned about mixed use, but that view is gradually changing,’ said Kok. ‘If it is a good inner-city location, having residential can be a counterbalance to the risks of retail investing, and it adds to the liveability and attractiveness of the area.’