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European Commercial – Spring 2019
33 Margaret Street
London W1G 0JD REPORT
European
+44 (0)20 7499 8644 Savills Research
Omnichannel
European Omnichannel European Omnichannel
Fast, cheap and good, today’s consumers want to
have it all.
58%
The customer truly is king
Whilst retailers were
70%
enjoying their golden age,
consumerism has given rise Of shoppers prefer to buy
to new and wider online with retailers that
expectations from have a “brick and mortar”
shoppers.
presence.
Internet of Things,
augmented reality, artificial
intelligence and 3D printing
have all in some ways
marginalised the retail
industry. Today’s consumers
have the ability to amass all
the necessary information
and knowledge to make a
purchase decision on their
1.16 sq m
own, most notably with Average retail sale area per
online reviews becoming
the Holy Grail for customers
capita in Europe.
to seek out “impartial”
feedback on brands.
With the customer
empowered more than ever,
the iron triangle concept of
“Fast, cheap, and good, pick
any two.” no longer holds
and is fading into an old
cliché. Consumers want it
all, which is forcing retailers
to above and beyond, when
it comes to their offering. The retail conundrum Graph 1: Potential excess of retail floor space
14,000 €
Size = Total retail sales 2017
What does it mean for the
industry? Retail and The retail industry has reached both. Hence, the traditional brick with retailers that have a “brick 12,000 € LU Less exposed
logistics will have to merge a point of no return where long- and mortar store is a powerful and mortar” presence. Hence,
to make the most out of the held certainties and beliefs vanish asset when it comes to creating a the main problem for retailers NO
opportunities triggered by into thin air. Adaptation to these shopping experience. is that traditional retail metrics 10,000 € CH
Retail sales / Capita
IE
new consumer’s habits, quickly changing consumer paint an unflattering picture of
notably in order to surf on behaviours is difficult given the For retailers, floor-space has their store performance, which in
FR
the ecommerce wave. For lack of hindsight, but solving become a gateway to “show-room” turn, brings the property cost into 8,000 €
GB SW FI BE
its first omnichannel report, this conundrum has become their products and their brand question.
paramount for retailers in order to philosophy to customers, to get DK DE AU
Savills looked into various 6,000 € NL
attract and retain customers. to know their clientele better. It The structural decline SI
indicators and metrics to
is also, a competitive advantage of in-store sales requires a IT
identify where in Europe, MT
PT ES EE
Despite the sensational compared to pure eretailers as rationalisation process which Most exposed
this merge is most 4,000 € GR CZ
headlines about store “Click & Collect” and “Return focuses on locations with strong SK LV LT
imminent. bankruptcies and closures, to Shop” services have proven existing footfall or with potential
TR
HR
HU
RO PL
predominantly occurring in the to trigger a rise in the average for growing footfall. Based on
2,000 € BU
US, consumers still put on shoes customer basket. retail sales and total sales area
to go shopping. However, since the per capita, we have identified the
act of buying has become as simple Yet, footfall does not always countries that are likely to be most 0€
as a click, buying is no longer the directly translate into in-store exposed to an excess of retail 0.6 0.8 1.0 1.2 1.4 1.6 1.8
first motivation to go shopping; it sales. According to Ipsos, 70% space (graph 1).
Sales area in sq m / Capita
has to be fun or convenient, if not of shoppers prefer to buy online
Source Savills Research based on Oxford Economics and Gfk retail
savills.com/research 2 3
European Omnichannel European Omnichannel
Omnichannel supply chain is the backbone of the
new retail era.
Ecommerce creates new requirements at consumption-end
International
15%-20%
of goods purchased online are
returned.
Raw International
materials manufacturing / NEW DISTRIBUTION NETWORK
suppliers Order consolidation Retail
Generally, retailers have a regional distribution centre in
Consumption
centre
the vicinity of their consumer’s base but the booming
Production
demand for ecommerce puts pressure on their delivery
strategies. In order to compete with pure online players,
retailers have had to leverage their distribution centre,
1 2 3 together with their stores, to adopt omnichannel rather
than multichannel strategies.
