Archive for the ‘Trends’ Category

Ecommerce Growth in EMEA: Implications for Retail real estate industry

Friday, October 3rd, 2014

Colin BurnetPosted by: Colin Burnet
Retail Research & Consulting
JLL EMEA Research 
 
 
 
 
Extract from JLL’s Redefining Retail Places

In James Brown’s recent article, ‘From zero to 3 billion – global ecommerce goes mainstream’, he discusses how Internet retailing has advanced at a global level over the last 20 years, and how the growth of ecommerce is reshaping the Global Retail landscape. As at a global level, across EMEA there is a broad spectrum of e-commerce markets, from the relatively mature to the embryonic.

e-commerce-graph

Mature E-commerce Markets

Currently, within Europe, the ‘big three’ markets account of c70% of total online sales; the UK generates €48 billion in sales, Germany €39 billion, and France €25 billion.

These markets, in addition to the Nordic countries, which have very high broadband penetration rates, make up the most mature ecommerce markets in EMEA. Any growth in these countries’ total retail markets tends to come from online.

The UK is undoubtedly the region’s ecommerce leader, with between 10 and 15% of total retail online (depending on which source you believe), but with scope for significant further growth.

This could come particularly from the food sector, where currently below 5% is online, albeit this is still far above the rest of the EU and even the US. Tesco, Europe’s third-biggest online retailer, has already opened six “dark stores” around London, simply to handle home-delivery orders.

In developed e-commerce markets, online retail sales typically account for between 5% and 15% of total retail spending, and per capita online spending is relatively high. As noted in JLL’s Global Retail Logistics Reports, these developed markets generally share a number of attributes:

  • High rates of internet and mobile broadband usage
  • Low fixed and mobile broadband costs
  • A willingness amongst internet users to purchase online
  • A regulatory infrastructure that supports online purchasing
  • A well-developed logistics infrastructure
  • Mature ‘bricks and mortar’ retail markets, that make it difficult for retailers to expand sales significantly by developing their store networks, but which offer multi-channel retailers opportunities to secure synergies between their online channels and their store portfolio

Growth E-commerce Markets

There are several retail markets in EMEA that have great growth potential for e-commerce, due to current low levels of adoption and sheer market size, but there are clearly challenges around online consumer behaviour, lower technology adoption rates and logistics in these markets.

Russia, Turkey and UAE, in particular, currently lag behind developed markets in terms of their online sales, but are predicted to see strong growth in the medium term.

In Russia, where online sales represent just 2% of the retail market, infrastructure and cumbersome planning rules have inhibited the growth of the necessary warehousing to support e-commerce.

In Turkey and the UAE, physical retail is still relatively undeveloped in remote areas; it is possible that with growing consumer demand, we might see online retail mature ahead of the provision of physical retail space in these locations. In all these markets, it is likely that city rather than national e-commerce markets will be the norm.

In addition to these relatively untapped markets, there are a number of more mature physical retail markets, such as the Netherlands, Ireland and Italy, which currently have low levels of online spend per capita, and that therefore have scope for e-commerce growth.

Emerging E-commerce Markets

In Sub-Saharan Africa, there are several emerging, embryonic e-commerce markets, albeit with great growth potential. According to McKinsey, more than 50% of urban Africans access the Internet regularly and over 55% own Internet-capable mobile devices.

As the physical retail sector in general is limited in these markets (in Lagos there are two malls serving 20 million people) the potential for retailers to develop e-commerce capabilities, particularly via mobile devices, is real and significant. In fact, Jumia, the Nigerian etailer, has spotted the opportunity, and owns over 500 delivery automobiles, more than UPS, FedEx and DHL.

Implications for Retailers

Cross-border retailing is growing rapidly throughout EMEA, as multi-channel retailers look to overseas markets to drive revenue growth. Retailers may use ecommerce to expand their geographical coverage before committing to a network of new stores in foreign markets.

As always it is about getting the balance right between the different channels, testing different strategies and adapting them to specific markets. But retailers certainly need to have an awareness of the nuances and variances in channel usage, online propensity to shop and therefore e-commerce growth potential across the EMEA retail markets and beyond.

Redefining Retail Places: for further information on trends influencing the retail landscape

Global: Discover how the growth in ecommerce is influencing retail real estate at a Global level

Asia Pacific: Discover how ecommerce and Alibaba is changing retail in China

United States: Discover how department store, Macy’s, is using ecommerce to trump Amazon


Colin Burnet
is a Director in JLL’s European Retail Research team. Follow JLL Europe Retail on Twitter.

