The Reshaping of Retail - Hammerson
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The
Reshaping
of Retail
open
Foreword
The retail environment As one of the pre-eminent owners of retail property in the UK, Hammerson
is changing more clearly has a strong interest in the future of retailing. And while there are
quickly than ever. undoubtedly huge challenges facing the sector, we are excited about the
The digital revolution opportunities in retail today. That was why we took the decision to become
a purely retail focused property company.
is having a profound
effect on how But there is no doubt that tomorrow’s retail world will look very different to
people shop, and how today’s, which is why we commissioned this report, working with leading retail
retailers operate. consultants Conlumino. Neil Saunders, MD of Conlumino is one of the most
The retail sector is recognised experts on retailing in the UK today, and we asked him to look at
under scrutiny more how the face of the industry will change over the years ahead.
than ever before, with The report has been independently written and as you will see, it is frank
high-profile retailer about the challenges facing the sector, and predicts there will be fewer shops
failures dominating by 2020.
the headlines. However, the overriding story is about opportunity. Retail sales are going to
grow more rapidly over the next decade, driven by the growth in the numbers
of older shoppers. We reveal that we’re entering a new era of buying behaviour
and one of the Considered Consumer. This is a change in mindset to the
pre-recessionary times. Online, and particularly the use of mobile devices,
will play an ever more important role as part of the multi-channel mix and help
improve the shopping experience.
Most importantly, the report confirms our view that while sub-scale retail
locations face real challenges, those which provide shoppers with true
convenience and a genuine experience will continue to prosper. Now, more
than ever, owners of shopping centres and retail parks need to give consumers
a reason to visit. A larger range of stores from the UK and around the world,
a great choice of places to eat and easy accessibility are all absolutely vital.
Hammerson is committed to that mission, but we can’t do it alone. The report
shows that those retailers which will prosper in what Conlumino calls the age
of Considered Consumption will need to have a clearly differentiated offer,
with products which are genuinely ‘must have’. Their stores will need to be
true showcases for their brands, and make multi-channel shopping easy for
customers.
As ever, in the cut-throat UK retail market, there will be winners and losers.
But for those in the retail market who continue to meet and anticipate
customer needs, there are exciting opportunities ahead.
David Atkins
Chief Executive
Hammerson
1 The Reshaping of Retail
Introduction
Over the next ten years we will During the recession, discretionary
see significant changes in how income has continued to fall. From
households spend their money. 2013, we expect to see it start
By 2022 retail spending will have to modestly rise again, partly due
reached £377bn, up 26% on current to limited positive increases in
levels. People will, in general, become wage settlements leading to an
more affluent and will wield much improvement in household budgets.
greater spending power; however, This will help stimulate annual
there will continue to be pressure on average growth in retail spending.
the household budget, meaning retail
While the consumer economy will
spend will have to fight harder for
recover over the next ten years,
its share.
growth will not be evenly distributed
across all consumer segments.
Retailers and retail destinations
need to understand where the
opportunities are and seek them
out. One of the most significant
opportunities over the medium
term is among older consumers.
By 2022 retail
spending will
up
have reached
£377bn 26%
on 2012
2 The Reshaping of RetailThe Four Ages of Growth
For the next ten years we estimate annual
average growth in terms of retail spending
will be 2.4%. While this is a marked
improvement on the past ten years, the latter
of which have been characterised by the
recession – it is a long way below growth
rates of the 1980s and 1990s.
Growth rates in
retail spending
9.5
%
10
8.6
8.1
8.1
9.0
9
7.2
8
6.5
6.0
5.7
7
5.6
5.5
4.7
6
4.4
3.9
4.1
4.1
3.8
5
3.4
3.4
3.1
4
3
2
1
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
1983-1992 The carefree years 1993-2002 The careless years
7% Average annual growth 4.5% Average annual growth
4 The Reshaping of Retail1 2 3
1983 - 1992 1993 - 2002 2003 - 2012
Carefree Consumption Careless Consumption Careful Consumption
Strong growth in retail, funded Continued growth in retail, funded A recessionary mindset characterised
mostly by real term increases in mostly by taking on extra debt (from by cuts in the amount of product
income and wealth plus the taking on already high levels), encouraged by purchased, as well as some trading
of more debt, albeit from low initial low interest rates. Rising house prices down activity. Spending levels
levels. A strong housing market and fuelled mortgage equity withdrawal generally very subdued.
rising home ownership. which, in part, funded consumption.