Import / national Regional distribution Last mile centre
distribution centre centre The standardisation of same-day delivery also raises the
Customer
stakes for retailers. In order to shorten delivery routes and
provide quick delivery services to online customers, they
have to include smaller urban warehouses in their supply
chain network or partner with third-party or fourth-party
logistics providers (3PL or 4PL).
4 This last chain at the consumer-end of the logistics service
has considerably boosted the Courier, Express and Parcel
Raw Domestic Return centre (CEP) industry. According to Apex Insight, the annual
materials manufacturing / revenue of the CEP market in Europe reached €61.7bn in
suppliers Order consolidation 2016, reflecting an annual increase of 4.5% since 2010.
During the same time, the B2C parcel market increased by
23% pa on average (graph 3).
Domestic
Graph 2: Role of the brick and mortar store in the supply chain Graph 3: Annual revenue of the parcel market in Europe
2016 2017 B2B C2X B2C
60% 80
48% 70
50%
45% 45%
44%
60
40% 38%
35%
34% 34% 50
Billion Euros
30%
29%
30% 27%
26%
24%
26% 40
20% 30
12%
10% 20
10%
10
0%
Click and collect Distribution ecommerce Returning ecommerce Showroom for Online order Repair centre 0
centre fullfilment returns to stock returns ecommerce location 2010 2012 2014 2016 2018 2020
Source eft Supply Chain & Logitics Business Inteligence - 2017 survey ; 218 retailers’ respondents worldwide Source Apex Insight
savills.com/research 4 5European Omnichannel European Omnichannel
Consumer online habits are at contrasting levels of
maturity.
ECOMMERCE SALES IN Graph 4: Total vs online sales growth Graph 5: Internet and ecommerce usage
FIGURES
25%
Total retail sales Online sales Spread Internet penetration Ecommerce penetration
100%
18% Ecommerce 90%
sales grew by 18%
in 2017 on average 20%
80%
across Europe.
70%
60%
15% 50%
Yoy change
40%
30%
58% of all
European 10% 20%
ecommerce sales
are generated in 10%
the UK, Germany
0%
and France.
5%
Romania
Poland
Turkey
Greece
Finland
Switzerland
UK
Slovenia
Netherlands
Estonia
Cyprus
Hungary
Czech R.
Ireland
Malta
Austria
Slovakia
France
Sweden
Lithuania
Croatia
Latvia
Spain
Belgium
Norway
Denmark
Luxembourg
Bulgaria
Italy
Portugal
Germany
0%
2010 2011 2012 2013 2014 2015 2016 2017
Online sales grew
by 30% pa on
average in CEE
countries over the Source Oxford Economics and Statista Source Savills Research based on Eurostat
past five years.
Ecommerce: the goose Graph 6: Ecommerce’s level of maturity across Europe
Largest spread
between internet
and ecommerce
that lays the golden egg? 100%
90%
Ecommerce sales growth 2016-2017
Demand for online goods
and internet usage are
penetration rates in embedded is society
Romania, Cyprus UK SW
Ecommerce is growing at a of the retail market of these three (graph 5) and highlight three DK
and Bulgaria.
Ecommerce penetration rate
faster pace than overall retail countries. different levels of maturity 80% Online shopping and CH NO
sales, hence becoming a major in consumer habits between internet use is becoming DE
AU BE
driver in the retail sector. Over the However, ecommerce is European countries (graph 6). part of everyday life
70% FI
past five years, the overall online gradually spreading across Europe, FR
retail sales increased by 21% pa picking up momentum in Central On average, ecommerce sales SK AU BE
on average across Europe. In the and Eastern Europe, with above represent 7.5% of the total retail 60% CZ
IR EE
Ecommerce same time, the total retail sales 30% pa growth over the past five sales, with large discrepancies MT
RU
penetration increased by 2.5% pa on average years. Ireland, Italy and Spain have between countries, with the UK 50% ES
≥ 80% in (graph 4). also witnessed a 10-12% growth of clearly leading the way. Ecommerce and internet PL SI LV
Denmark, online sales over the 12 months, usage is a rapid
Luxembourg,
The large majority of the according to Statista. 40% phenomenon HU
Sweden and the UK. IT
ecommerce sales (58%) is PT LT
GR
CY
generated in core countries: The spread between internet 30%
the UK, Germany and France, usage and the ecommerce HR
partially as a result of the rapid penetration rate gives us a clear TU
20%
adoption of internet usage but view on where there is a high
BG RO
also due to the intrinsic quantum potential for ecommerce growth
10%
€1,733 is the 60% 65% 70% 75% 80% 85% 90% 95% 100%
average spent per
eshopper in Europe.