Luxury, innovation and collaboration: the keys to the success of the London Luxury Quarter

Friday, June 20th, 2014

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Posted by: Colin Chan
Retail Research & Consulting
JLL EMEA Research 
 

 

 

This week we launched our new report, Hospitality and Service: Driving business investments through a thriving luxury destination’, which focuses on the importance of the ‘beyond retail’ offering in The London Luxury Quarter.

Exterior
The launch took place in the grand surroundings of the Ritz, the symbol of British grandeur. Walking into the foyer I was struck not only by the glamour of a bygone age, but also by the many international visitors that were there. Indeed, this is one of the key focuses of the report: How does the London Luxury Quarter stay traditional and quintessentially British, yet maintain its reputation as a magnet for overseas investment and visitors?

With 18 five star hotels, 31 Michelin starred restaurants and 45 private members clubs this area contains some of the UK’s finest hospitality and service experiences. Our report examines the strong relationships between businesses, hotels, restaurants and retailers situated in some of London’s  most prime real estate. It is these relationships and collaboration that help give the Quarter its unique DNA and often drive innovation. Some examples include Claridges providing hotel guests with the loan of a Burberry trenchcoat for the duration of their stay, and also providing the opportunity for the likes of luxury retail brands such as Dior and Lanvin to produce a Christmas tree for the hotel’s grand entrance.

The report highlights the average spend per visit from Chinese, Qatari and Saudi Arabian visitors is upwards of £1,350. One of the key messages was the importance of ensuring that visitors from China, who have the highest average spend per visit, are aware of all the amenities and services available within the Quarter. Being a second generation, Irish born Chinese I was particularly struck by the comment from Andrew Love, Deputy Chairman of The Ritz Club at the launch. He commented on how some staff at The Ritz London are currently being taught mandarin to make Chinese visitors feel at home, another great example of innovation and adapting to the continually changing market within The Quarter.

Borris
The report and the participants at the launch both came to the same conclusions: London Luxury Quarter is great at keeping up to date with changes in the market and is able to offer innovative solutions, which is why it remains the prime location it is. However, changes such as the Crossrail development will draw in affluent consumers from across London and South East, in addition to a wider demographic. For the Quarter to maintain its prime position, investment in the hospitality and service sector needs to be maintained to ensure businesses, retailers and visitors continue to be attracted to this unique area located at the heart of London.

Colin Chan is a Senior Analyst in JLL’s European Retail Research & Consulting team. He is an expert in location and demographic strategy and works with his investment and agency colleagues advising international investors and occupiers on their retail real estate strategy across the UK and Europe.

 

 

Redefining Retail Places: European economic recovery paves the way for opportunities in Retail

Friday, February 21st, 2014

Brown JamesPosted by: James Brown
Head of European Retail Research
Jones Lang LaSalle EMEA Research

 

Economic history indicates that an upturn follows every downturn; therefore it should not come as a surprise that the outlook for European retail is brightening. Consumer confidence is increasing due to sustained economic growth, job creation, lower inflation and the prospect of real wage growth. Of course headwinds remain and opportunities and risks are everywhere, but on balance the positives currently outweigh the negatives.

My latest podcast explores the improving sentiment in the European retail market, which presents increasingly numerous opportunities for retailers and investors. The outlook is generally bright although uncertainty remains and the risks and challenges will linger until the dust from recent economic turbulence settles.

The retail environment has fundamentally changed since the global economic crisis began and retail space is being redefined. Our latest research and this blog series explores this in detail.

Read more about the risks and opportunities facing retailers in the full blog.

 

Redefining Retail Places – MAPIC Reflections Part 2

Friday, December 6th, 2013

james-brown-emea-research-jllPosted by: James Brown
Head of EMEA Retail Research
Jones Lang LaSalle EMEA Research

 

 

The positive mood at MAPIC really shone through many of the discussions and presentations that Jones Lang LaSalle was part of over the course of the week. We saw investor interest returning strongly, with some areas, notably Southern Europe, that have been off the radar for the last few years getting renewed attention from investors.

During the panel discussion that Jones Lang LaSalle hosted at MAPIC, it was clear that investors firmly believe that physical retail space has a bright future. Many are excited about the way that retailers are adjusting to and embracing the changes that are sweeping over the retail market. The change to a more positive mood does not, however, mean that there is any less intense focus on making the right selections, with a clear emphasis on the right space in the right location – and that applies to both mature and developing markets. What’s more, effective, active and responsive asset management has never been more important. The pace and extent of change in the retail market means that investors and owners have to be increasingly vigilant and sensitive to changes in retailer and consumer sentiment and behaviour  – and, crucially, have the agility and flexibility to respond fast.

