Words by Katie Puckett
The internet has transformed the world of retail. But commercial centres still have a vital role to play as we move towards an "experience economy"
Retail is important.
Not only for the economy, but also for the health of towns and cities on every continent. For example, retail accounts for more than a quarter of all commercial real estate in Europe. In 2014, €48.7bn (US$53.7bn) was invested in retail assets in 26 European countries.
But going to a physical shop is no longer the only way to acquire the things we want. The growth of online shopping has already transformed the world’s largest retail markets, and will continue to do so. Between 2016 and 2019, e-commerce’s share of total retail spend will grow worldwide by 49%, from 8.6% to 12.8%.
“Over the next 10 years, 12% of everything that’s sold in the world will no longer be sold in stores. If every store lost 12% of its business tomorrow, 90% of them would go broke. So between now and 2025, the retail real estate world is going to need to reconfigure itself”Bryan Gildenberg, Kantar Retail
China is perhaps the most dynamic retail market in the world.
“Brick-and-mortar retail in China has grown quickly, but nowhere near as quickly as the Chinese economy,” says Bryan Gildenberg chief knowledge officer at analyst Kantar Retail. “Through the digital ecosystem that consumers now had in their hands, they could access a branding ecosystem that they couldn’t buy in their towns. This is particularly true for the 1.3 billion out of 1.4 billion citizens who don’t live in Greater Beijing, Greater Shanghai or Greater Guangzhou.”
We no longer have to go outside to acquire the things we want. So why do it?
We are now in an “experience economy”.
“In the West, we have probably hit peak stuff”
Steve Howard, head of sustainability, IKEA
“We’ve seen a lot more retailers become genuinely global so there’s more competition in local markets, and at the same time, there’s a slowdown in growth. So stores have to be a lot more engaging. People are very busy. If they’ve made the effort to come to a store, they want to feel it’s worthwhile. It’s about going to a place and thinking ‘Wow, great experience’, even if you don’t buy anything”Neil Saunders, Conlumino
The relationship between off and online shopping is a lot more fluid than previously thought. 90% of retail sales still involve some contact with a store, even if they do not go through the cash register. “It might be through a mobile device of your own or of the store’s while you’re in store, or you might purchase online and collect in-store,” says Ed Cooke, chief executive of UK retail industry body Revo. “And that doesn’t take into account the wider marketing role that a store plays. Although their function might be changing, stores are still the absolute epicentre of retailing.”
Jamie Murray Wells, industry head of retail at Google UK, agrees: “Our research shows that for every mobile sale that we send a retailer online, we’re also sending four people to their stores offline. Which is huge.”
85% of consumers report they like to shop in stores because they want to “touch and feel the products” before buying decisions.
If an item was available in a nearby store, online or on a mobile device, 71% of consumers would opt to buy it in the store. Just 3% would buy it via a mobile device.
As retailers must sell an experience rather than a product, a physical presence becomes even more important to their brand — even essential. Apple is an example of a retailer that seeks to sell its “culture” through its stores. “Apple could easily sell its products on the internet but selling that culture has made all the difference to its profit margin,” says Chris Lanksbury, director of architect Chapman Taylor. “People are not just shopping to buy things at the cheapest price. They’re buying into something else.”
“We know that 80% of people are more than comfortable with ‘showrooming’ — looking at their mobile phone when they’re in the shop, even to the point of purchase. A third are actually more comfortable doing that than talking to a shop assistant”
Jamie Murray Wells, Google UK