4
2013 - 2022
Considered Consumption
Considered Consumption is an Considered consumers are not only As a result, Considered Consumption
emerging consumer mindset. It is concerned with the product itself, is a less impulsive form of buying
characterised by a consumer who but are also concerned with the behaviour. It is also less about volume
is less concerned with the pure realities behind the product – purchasing and more about selective
acquisition of products and is more the ethical soundness of the supply purchasing where fewer, perhaps
concerned about the nature of those chain, the environment in which the more expensive, items are selected
products and their real value. product is sold, and the corporate because of their quality, convenience
responsibility of the company or value to the consumer.
The considered consumer is less
which sells it.
impulse driven and questions much Real value will also be measured
more before they buy. Do they really The considered consumer takes by excellent customer service
need the item? Do they need it now? more time to research purchases, and the retail experience when
Is it worth the money? What is the particularly online and will seek out purchasing products.
quality like? How long will it last? product reviews, and expert opinion
as well as checking on price.
Inherent within this is the fact that
considered consumption is a much
more holistic form of purchasing.
3.7
3.6
3.3
3.0
2.9
2.8
2.6
2.6
2.3
2.2
2.0
1.9
2.0
1.8
1.7
1.6
1.1
0.7
0.6
0.7
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2003-2012 The careful years 2013-2022 The considered years
1.9% Average annual growth 2.4% Average annual growth
5 The Reshaping of RetailConsidered Consumption Considered Consumption and a changing demographic will change the way consumers behave as well as changing the way retailers need to react. £
Winning Propositions
The frivolous, carefree consumerism The key for retailers will be to inspire To succeed in the era of the
of the past has given way to people to ‘want’ things, in other considered consumer retailers,
Considered Consumption, where words, to really sell to them. stores and retail destinations need
other priorities are demanding a to establish reasons which compel
Consumer demand has become
greater share of traditional retail shoppers to visit them. Those
increasingly fragmented and it has
spend. that flourish will excite and inspire
become less viable to go after the
consumers, and brands which are
Part of the change will involve whole market. Retailers must break
unable to differentiate or excite
understanding the consumer down and segment their ranges into
shoppers will find it tough.
and engaging with their values. discrete areas that have relevance to
Compared to 20 years ago, a far individual consumer groups, ensuring
greater proportion of our spending that they are offering compelling
is now on indulgent, rather than products.
needs-based goods.
Old mindset: Newest mindset:
Careless Considered
Consumption Consumption
Quantity
I buy lots of
> Quantity
I buy things that
things; some I need, I really want...
some I don’t...
Product
It’s mainly about
> Holistic
It’s about the product
the product... and the background
to the product.
Price
I want everyday
> Value
I don’t mind paying
low prices... for good things...
Impulse
I buy things
> Considered
I research online,
without thinking buy things I like,
much... but think about what
I’m buying...
7 The Reshaping of RetailWho’s Shopping?
Our population is ageing. Over Although older shoppers will
the next ten years we will see an represent a strong growth potential,
explosion of growth among older age retailers will need to work hard to
demographics. The over 55’s will also persuade them to spend, giving them
contribute the lion’s share of growth compelling, interesting and engaging
over the next ten years, some 62% offers to entice them into buying.
of all retail growth (£48.7bn). This is This is a particular challenge, as most
due to the actual growth in the size retailers and shopping destinations
of these segments (driven mostly have not traditionally targeted older
by an ageing baby boomer cohort); consumer segments and so far they
a real terms increase in incomes have been a missed opportunity.
for this segment over the ten year
period; and, a change in mind-set
whereby older consumers of
tomorrow will be far more engaged
and interested in retail than their
equivalents of today.
The over 55’s ...some
62%
will contribute
the lion’s
share of growth
over the next
ten years... of retail
growth £48.7bn
8 The Reshaping of RetailChanging Demographics
Total annual retail
expenditure by segment
Key;
- T
otal % growth in spending
from 2012-2022
- T
otal spend by age
group £m
21.0% 3.8% 19.1% 17.4%
2012 £5,828 2012 £25,765 2012 £55,535 2012 £60,437
2022 £7,052 2022 £26,698 2022 £66,142 2022 £70,931
0-14 15-24 35-34 35-44
years years years years
10.5% 42.0% 64.8% 62.1%
2012 £59,899 2012 £44,227 2012 £28,604 2012 £18,591
2022 £66,180 2022 £62,824 2022 £47,137 2022 £30,130
45-54 55-64 65-74 75+
years years years years
9 The Reshaping of RetailHow we’re consuming The emergence of mobile technology and the maturity of online retail inevitably means that consumers are using more channels during the purchasing process which creates new opportunities for sales growth.