Being able to achieve that agility in the face of change will require new capabilities and talent that have not perhaps featured high on the property industry’s agenda in the past. Technology skills in particular are going to become increasingly important to ensure that retail assets are able to create the integrated virtual and physical experiences that are defining success in the 21st Century. Large, global businesses with the wherewithal to attract the right kind of talent will be at an advantage. Other players will need to be smart about using others to help them access these key technology skills. But it’s clear that not having those skills will put any developer or owner at a major disadvantage in the future.

The nimbleness and agility that are required to respond effectively to exciting technological changes are also critical qualities when it comes to entering some of the most dynamic developing markets. The opportunities for investors presented by a rapidly growing middle class with rising incomes – and an increasing propensity to spend them – are clear. What can be overlooked though are the very different risks attached to operating in developing economies. Those that are unfamiliar with the idiosyncrasies of, for example, local planning and regulation can find the road to success fairly rocky. A market can change quickly – with the recent dip in the fortunes of some of the luxury brands entering China serving a case in point. So that there are exciting opportunities for retailers and investors in emerging markets is not at issue. But those opportunities also come with sizeable risks –and it’s important that those are not forgotten in the clamour for growth.

Redefining Retail Places: MAPIC Reflections Part 1

Wednesday, December 4th, 2013

james-brownPosted by: James Brown
Head of EMEA Retail Research
Jones Lang LaSalle EMEA Research

 

One message that came though loud and clear from this year’s MAPIC was that physical retail space has a very solid future. The binary distinction between the virtual and the real worlds of retail has gone for good. What we’re now seeing successful retailers pursuing is the creative orchestration of both worlds. They are creating environments in which customers can seamlessly move between the two, using the strengths of both to their maximum in order to offer unique experiences, along with the benefits of convenience that consumers demand.

Not surprisingly, physical expansion is at the forefront of many retailers’ strategies as they seek to harness the power of digital and physical convergence for their brands. But in the rush to the new, there is a danger that the needs of legacy assets can be overlooked. One of the panellists at Jones Lang LaSalle’s Redefining Retail Places session at MAPIC highlighted that it was important to make sure that the right decisions about existing stores were taken – and this needed at least as much clarity and focus as planning moves into new territories and markets. Getting legacy portfolios right is fundamental.

Creating or reinventing spaces to successfully integrate the physical and virtual in one joined up experience requires considerable capital investment – and that always means making clear choices. Deciding which assets will benefit from significant new capital investment and those that can be left to tick over or exited is a critically important distinction. And as they seek to take advantage of renewed optimism and a strengthening economy, both in the UK and elsewhere, retailers are having to decide about where to allocate capital. In the process they are having to make some tough decisions about how to spread investment across existing portfolios as well as looking at allocations for physical expansion. The need to delineate between assets and locations that are core to future strategy and those that should be rationalised is essential, in order to focus investment on creating the right kind of customer experience that is going to drive footfall, sales and sustainable growth.

So, there are still difficult decisions to be made. Broadly positive news across a number of key economic indicators is to be welcomed, of course. But there’s no room for complacency or scope to dodge the tough choices that lie ahead. At the same time, however, there’s no question that retailers are feeling more positive about their prospects than they have for some time.

Redefining Retail Places: Introduction

Thursday, November 7th, 2013

james-brownPosted by: James Brown
Head of EMEA Retail Research
JLL EMEA Research

 

 

A broad set of economic, demographic and technological trends are converging to force changes in the way that we need to think about the future of retail – and retail space in particular.

Perhaps the most profound development that we have seen in the retail world – and elsewhere – is the impact of digital technologies and new forms of communication in reshaping how consumers behave and interact with retailers and the physical space. Consumers’ expectations of the experiences they will encounter in a physical environment are now fundamentally different from even just a few years ago. The distinction between virtual and physical space in the retail world has become increasingly blurred and consumers are no longer choosing between the two as straightforward ‘either/or’ options. Rather, they expect an experience that enables them to move smoothly back and forth from one to the next as they wish. And for retailers that means connecting their online and physical environments in new configurations that can deliver a seamless and immersive ‘omni-channel’ proposition.

Achieving that is far from straightforward. One of the keys to unlocking the challenge is the use of big data and analytics. These can help create a deeper understanding of consumers’ behaviour and their changing preferences. Added to these insights, the clever use of technology can enhance and influence consumers’ experience while in a physical retail environment. This is already happening today with such developments as loyalty programmes, location-based marketing communications and augmented reality. The further rapid development of new technologies will expand the art of the possible in ways that we are only starting to see now.