7.5% Is the average share of ecommerce across
Europe.
Internet penetration rate
Source Savills Research based on Eurostat and Statista
savills.com/research 6 7European Omnichannel European Omnichannel
Ecommerce and logistics
tipping point
As retailers scramble to adapt their on the logistics market.
supply chains, the logistics market is
progressively seizing the opportunity The UK which has always been
opened up by the rapid rise of ahead in the property cycle and in
ecommerce. terms of market maturity acts as a
very useful case study for investors
In the UK, the logistics market has looking for potential opportunities on
undergone significant positive change the European continent. Of course,
since 2012, when B2C online retail sales one size does not fit all, but by looking
reached approximately 11% of the total at the different European logistics
retail sales. Vacancy rates have fallen to markets and where they are compared
lows of 5%, whilst prime quoting rents with the UK in circa 2012, it should
have risen by as much as 95% in certain help to forecast how this rapid shift in
markets with land prices also soaring. demand might be replicated (graph 7).
Additionally, retailers, parcel firms and
logistics companies accounted for 64%
of take-up in 2018, highlighting the
scale of the impact ecommerce has had
Graph 7: Where European countries sit compared to the UK?
Share of online sales in European countries in 2017 UK share of online sales
20%
15%
10% 10.7%
Savills have found a
clear inflection point
at 10.7% when rapid
occupier demand for
logistics space
5% occurs.
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source Savills Research based on ONS, Statista and Forrester
savills.com/research 8 9European Omnichannel European Omnichannel
Ecommerce
Logistics Market Attractivness Fundamentals Retail Sales
Internet Penetration
Matrix results and methodology
eCommerce Penetration
To establish where in Europe the ecommerce revolution is likely to have the biggest shift in logistics, Savills formed a Logistics Market Attractiveness
eCommerce Sales
Index. The index measures 32 European countries against 23 metrics, which assess the strengths of ecommerce and identifies the best opportunities for
+
expanding logistics activities.
Demographics
Neighbouring
country
Ecommerce fundamentals Logistics viability
Score out of 100 Score out of 100
+
70+ 70+
60 - 69 60 - 69
Logistics
50 - 59 50 - 59 Labour
viability
40 - 49 40 - 49 Incentives
30 - 39 No Data Freight
No Data Energy
Real Estate
METHODOLOGY
This research covers 32 European countries including Austria, Belgium, Bulgaria,
Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands,
Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden,
Switzerland, Turkey and the UK.
The analysis used to develop the Logistics Attractiveness index draws on 23
different indicators gathered into two matrices: Ecommerce fundamentals and
Logistics viability. We also added a Neighbouring countries element in our final
ranking, with each country impacted by the score of its neighbouring countries , to
reflect the importance of cross border online sales.
The data used for the index was collected at a national level. Where possible these
indicators use the latest annual data available and five-year forecasts, to ensure the
index incorporates a forward-looking view.
The various indicators have been ranked and weighted across the 32 countries
included in this report allowing us to develop the index. The results of the index does
not determine the exclusive attractiveness of a given country to prospective logistics
market players, it purely provides a macro guide for retailers and logistics market
Source Savills Research Source Savills Research players to incorporate as part of their specific omnichannel strategy.
savills.com/research 10 11European Omnichannel European Omnichannel
Logistics Market Attractivness
FINAL RANKING
Final ranking and top five countries Germany 70.2
France 68.3
The final results show that Germany, France, the UK, the Netherlands and Ireland top the index, all
combining strong ecommerce fundamentals, solid logistics viability and high-scoring neighbouring United Kingdom 68.1
countries.
Netherlands 63.1
62.6
1 Unsurprisingly Germany is leading the has already translated into growing demand from is rising fast hence the prime yield in Dublin moved Ireland
table. This is notably due to the customers’ logistics market players. Additionally, the UK is a in by 300 basis points over the past five years. It
fast adoption of ecommerce habits but also due to strategic destination when it comes to labour costs currently stands at 5%, the same as in Amsterdam.
