Head of Research and Consulting, Poland
Jones Lang LaSalle
Read Part 1
The CEE retail market has matured considerably over the last few years and this will be even more pronounced going forward. With regard to our recent report on the CEE retail market; there are some good opportunities in this region for all retail players going forward. Following a clear slowdown, the market is likely to register retailer, development and investment activity in the short to medium term, depending upon the individual country of CEE. In the long term, it is becoming critical for the retail environment to better understand wider trends around innovation and consumer behaviour. Compared to other asset classes, retail is the most complex as it has an additional powerful dimension, namely ‘consumers’. The growth of new technologies will create a new imperative for retailers to enter into dialogue with consumers thus; retailers will have more data about their customers than ever before.
In addition to the more or less pronounced cost benefits, on-line shopping offers numerous benefits to both retailers and consumers. These include: reaching clients beyond traditional catchment areas, raising global sales, access to detailed monitoring and understanding of a client and their needs. For the customer, on-line shopping offers time savings and comfort, the opportunity to compare prices across products and locations, the possibility to return goods easily, and most importantly, it allows consumers to reach goods which cannot otherwise be accessed physically.
So what are the consequences for brick-and-mortar shopping centres in the long run? Well, in order to increase on-line sales, retailers will be interested to have a wide retail chain covering as wide a catchment area as possible, as some parts of population live beyond the catchment areas of retail assets. Therefore, brand awareness is likely to grow, triggering retail sales. On the other hand, with regard to increasing on-line sales, brick-and-mortar shopping centres are likely to become more “showrooms” or clusters of flagship stores. Entire collections, and more importantly, all sizes would be available for shoppers and once purchased, the goods would be couriered to a customer’s home directly from a separate city warehouse/ storage.
Under this scenario, retailers are likely to carefully consider all leasing offers in the search for locations best suitable for a “showroom”. Centrally located assets or those close to densely populated catchment areas seem to be the most obvious choices. Again, there will be a growing gap between the top performing centres featuring retailer demand and secondary assets. The role of an asset manager therefore widens to include working with retailers who would need to move beyond simple transactions and would have to provide consumers with the right service and the right experience at the right moment. More importantly, retailers will have to provide a sensational customer experience and inspired in-store services to prevent the customer from shopping directly from the manufacturer or re-seller on-line.