The broader interaction of consumers and retailers is also changing traditional relationships out of all recognition. The flow of information today extends in both directions – creating both pull and push effects. And these also create challenges and opportunities. Consumers’ access to almost limitless information gives them the upper hand in determining range and pricing. Yet products and price are only two of the considerations that retailers will need to balance in order to be successful. How, for example, can retailers reconcile the apparently competing aims of ethically and environmentally aware consumers, who at the same time also want the latest products and fashions? How can they capture and keep consumers’ attention in a media and information saturated environment?

Jones Lang LaSalle’s retail team has explored these and other converging trends that are already transforming the retail environment and will continue to do so in the coming years. The speed of change we see taking place is unprecedented. Making predictions about the future is therefore inherently risky. However, by looking at what we see as possible likely future scenarios, we can tease out the attributes that retailers and developers will need to incorporate in physical space in order to embed resilience.

Over the coming months, we will be exploring these questions – and more – in greater detail to develop a truly global picture of what the future of retail looks like, and what it will take to operate effectively in this new world.

UK Retail – House of Fraser records record annual growth

Tuesday, May 28th, 2013

jonathan bayfield

Posted by: Jonathan Bayfield
Retail Research & Consulting
Jones Lang LaSalle EMEA Research

Department store House of Fraser (HOF) has announced that like-for-like sales increased at record levels at 3.3 per cent to £1.2 billion over the last full year as the group has achieved growth across all categories, according to figures released last week.

In the 52 weeks ended January 26th 2013, adjusted EBITDA rose 4.3 per cent to £61.1 million while the retailer accrued its largest ever gross profit, up £4.7 million to £403.8 million

This update comes during further news of investment in its multichannel operations which have seen the retailer vastly improve its website, create a broader variety of products and a much more mature selection of delivery possibilities. This has assisted sales online to be boosted 53 per cent and accounted for 10.9 per cent of total sales last year.

House_of_Fraser

In-store refurbishment has continued over the year, with focus notably at HOF’s Oxford Street flagship on retail experience, something this blog has talked around many times. The retailer themselves have noted that this investment in-stores has been reflected in positive performances.

HOF’s debts are down £6.2 million to £157.2 million and there seems to be interest from a number of buyers, it is said that HOF held talks last year with Mike Ashley’s Sports Direct firm and it has been widely reported that  Qatari investors have held talks about making a bid for department store chain.

In stark contrast, Marks & Spencer announced last week that it had underwent a 4.1 per cent fall in like-fore like sales of general merchandise in the year to March 30 as it lost sales in the ever important womenswear sub-market. The UK’s chief clothing chain posted a 5.8 per cent fall in underlying pre-tax profit to £665.2m.

Further news this week from Marks & Spencer which has put a halt on all new clothing stores in the UK. With its its lowest pretax profit in eight years at £564m, down from £658m a year ago, they announced that they would add no extra space for general merchandise in the UK from 2016 and would instead focus on its digital operations. M&S, which has 766 stores in the UK, believes it will have reached saturation in the country by 2016 as more customers shop online.

John Lewis has enjoyed success in the last week also as weather conditions meant that they saw 8.8 per cent increase in sales last week, with its Glasgow store among the best performers.

While its Tamworth store in Staffordshire saw the biggest increase – of 16.5 per cent – John Lewis said its Glasgow branch “was also on fine form, up 15.1 per cent”. There was also success in other Scottish stores as, takings in Edinburgh grew 4.7 per cent, while its Aberdeen store gained 0.5 per cent.

UK Retail – British Land signs deal with BT to provide Wi-Fi at its Shopping Centres

Monday, May 13th, 2013

jonathan bayfieldPosted by: Jonathan Bayfield
Retail Research & Consulting
Jones Lang LaSalle EMEA Research

 

One of the big stories in the UK retail sector this week is that customers at British Land’s shopping centres will be able to enjoy free Wi-Fi later this year. As many of you know, for me, this is really great news!

British Land’s full shopping centre portfolio will benefit from the deal with BT Wi-Fi. Additionally to providing free Wi-Fi to its shopping centre customers, British Land has come to an arrangement to work with BT to try and deliver a strong Wi-Fi offering at a number of its open air shopping parks.

The move follows news from earlier in the year that intu, the rebranded Capital Shopping Centres, is installing Wi-Fi across its shopping centres as part of a wide-ranging digital improvement. The Trafford Centre is the first in the portfolio to benefit from a new fibre optic network and the provision of high quality free Wi-Fi throughout the mall.

It seems that Wi-Fi in UK shopping centres is slowly becoming the norm. It wasn’t too long ago that I visited Westfield Stratford City after work to pick up some ‘summer’ items for a family trip to Southern Africa. My flatmates and I did a bit of shopping, then went for a Nando’s; while waiting in the queue I was able to log on to the Westfield Wi-Fi and find out whether retailers had launched their ‘summer’ lines or not, and see what was in the market before I went in to try on my favoured items.

