International brands still betting on physical retail in key cities - research

New York, Paris and London have demonstrated that they retain the key fundamentals of a successful retail location and are set to bounce back quicker this year than other destination cities, according to Savills' retailer attractiveness city ranking.

'These cities all benefit from affluent domestic markets and have already demonstrated far higher levels of resilience over the last 18 months,' said Marie Hickey, director of retail research at Savills.

'New York (ranked first), suffered relatively less during the pandemic due to a robust domestic tourism market and a lower penetration of ecommerce in Paris (second) has steered costumers to its bricks and mortar luxury stores.'

Diverse picture
In comparison, cities such as Hong Kong (fourth), which are dependent on a steady stream of inbound tourism, have faced sharper declines and will face a longer road to recovery.

By sparking this mixed recovery among key destination cities, Savills reveals how the pandemic has created opportunities for retailers in a number of emerging markets, primarily across the Middle East and Asia.

In Dubai, many luxury brands are represented by mono-brand stores through local franchises but with the recent change in government policies, Savills is seeing international brands come in directly looking to take back full control of their stores.

Cairo, Saudi Arabia and Bahrain all have relatively affluent domestic populations and also currently represent interesting opportunities for luxury retailers in this region.

Top sectors
While several brands struggled to sustain sales throughout the pandemic, there are some sectors that really performed, namely; athleisure, homeware, wellness, F&B and electric vehicles.

Sam Foyle, co-head of Savills' prime global retail team, said: 'Some successful brands within these sectors are capitalising on their strong revenues during the pandemic. With a rebasing of rents in some markets, and units in great locations being available and far cheaper than in 2019, now is an opportune time to acquire new sites and grow their physical footprints.

'Additionally, for dynamic luxury brands, the current market may make it possible to relocate existing stores to larger units in stronger locations, as well as providing opportunities for new luxury entrants.'

'In an increasingly digitised consumer landscape, physical stores are now becoming aspirational destinations that straddle leisure and entertainment too,' continues Marie Hickey.

This year, for example, streaming giant Netflix is set to open its first physical store in Tokyo.

Concludes Foyle: 'Covid has created inevitable changes for the retail industry, predominantly with the structural shift towards soaring levels of ecommerce activity.

'However, the ramifications of the pandemic on consumer behaviour have served to accelerate previous trends and the resilience of many of these destination cities infers that physical retail remains an essential component of a brand’s strategy to reconnect with customers, enhance exposure and ultimately drive sales.'


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