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News & opinion

13 FEB. 2019

The retail experience – alive and kicking?

Sander-Scheurwater-RICS

Sander Scheurwater

Director Corporate Affairs, Europe

Brussels, Belgium

RICS

On 12 February, RICS organised its third European Retail Conference. After Madrid and Milan, this year the event was hosted in Amsterdam and focused on the current state of the retail markets, trends and challenges.

Starting with a site visit to the recently opened Mall of the Netherlands, the event proceeded with discussions chaired by Martin Eberhardt FRICS, Managing Director at Swiss Life KVG and Chair of the RICS Board in Germany.

Real estate investment volumes in Europe are still at record high level, but there is a slowdown and the expectation is that the end of the cycle is in sight. Retail investment, whilst still around the long-term average of €50 bn/year, has declined slightly in the past three years.

From product to experience

The participants believed there is still a bright future for both shopping centres and high streets, but they will have to continuously re-invent themselves. What are the main drivers causing this constant need for re-invention?

  • “MAGAFA” (Microsoft, Amazon, Google, Apple, Facebook, Alibaba) is one of the main drivers for the fundamental transformation the retail sector is going through leading by example.

  • Then there's the changing consumer behaviour. Millennials, who are expected to outnumber babyboomers some time this year, are ‘conscious consumers’, looking for a shopping experience that goes beyond products. Some companies are already looking which experiences the alpha-generation (those born after 2010) is after.

  • The attractiveness of cities. Next to attractive high streets and shopping centres, the city as a whole needs to be attractive. More than location, location, location, for cities it is about communication, communication, communication. Find what makes your city special and run with it.

Bart Vink, Head of Research and Strategcy at Redevco, presented their City Attractiveness Index, which they use as a basis on where to invest. What they see happening is fewer cities becoming more attractive, with increased polarisation between attractive and less attractive cities increasing. This is shown by the fact that in 2012 Redevco ranked 210 cities, whereas in 2018 this number went down to 152.

Where cities can make a difference is sustainable consumption. For example, rankings exist on the top vegan cities in the world. There are many such rankings, but in Europe Amsterdam, Berlin and London are consistently amongst the highest scoring.

  • In addition, there is a convergence happening between online and offline. Where retail used to fear online shopping, now they have come to accept it as something inevitable, with some starting to integrate it in their offering. Consumers more and more look around in shops, for then to buy online. The challenge lies in to how to measure the success of a shop beyond sales numbers, and therefore how to value a shop. An example was given of a chain store where facial recognition software is used to determine the percentage of people who exit the store smiling, and use this as a metric of success. Perhaps, in a world where experience matters more than product, emotion metrics will become an integral part of measuring success?

  • Finally, the specific niche, and spectacular growth, of food and beverage as part of the retail offering. Ian Hanlon, Director Foodservice Consulting at JLL, explained that from being the lowest value to a shopping centre until as recent as 10 years ago, and therefore always placed at unattractive places such as the basement, food and beverage can now be found in the top locations of shopping centres, with a halo-effect on the shopping centre as a whole. There are several explanations for this trend. First and once again, food is all about experience. Second, changing demographics. With over a third of households in Europe now being single, the need for public social space is increasing. Looking forward, rapid urbanisation is likely to mean higher rise, which means a decrease of private social space. Finally, where previously there were only two ‘food moments’, lunch and dinner, currently breakfast and snacking make food and beverage a 24/7 business.

This does not mean it is all good. Restaurants are squeezed by margins and challenged by changing consumer needs. They have to keep re-inventing themselves to remain attractive.

Opportunities and challenges

From product to experience gives great opportunities for brands. Richard Lems, Director Format & Design at Rituals explained that a brand is all about being experienced, and the journey Rituals went trough from being a product to being a brand. The two main factors to differentiate a brand are through presentation and people, which is why Rituals spends a lot of efforts on training their staff.

To get the optimal shopping experience, the municipality, landlords and retailers need to work together. In some countries, the concept of a ‘street manager’ exists, which enables a high street to elevate itself beyond the individual interests of several landlords and retailers.

Pop-up stores and “bricks versus clicks” (shopping offline or online) are challenging and an opportunity at the same time. Pop-ups have a great value add for any shopping experience, but can be challenging for e.g. landlords and investors because of short term leases.

Finally, how can all these changes be taken into account when valuing retail? Are current valuation methods sufficient, or do new ways to be found. In line with the findings of the RICS Future of Valuations report, the panel moderated by Javier Kindelan FRICS, CEO Valuation Advisory & Vice President of CBRE Spain, concluded that the valuer needs to take on more of an advisory role, and  be inventive in news of valuation.

As it is all about the retail experience, the question was posed on whether one could put a value on experience per square meter. Finding the answer to that may be a good starting point for the discussion going forward.

European Retail Conference

Did you miss the conference? Take a sneak peek.

How are the latest trends impacting surveying?

It’s easy to assess what we do today, or what we did in the past. Trying to plan for the future is a much more daunting prospect.

Sean Tompkins
CEO, RICS

Sander-Scheurwater-RICS

Sander Scheurwater

Director Corporate Affairs, Europe

Brussels, Belgium

RICS

Sander Scheurwater leads the Corporate Affairs for Europe team, which aims to inspire trust and confidence in real estate and construction markets, as well as provide expert advice to decision makers and markets, focusing on policy, brand development, thought leadership, media and communication and market adoption of our standards and our qualification.

Sander is a Dutch national and studied economics at the Erasmus University of Rotterdam. He majored in sociological economics.
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