2. Winning locations

10 The future of retail: the supply picture Prepared for Webloyalty by Conlumino August 2013

The future of retail

The supply picture

Winning locations Introduction

•  While many attributes contribute to creating winning retail locations, most can be grouped as either convenience or retail experience drivers. In relation to convenience, the rising influence of factors such as accessibility and cost of parking – while appearing mundane – are indicative of the changing role of physical locations and the increasing popularity of services such as click & collect.

•  In relation to retail experience drivers, in line with a shopping day out becoming more than just about shops, consumers are becoming more influenced by the presence of foodservice and leisure facilities. This mindset is also driving more importance on softer, more cosmetic attributes, such as locations offering a pleasant shopping environment and boasting strong design and layout.

•  Looking further ahead, as different retail locations continue to evolve, off the back of factors such as the increasing transfer of spend to online and more general economic and social trends, their ability to respond to these consumer demands will evolve too. Online will continue to build upon its traditional convenience strengths, while also benefitting from closer personalisation and the emergence of new technologies. Major city centres and out-of-town shopping malls are becoming even more strongly positioned to draw consumers in off the back of a strong retail and leisure mix.

•  Perhaps the starkest contrast in location performance over the next decade will be between out-of-town retail parks and smaller secondary and tertiary highs streets and town centres. Out-of-town retail parks are increasingly performing a vital fulfilment function, and becoming more relevant destinations as a result. Conversely, secondary and tertiary locations are already falling short for convenience attributes, such as parking, and falling further behind for retail experience, as multiples look to lessen their exposure in poorly performing locations.

•  There are a number of key developing themes which will contribute to winning locations over the next decade. With a high proportion of retail locations suffering from high vacancy rates, their revival will be reliant on making them more community-orientated and less reliant on retail. We expect that leisure services will continue to rise in importance, evolving to encompass more premium foodservice and more creative and unique attractions. Elsewhere, the rise of online will foster the need for closer channel integration, with new technologies, including mobile, interactive TV and augmented reality, aiding this trend.

THINGS TO CONSIDER

•  While a strong and differentiated retailer mix remains imperative, consumers are increasingly being drawn to true retail destinations which also provide pleasant environments and leisure distractions which can help make their visit a fully-rounded family day out. For retailers, foodservice remains an opportunity, as does tailoring store environments to make them relevant to the whole family.

•  The ability of different retail locations to meet consumer expectations is evolving. For example, the online channel will continue to build upon its convenience strengths, underpinned by the continued growth and improvement in mobile technology and more flexible fulfilment. Perhaps the most fundamental location contrast will occur between more secondary and tertiary high streets, and out-of-town retail parks. The former will continue to decline in relevance as multiple retailers look to lessen their exposure to underperforming locations. Meanwhile out-of-town retail parks will continue to grow in influence and increasingly perform a vital fulfilment function.

•  Over the next decade, winning locations will increasingly be characterised by the

emergence of key winning themes. With smaller and tertiary town centres becoming less reliant on retail, the revival of these locations to be focused on making them more community orientated, with the development of more residential space and public services. Elsewhere, the trend towards leisure orientation in retail will continue unabated and more creative and unique developments will begin to emerge. Inevitably, the continued rise in online penetration, allied with the emergence of new retail technologies, will also necessitate closer integration between different channels.

Section 2

Winning locations

11 The future of retail: the supply picture Prepared for Webloyalty by Conlumino August 2013

The future of retail

The supply picture

28.8

36.4

40.4

41.5

47.7

50.0

53.7

64.8

Leisure facilities

Unique shopping experiance

Choice of smaller shops

Choice of independant stores

Choice of restaurants and cafes

Choice of bigger shops

Design and layout

Accessibility

Attributes of most visited retail location which rank very good/good All numbers are percentages

What good locations command Strong convenience and retail experience are key

Convenience

Experience

Winning locations are those which are either meeting consumer demands for flexible fulfilment, or are commanding true destination status •  While retail more generally continues to be stuck in the mire, locations boasting true destination status

and/or strong convenience credentials are performing remarkably robustly.