The New Rules
of Retail
A strong, Engage with Adapt the business
differentiated consumers more models to a slower
brand and ‘must often. growth environment.
have’ products.
The slowing in expenditure is not It’s no longer a case of putting Some will need fewer physical stores
coming about because of a decline products on shelves and expecting than they used to and others may
in household incomes but because them to sell. Retailers that create need to rationalise their product
of buying behaviour. interesting environments that offer. Others will need larger stores
stimulate consumers and give them in the right location. Retailers that do
Strong brands that promote lifestyle
a reason to visit their stores will be not review and change their business
values that consumers recognise
the ones that secure sales growth. propositions will be the ones that
and buy into will be the ones best
lose out.
placed to do well.
Old selling New selling
skills skills
Price > Product
Choice
> Differentiation
Range > Niche
Product as > Retailer as
a brand a brand
Self Service > Personal Service
Product Marketing > Brand Marketing
Signage
> Experience
11 The Reshaping of RetailTime is Money
The myriad of Considered Consumption is key to
purchasing channels the change in buying behaviour.
and the greater The emergence of online, mobile
ease with which and tablet technology has made it
significantly more convenient for
consumers can
consumers to research retailer ranges
research purchasing
and compare price. While at the
is lengthening the
same time, the post-recessionary
buying process. consumer has become more
considered with their spending.
In 2001, the average shopper would
typically spend about an hour when
making a higher value purchase (i.e.
not everyday products such as food
and basic clothing). By 2014, this
figure is set to reach over two and
a quarter hours (again for higher
value purchases).
Time spent
on purchasing
All numbers
are minutes
2001 2014
Thinking
38 > 97
Researching
18 > 44
Buying
3 > 14
Receiving
2 > 6
Total
61 > 161
12 The Reshaping of RetailMulti-tasking
and Multi-channel
Back in 2001, when online shopping This abundance of channels means
remained in its relative infancy and the consumer purchasing process is
mobile retailing was non-existent, becoming more complex for retailers
the majority of consumers used and more convenient for consumers.
two channels (physical stores and For retailers and retail destinations,
catalogue) during the purchase continued investment in servicing
process. By 2014, we forecast that consumers is essential. Greater
the picture will have evolved to the discipline is required to create a
extent that 69% will be using an consistent experience across these
average of three or more channels. channels. If a shopper feels let down
utilising one channel, this reflects
negatively on perceptions of the
whole retail proposition.
Average numbers of
channels used in the
purchasing process
Channels: 1 2 3 4 5 6 7
2001 16.4% 66.2% 10.1% 7.3% 0.0% 0.0% 0.0%
2014 2.1% 28.6% 32.7% 14.9% 9.6% 5.4% 6.7%
Channels:
physical catalogue online via online via social telephone interactive
stores desktop/ mobile/ media ordering TV
laptop tablet
13 The Reshaping of RetailSmart Shopping
The rising penetration Mobile will continue to grow as a This evolution is having direct
of smartphones and direct sales channel in its own right, implications, not only for the
and while remaining a relatively relevance of physical stores and retail
tablets is blurring
immature channel today, mobile retail destinations, but also in relation to
the lines of where
is currently responsible for £2.9bn how retailers manage factors such
consumers are
of both direct and indirect spending. as the configuration of websites and
shopping. Places for Inevitably, the coming decade will stores and enlarging the number of
retail are no longer see this value rise rapidly. By 2020, competitors and price comparisons –
fixed, with today’s we forecast that mobile will be worth which is becoming more transparent
consumer being able £53.9bn of direct and indirect sales; across channels and locations.
to buy and research just over a quarter of all retail sales.
The use of in-store technology is also
from anywhere.
increasing with tablets and terminals
making the experience more
convenient for consumers.
The value of
mobile retail
Reach: Influence: Value:
total retail spend spend linked to sales made
of mobile users mobile browsing directly via
and price checking mobile
2012 2012 2012
£49bn £1.8bn £1.1bn
2020 2020 2020
£207bn £39.7bn £14.2bn
14 The Reshaping of RetailThe Store Evolution
The role of the store Wider pressures on spending and Retailers need to ensure that all
for both retailers the rise of multi-channel retail is stores are trading well. This means
and consumers is changing how and where consumers moving away from a ‘one size fits all’
undoubtedly changing. are shopping. The downturn has store portfolio to ensure local and
served only to accelerate structural tailored demographic demand is met.
trends already prevalent in UK Store expansion will become more
retail. Having rode the crest of an flexible, and traditional high-street
expansionary wave during the late retailers will seek out-of-town
90s and early 00s, UK retail is at presence in retail parks.