Denmark 62.0
the scale of the retail industry and its proximity having one of the lowest average wages in Western Poland 61.6
to large customer hubs in Poland, Czech Republic European after Portugal and Spain. The prime
and Austria, and smaller ones in Switzerland and logistics yield in the London area is currently at 4%, Sweden 60.6
Luxembourg, where the share of cross border the lowest in Europe and has come in by 175 basis
ecommerce is high. The central positioning of points over the past five years. Luxembourg 59.0
Germany, between the western and eastern flanks
57.7
4
of Europe, is strategic for the logistics market. The Netherlands is ranked fourth. Internet Spain
Extensive and quality infrastructure enable the penetration is amongst the top five of the
country to generate some of the highest levels of 32 countries benchmarked in the report and the Norway 57.5
both road and seaborne freight across Europe. The limited spread with ecommerce penetration reveals
LPI score is the highest of all European countries the maturity of the market. Additionally, online
Switzerland 57.2
benchmarked in this report. Strong investor interest sales are still expected to grow by 9.2% pa until Italy 55.6
for the logistics sector has pushed prime yields 2022 according to Statista. Besides, the country
downward, by 300 basis points in Berlin over the has a close and long relationship with the freight Portugal 54.3
past five years. Prime logistics yields range between and logistics industry, notably thanks to its major
4.1 and 4.4% depending on locations, the lowest container port in Rotterdam which provides a Czech Republic 53.7
yield across Europe after the UK. gateway in Europe. The LPI score (4.02) is amongst
the top five of the benchmarked countries. Since the Austria 53.5
2
France still has a strong growth potential for logistics sector contributes to only 4.3% of the total
its ecommerce market. The spread between employment in the Netherlands, compared to 5.6%
Belgium 53.1
internet and ecommerce penetration remains on average in Europe, the main drag on the industry
Slovenia 51.0
relatively wide compared to that of the UK, is the availability of workforce which is very limited.
Germany and the Netherlands, whilst its retail The amount of logistics investment is rising and the Russia 51.0
market is large with most notably a high level of prime yield, currently standing at 5% in Amsterdam,
retail sales per capita. According to Statista, online moved in by 250 basis points over the course of the Finland 50.6
retail sales are forecast to grow by 9.8% per annum past five years.
over a 5-year horizon. Both the levels of road and Malta 48.7
seaborne freight transport are amongst the highest
in Europe, thanks to very good infrastructure.
However, labour costs are amongst the highest
5 Compared to the previous four countries,
ecommerce in Ireland is not as mature but
solid fundamentals are paving the way for strong
Cyprus 48.3
in Europe. Investors interest for the sector is future growth. The internet penetration rate (82%)
Slovakia 46.8
expanding hence prime yields are compressing is slightly below the European average (83%) and Lithuania 46.4
(-275 basis point compared to five years ago). In the gap with the ecommerce penetration rate is
the Île-de-France region, the prime logistics yield is relatively wide. However, the scale of the retail Latvia 45.0
currently at 4.75%. market is large. The volume of retail sales per
capita ranks fourth amongst the 32 benchmarked Hungary 44.7
3 The UK comes third, benefiting from having
the most mature ecommerce market. The spread
between the internet and ecommerce penetration
countries. According to Oxford Economics, total
retail sales are expected to increase by 4.3% pa
on average in the next five years, the second-best
Estonia 44.2
rates is the lowest across Europe, meaning that performance in all European countries after Poland Romania 42.7
high internet usage has fully translated to online (4.8%). At the same time, online retail sales are
purchases. Hence, the potential for further growth predicted to have a compound growth rate of 17.3%,
Croatia 42.4
is now slowing down. According to Statista, according to Statista, the best performing of all 32 Bulgaria 38.4
ecommerce is expected to increase by 6.7% pa over countries. On the logistics side, Ireland benefits
the next five years, the lowest level anticipated in from a relatively large pool of available and skilled Greece 38.1
Western Europe. The rapid expansion of online sales workforce. Investors’ appetite for logistics in Ireland
Turkey 36.2
savills.com/research 12 13European Omnichannel European Omnichannel
Conclusion & Outlook
The US-China trade war, the resurgence of usage and online purchases are rapidly 3. The logistics sector is increasingly
financial turbulence in Italy, the “gilet jaune” spreading across all European countries, criticised for its negative
protests in France and the uncertainties an important shift in logistics will follow environmental footprint. Recent
surrounding the outcome of Brexit all in all large European consumer hubs and protests around the globe suggest how
undoubtedly have had a negative impact eventually into tier 2 and tier 3 cities when imperative it is for the industry to take
on consumer psychology. However, retail ecommerce will have reached maturity and a step towards improving its green
sales which grew by 2.2% last year are still Generation Z will lead the consumers world. credentials..
