Whilst online sales peak, it’s not all bad for the high street

With today (Monday 3rd December '12) set to be the UK's busiest online shopping day in history as £222,222 is spent per minute, the below article is very relevant as landlords, investors and retailers try to understand the long-term impact of online retail on the UK's high streets and shopping centres. Whilst retail tenants are bound to suffer, Prideview does not expect there to be a material impact on other high street tenants such as banks, supermarkets, restaurants, pubs, medical, motor and betting shops.

Theisarticle has been paraphrased from Piers Wehner's report, "What's in store?"  in Estate Gazette's Retail Winter 2012 Magazine.

"You would be hard pushed to find a single retailer who isn’t exploring how best to use online and mobile technology,” says Rebecca Gates, regional director at LaSalle Investment Management. According to the Office of National Statistics, Britain’s consumers do 8.5% of their shopping online and as of July 2012, £505m each week is spent online rather than in stores. Also, while total spend rose by 3% on last year, online spend increased by 14.2%. And, according to research commissioned by eBay, sales influenced by social media will exceed £3bn by 2014. This is great news for retailers.

“Retailers don’t mind how you buy their product, as long as you buy it. Online, on the phone, in a shop; it doesn’t make a whole lot of difference,” says Gates. But for those whose livelihoods depend on what is spent in-store, it is more troubling. “For landlords,” says Ben Grose, retail asset manager at British Land, “this is a vital issue of enormous concern.”

But research published by CBRE in September gives hope. The research consulted 50 leading international retailers and found that, far from feeling daunted by online sales and in retreat from their vast store portfolios, 72% were planning to expand. Indeed, investment in new stores was seen as a top priority for most retailers. “Our message to the retail and real estate industry is don’t panic,” says Peter Gold, the author of the report and CBRE’s

head of cross-border retail for EMEA. “Consumer-driven technology continues to advance and, contrary to widely held assumptions, multichannel retailing is complementing, not competing with, existing store networks,” Gold insists. “If it is an ‘online versus traditional store’ battle neither format will prevail in isolation,” says Standard Life Investments (SLI) head of UK retail Ed Jenkins. “There will be successful retailers in each arena, but the expectation is that the most successful will operate on a multi-channel level.”

BNP Paribas retail analyst Domenica Scordo says it is important to remember that actual shops are still a necessary part of the retail ecosystem. “Not everything can, or should, go online. Retail is leisure, for one thing, but consumers also want their products now. That means a physical store.”

On top of that, for the retailer, stores give brand recognition. “Yes, there will be a need to decrease portfolios, but it will mainly be to reconfigure,” says Scordo. “The only thing stopping that from happening now is money. After the recession we will see a growth of new store formats.” Already John Lewis in Liverpool and House of Fraser in Aberdeen are experimenting with smaller formats, more like a café than a department store, in locations where otherwise they would not operate. Which all sounds like great news.

But, looked at from another perspective – as Deloitte did in its September report, Right-Sizing the Retail Estate – online retailing in the UK is now the equivalent of an additional 60m sq ft of shopping space. This is exacerbating an already challenging market. “You’ve got the recession, you’ve got the squeeze on spend, escalating business costs and competition,” says Grose. “And then there is the technology. “The mantra is still ‘location, location, location’, but that location is online,” says Darina Kerr, partner at Dundas & Wilson, which advises Land Securities, among others. According to Deloitte, online retailing will result in as many as four in 10 shops in the UK closing over the next five years, either as victims of competition, or as part of a strategic retreat by retailers.

Hugo Clark, director in Deloitte’s real estate team and the author of the report, says: “Stores are now just one part of a larger, more connected customer experience and many retailers are struggling to define the relevance and future contribution of their physical space. Shops now represent a potentially clumsy, fixed point in an increasingly mobile world. In many cases, they are slow and costly to adapt, expensive to operate and difficult to relinquish once surplus to requirement.”

For good locations shops are already starting to change into something more modern. “Stores are becoming more and more like showrooms,” says Scordo. Another strong factor is the growth of click and collect as part of an omni-channel strategy. For Peter Courtney, retail senior director at Lunson Mitchenall, this will save bricks and mortar. “Click-and-collect concept stores will ensure that store formats evolve with this trend, in most cases putting the physical store at the heart of the process,” he says. Amazon “756544” facilities, which serve as collection points for Amazon purchases, have already been installed at SLI and Hammerson’s Brent Cross Shopping Centre. “This is a perfect example of bridging the online and traditional shopping experience,” says SLI ’s Jenkins.

Prime locations are also becoming more focused on leisure. “We are putting cinemas in many centres. And we have done 39 food-and-beverage deals in our out-of-town centres in the past year,” says Grose. “That is twice as many as previous years.” Gates adds: “There is also a really strong requirement for convenience-led locations. And these are places for things that will probably never go online, like Poundland, because delivery costs will be prohibitive.

Meanwhile, the landlord needs to embrace the changes and, says Grose, listen to the retailers and the customers. Keeping up with the pace of change will probably be the industry’s biggest challenge over the next decade. “It won’t be easy, but it is possible,” says Grose. Technology seemingly moves at the speed of light and retail evolves as swiftly as fashion. As retail evolves to keep pace with technology, so the property industry must keep pace with retailers. As Grose says: “The key is to be fleet of foot.”

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on pinterest
Share on email



Don’t miss out on our opportunities

Advanced Search

Try Selecting Multiple Options to search

Recent Articles:

22 Lockdown Deals Done as opportunistic enquiries surge

In the 3 months since the nationwide lockdown commenced in late March, the Prideview team has dealt with an unexpected …

Read More

Covid-19 debate: Buy now or wait til September?

For anyone looking for investment opportunities, this is the key question of the moment. Listen to these highlights of a …

Read More

Infographic: Pro Tips for Landlords Facing Coronavirus

If you found this useful, check out our full analysis of these issues in our Complete Guide for Landlords Facing …

Read More

Current Opportunities

In Auction
£ 375,000

Vacant Shop & Flat, Feltham, Greater London

98 Harlington Road West, Feltham, Middlesex, TW14 0JJ
Current Opportunity
Call for price

McColl’s & Well Pharmacy, Manchester

183/185 Victoria Avenue, Higher Blackley, Lancashire, M9 0RB
Call for price

Nail Salon, Stanmore, Greater London

7 Buckingham Parade, The Broadway, Stanmore, HA7 4EB
In Auction
£ 2,350,000

Development Site with Planning, Leicester

510 Melton Road, Leicester, Leicestershire, LE4 7SP
Call for price

Gym & Cafe, Liverpool

Lower Ground Floor, Silkhouse Court, 7 – 17 Tithebarn Street, Liverpoool, L2 2DP
Call for price

Heron Foods, Crewe

Heron Foods, site of former Merlin PH, Bradfield Road, Leighton Crewe CW1 3RH
Call for price

Co-op Food, Loughborough

Co-Op KnightThorpe Road, Loughborough, Leicestershire, LE11 4JX
Current Opportunity
£ 1,000,000

Vacant Restaurant & 3 Flats with Development Potential, Newington

53-57 High Street, Newington, Kent, ME9 7JJ
£ 50,000

Vacant (To Let) Retail Unit, Doncaster

Formerly The Factory Shop, Scrooby Road, Harworth, Doncaster, Nottinghamshire, DN11 8JW

Vacant Former Post Office, Pinner, Greater London

Ground Floor Unit, 67 Bridge Street, Pinner, HA5 3JB

The Home of the Blue-Chip Investor

Click the logos below to see relevant investment properties