overcapacity, a situation which is
Multiple retailers will increasingly
now correcting itself.
look to focus expansion on major
We forecast that between 2010- cities and destination shopping
2020, total store numbers across centres to take advantage both of
the country will decline 10.3%, with the high footfall and growing prestige
retail space falling 5.7%. This will of these locations.
have a more significant impact on
The importance of each store in
in-town locations, where store
heightening brand awareness will rise
numbers are set to fall 31%.
markedly. It will become imperative
The watchwords for retailers are that stores command strong
Fewer, Bigger, Best. This means experiential attributes, showcase a
better merchandised, better retailers’ full product offer. Tailoring
supported by multi-channel propositions in line with the rise of
capabilities and situated only in mobile is as important now as it was
the best locations. for online investment a decade ago.
As a result, retailers will need to
‘rightsize’ the store portfolio. In the
era of Considered Consumption
the performance of each and every
store becomes paramount.
Floorspace
(million sq ft)
2010 559
2020 527
Shop numbers
(000s)
2010 246.6
2020 221.2
16 The Reshaping of RetailRetailers will need to ‘rightsize’ the store portfolio. In the era of Considered Consumption the performance of each and every store becomes paramount.
Winning Locations
Winning locations In relation to convenience, the The addition of leisure to the
are attracting growing importance of factors such retail mix gives shoppers a fully
consumers by offering as accessibility and cost of parking, rounded day out and consumers
either the best in while appearing mundane are are becoming more accepting of
symptomatic of the changing role of retail environments as a dining out
convenience and or
physical locations and the increasing destination in their own right.
experience at retail
popularity of services such as click
destinations across
& collect.
the UK.
Partially indicative of the popularity
of retail as a hobby, consumers are
also increasingly looking to retail
locations to provide more than just
shops. Consumers are increasingly
being drawn to retail destinations
which command a strong retail mix
with international brands. Rising
consumer expectations also dictate
that successful destinations need
a relevant leisure offer.
Attributes of most
visited retail
locations which rank
very good/good (in %)
Convenience
Accessibility
64.8
Design and layout
53.7
Choice of bigger shops
50.0
Choice of restaurants
and cafes
47.7
Choice of department stores
41.5
Experience
Choice of smaller shops
40.4
Unique shopping experience
36.4
18 The Reshaping of RetailBricks and Clicks
Rather than diminish One of the most important trends
the relevance of has been the proliferation of click &
physical stores, the collect services. 59% of consumers
growth of spend to have reserved online and then
picked up from store, and 57%
multi-channnel retail
have bought online and picked up
is evolving the role
from a store. The growth of click &
of stores.
collect services is increasing both the
influence and profile of out-of-town
retail parks, which are capitalising on
their traditional strengths such as
free parking and ease of access to
become important fulfilment centres.
Use of online-to-
store services
57%
Buy online,
pick up from
59%
Reserve
a store online, buy
in-store
19 The Reshaping of RetailConclusion
The age of considered However, obtaining a share of that The market is more competitive
consumption represents growth won’t be easy. Consumers than ever, the customer more open
a time of opportunity have more control than ever, with minded than ever. Those retailers
for retailers and very fast growth in the use of mobile which fail to keep up in the multi-
devices meaning the customer is channel world will struggle. But those
retail destinations.
better informed, demanding greater which don’t just meet, but anticipate
Despite the well-
price competitiveness and greater their customers’ expectations, have
publicised challenges
product knowledge in store too. nothing to fear from the age of
facing the sector, considered consumption which
sales growth should Differentiation will be key. Tomorrow’s
lies ahead.
be more rapid over consumer needs a reason to buy.
Stores need to be the best possible
the next decade than
physical embodiments of the brand,
it has been over
but at the same time, provide efficient
the challenging one
click & collect services.
just past.
.
Report methodology
Consumer research in All numbers relating to expenditure
this report is based and forecast expenditure are taken
on a survey conducted from Conlumino’s own retail model.
with a UK-nationally This is updated on an ongoing
basis with inputs from both official
representative survey
sources (such as the BRC and
of 2,000 shoppers.
ONS), retailers’ results and trading
updates, other secondary sources
and industry surveys, Conlumino’s
ongoing programme of research into
consumer spending and habits, and
underlying economic drivers and
trends.
Unless otherwise stated, all sources
of information are derived from
www.rocdesign.com
Conlumino’s and Hammerson’s own
research and should be referenced
to Hammerson/ Conlumino.
20 The Reshaping of Retailclosed
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