expected to rise by 2.1% per annum until
2020, backed by the improving labour The future of logistics is quite bright but
market, increasing wages across Europe and not all rosy. We have identified a number
low inflation environment. of issues that are likely to be a drag on the
future performance of the sector.
At the same time, ecommerce is forecasted 1. Logistics costs are rising, notably land
to increase by 8.5% and 9.5% this year and the values. Land availability is shrinking
next, as the convenience of the digital world and development activity is hardly
is rapidly influencing consumer habits. The meeting the demand and is pushing
ecommerce impulse will continue to have a all prices up. Additionally, same day
positive knock-on effect on the logistics and delivery, which is becoming the norm,
CEP industries, which in turn will inevitably requires logistics centres to be located
result in growing occupier demand. close to shoppers. Industrial zoned-
land, especially near cities, is hard to
Over the past two years, the total volume come by and commands a significant
of logistics investment in the 32 countries price premium.
covered in this report, increased by 2. The sector suffers from a shortage
approximately 12% annually. We expect this of qualified staff. Unemployment
trend to continue throughout 2019 as the rates across Europe have fallen quite
strong performance and bright outlook of the significantly over the course of the past
sector are a magnet for investors, especially few years. The modernisation of the
those seeking to step away from strong logistics sector, notably going through
“office exposure”. automation, is also requiring new
skilled labour.
Prime logistics yields will keep hardening
in most European countries, except
in Norway where they are expected to Savills Commercial Research
Average 2018 2019 2020
soften and in the UK, Germany, France, We provide bespoke services for landowners, developers, occupiers and investors across the
Netherlands and Italy where they are lifecycle of residential, commercial or mixed-use projects. We add value by providing our clients
expected to remain stable. The sector will Retail sales 2.7% 2.2% 1.6% with research-backed advice and consultancy through our market-leading global research team.
remain competitive compared to other asset
classes. In fact, logistics is the only prime Share of online retail sales 8.3% 9.1% 9.9%
commercial asset offering yields above 5% in
certain European countries. Research
Logistics employment growth 0.8% 0.8% 0.3%
Lydia Brissy Kevin Mofid
According to Capital Economics, on Europe Logistics
average across the European countries, Total employment growth 1% 0.5% 0.4% +33 (0) 624 623 644 +44 (0) 7812 249 386
industrial total returns outperformed lbrissy@savills.com kmofid@savills.com
all properties by 297 bps last year. This Logitics growth value added 2.6% 1.7% 1.9%
outperformance is expected to reach 331bps
in 2019 and 279bps in 2020.
GDP growth 2% 1.4% 1.8% Omnichannel Retail Group
Based on our index, we believe Germany, Oliver Fraser-Looen Marcus de Minckwitz Will Percival
2.6% 1.5% 0.8% Regional Investment Advisory | EMEA Regional Investment Advisory | EMEA Regional Investment Advisory | EMEA
France, the UK, the Netherlands and Ireland Logistics rental growth
+44 (0) 20 7409 8784 +44 (0) 207 409 8755 +44 (0) 207 330 8628
provide an ideal combination of solid
oflooen@savills.com mdeminckwitz@savills.com will.percival@savills.com
ecommerce fundamentals and logistics Logistics total return outperformance (bps) 297 331 279
bases, triggering substantial opportunities
in their respective market. But as internet Source Oxford Economics, Forrester, Capital Economics Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,
continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has
been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form
is prohibited without written permission from Savills Research.
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