London: Retail & Leisure
Reinventing Retail: Emerging Trends in London’s Retail Market
As the physical and digital customer experience becomes a key part of driving retail growth, we look at the ways in which retailers are reinventing their offer to keep pace in a changing world.
We all know that customer satisfaction and enhanced in-store experience is a big driver of growth as retailers stop chasing sales and start focusing on the customer and on dwell time.
Personalisation – a tailored shopping experience based on customer data or social media feeds – will be a key focus, as will authenticity, which is the desire for consumers to understand the provenance of the products and the retailers they are purchasing from.
But all in all it will be about the experience. Personal time is short and people want to create memories, not just buy things.
One no longer visits a shop for a single purpose. We want the whole package: to shop, eat and be entertained in one go. Athleisure brand Sweaty Betty is opening a flagship store in London that will sell you the outfit, the exercise class, the post-exercise health café, and also a blow-dry bar for the post-shower tidy up. Creating a connection with the customer ensures repeat visits.
The New Department Store
The new department store of today is the internet. The physical department store must reinvent itself for the digital age. Many, particularly outside of prime central London, are arguably too inflexible: too big, spread over too many floors and constrained by the physical space. Reinvention is key. Alternative uses will need to be found to drive and convert footfall.
A food and beverage offer will fill some of the gap, as Debenhams has done with Joe & The Juice and Patisserie Valerie, as will pop-up retail. The key however will be to harness all social activity and maximise the relevance of the space at different times of the day. When the shops close, can the malls become bars, pop-up cinemas, live music venues or galleries?
If department stores do not reinvent themselves, the next casualty could be shopping centres, given that many of them are anchored by these retailing legends. Clever asset management, based on customer needs and understanding future-proofing, will be instrumental.
Retail in regeneration
London’s high profile regeneration schemes – from Stratford, to King’s Cross and Battersea – demonstrate the move beyond creating pure retail spaces to creating visionary commercial mixed-used developments.
This will be seen at the main Crossrail hubs in the coming years, many of which will become new urban centres. Paddington, for example, is set to embrace the structural changes we are experiencing in real estate and the retail sector in particular, delivering new models where physical retail will combine seamlessly with a high-tech digital experience.
Regeneration watchwords continue to be big data, experience and curation. Shopping centres can learn from experiential retail platforms such as airports, where merchandise is curated flight by flight to be most appealing to whoever is travelling through at a particular time.
Global brands’ use of concept stores will become increasingly interesting in the UK. We’ve already seen people like Dyson and Nespresso opening these stores, which act as giant experiential advertising sites.
This year car brands such as Mercedes, tesla and BMW will become more visible in UK retail destinations, as opposed to edge-of-town parks, as landlords start to understand the use of space and the rent deliverability of occupiers.
Rents keep rising
Record rents continue to be set by occupiers for the right stores in the right locations and, despite some softening of the premium market, there are exceptions to the rule.
There is also a positive premium market in locations where there is strong competition from a particular sub sector – cosmetics in Covent Garden or prime Jewellery New Bond Street – or where an occupier is able to secure a decent lease term and security of tenure. This is increasingly important in Central London where shops are either owned by large estates, which are increasingly reluctant to offer leases with 1954 Act protection or, in the case of Bond Street, are owned by retailers who are seeking the ability to occupy stores at lease expiry.
In the mid-market, large store and fast fashion sectors, the necessity to give away incentives to dispose of larger stores continues where sales and experiences fail to keep pace with rental growth.
This article was published in the Estates Gazette London Investor Guide, Autumn 2017.