•  Growing consumer demand for flexible fulfillment means that convenience attributes such as accessibility and cost of parking are growing in influence. Consumers using services such as click & collect, or looking to return items purchased online, are seeing physical locations as a means to an end, which is changing the role of stores.

•  Partially indicative of the popularity of retail as a hobby, consumers are increasingly looking to retail locations to provide more than just shops. Consumers are increasingly being drawn to true retail destinations which command strong retail mix, pleasant environments and leisure distractions, which can help make their visit a fully rounded family day out.

Section 2

Winning locations

12 The future of retail: the supply picture Prepared for Webloyalty by Conlumino August 2013

The future of retail

The supply picture

Evolution of locations What will win

Retail locations: now and in 2022

Over the next decade, we anticipate that the ability of different retail locations to meet consumer expectations will evolve •  The online channel will continue to build upon its convenience strengths, underpinned by the growth and

improvement in mobile technology and more flexible fulfilment. Moreover, greater personalisation, improved layout and functionality and the emergence of new technologies will improve the consumer experience – where the channel can currently fall short.

•  Major city centres will continue to benefit from polarisation in the performance of retail locations and the rising tendency for multiples to consolidate their store portfolios, focusing on better performing locations. These same trends will also benefit shopping malls, which are also enhancing the retail experience – and destination status – through greater emphasis on leisure and food service.

•  The most marked contrast in retail location performance over the next decade will be between out-of-town retail parks and local high streets. The influence and importance of out-of-town retail parks will continue to grow, as they perform a vital fulfilment function and more traditional high-street based retailers concentrate expansion towards these locations. Conversely, local high streets will continue to decline in relevance; already falling short for convenience attributes such as parking and falling further behind for retail experience, as multiples look to lessen their exposure in poorly performing locations.

Weak destination status

Strong destination status

Retail park

Major city centre

Neighbourhood

Shopping mall

Small local high street

Town Centre

Low

con

veni

ence

High convenience

Online

Section 2

Winning locations

13 The future of retail: the supply picture Prepared for Webloyalty by Conlumino August 2013

The future of retail

The supply picture

Key themes Of winning locations

Smaller secondary and tertiary town centres – particularly those suffering from overcapacity – will become increasingly less reliant on retail. We expect the revival of these locations to be focused on making them more community orientated, with the development of more residential space and public services, such as doctor’s surgeries. Due to their destination and rising footfall, there also exists an opportunity for shopping centres to perform a similar function – particularly urban-located centres. Bristol’s Cabot Circus, which is closely integrated with the existing town centre, highlights the more responsible and community-orientated direction of development.

The trend towards greater leisure orientation in retail – and in particular shopping centres and out-of-town retail parks – is set to continue unabated. This will further boost the destination status of these locations, helping them to cater to the divergent and often conflicting interests of the whole family. There will be further emphasis on foodservice, with more premium operators focusing on these locations, taking advantage of rising consumer expectations and acceptance of such propositions. Moreover, in addition to further growth in traditional leisure facilities such as cinema, more creative and unique developments will begin to emerge over the next decade. For example, in Portugal, the Dolce Vita Tejo shopping centre boasts Kidzania, Europe’s first kids theme park; a new family entertainment or “edu-tainment” concept.

Rather than killing physical locations, the rise of online penetration is serving to change their role. Both retailers and landlords face a challenge in managing this transition. One of the major roles of physical locations will be one of fulfilment. Out-of-town retail parks are already serving this function strongly, off the back of strong accessibility and larger store footprints. The emergence of Amazon Lockers has highlighted the potential for click & collect services in urban locations and we expect that a third party operator will seek to roll-out such a service across the country. The development of new technologies such as virtual walls will also produce closer connection between physical and virtual channels. In particular, rising smartphone penetration will provide opportunities to drive greater personalisation, allowing for closer interaction with consumers while they are shopping.

Closer links to the community

Evolving leisure services

Closer channel integration

Section 2

Winning locations