Intu’s research signals that almost half of UK internet users will, like me, make use of the internet at some point during the shopping process and that the conventional borders of online and offline shopping experiences are becoming more distorted. As I have discussed in this blog before, the introduction of new technology by both retailers and landlords is crucial to improving the customer experience, and increasing the connectivity between the landlords, retailers and consumers. British Land, Westfield and Intu are at the forefront of this evolution, as they seek to provide customers with a harmonious, multi-channel experience in their centres.

 

Please click on this link if you would like to read this week’s retail and leisure news.

City breaks that break the bank

Friday, November 30th, 2012

Posted by: Colin Burnet
Retail Research & Consulting
EMEA Retail Research and Consulting

Wondering where to go on your city break next year? If it’s shopping you’re after, and the buzz and glamour of the big, international brands in particular, then Jones Lang LaSalle’s new report, Destination Europe 2013, is a must read.

The report unveils our new cross-border retailer index, which analyses the expansion and presence of 250 international retailers across 57 key European city retail markets. London comes out as the most attractive city, with Paris, Moscow, Milan and Madrid, all mature retail markets, comprising the remainder of the top five most attractive cities.
London is a springboard for many retailers who want to expand internationally. Several US and now Chinese retailers have started their European journey over the past few months in this way. More will follow, driven in part by Westfield’s successfully launched new shopping centres, continued demand for space in Bond Street, Oxford Street, Regent Street and Covent Garden, but also sustained market opportunity, tourism levels post the Olympics, political stability and a transparent real estate market.

However, with subdued economic growth in Western and Southern Europe, retailers are also starting simultaneously to look further east. Emerging growth markets provide attractive expansion opportunities. Rental levels are generally lower than in more mature markets and retail sales growth prospects are clearly stronger. St Petersburg (8th), Prague (9th), Istanbul (11th), Warsaw (19th=) and Kiev (23rd=) all therefore perform strongly in the index within this context. Central and Eastern Europe has more markets in the top 30 retail locations than Southern Europe. For mature retailers established in core European markets, Eastern Europe provides both growth opportunities and diversification.

So, plenty of tasty options there for the city breakers amongst you – just remember to take your credit card, and leave plenty of room in your suitcase…

Global Retail Banking – Prepare today or fail tomorrow

Thursday, July 12th, 2012

Posted by: Colin Burnet

Retail Research & Consulting

EMEA Retail Research and Consulting 

We live in a world of economic uncertainty and marketplace volatility. Weakening growth in the developed world, allied with a lack of political leadership is unnerving markets and business leaders alike. As this blog is published, the eurozone crisis rumbles on (or even worsens). Meanwhile, the political stand-off in America is adding to the sense that leading authorities will make a fatal miscalculation.

At the heart of all of this, still, are the banks. Despite the stress tests, there are too many unknowns for any complacency. How many toxic assets still sit on bank balance sheets? How far will slow economic growth or any rises to interest rates, cripple the banks’ loan books? What are the counterparty risks? How quickly could sovereign insolvency and bank illiquidity lead to a meltdown of confidence, a drying up of the interbank market and a second credit crunch? To what extent will regulation force restructuring in the banking industry? Which bank is the next to fail or to need government support?

Meanwhile, the picture in the developing nations and frontier markets could not look more different. By and large we are looking at an increasingly decoupled world where Asia (and other emerging markets like Brazil) are reaching a self-sustaining cycle with far less dependency on the USA and Europe. On-going trade surpluses are raising domestic demand little by little. Economic growth has recovered quicker and to much higher levels than in the developed world. Meanwhile, banks in China, India and beyond, cleansed a lot of their bad debts in the 1990s and capital ratios are in better financial shape than in the West. Despite occasional nervousness about bad loans (e.g. in Chinese local government), and a marginal weakening in economic outlook, the still strong GDP expansion means that, overall, banks in developing countries are looking forward to a decade of profitable growth.

With such macro-economic instability (and divergence), geo-political and balance sheet uncertainty, who’d be a forecaster? And yet it is vital to get our hands around the future. Yes, the exact future is unknowable, but it is possible to anticipate plausible outcomes which can then inform decision making today. Better to predict, assess probabilities and prepare than sit back and become the victim of future changes.

It is in this spirit that Jones Lang LaSalle we have written a report on Retail Banking, 2020. Using desk research, expert interviews and industry round tables across three Continents, we have taken a 360° tour of the horizon. We have looked at political, economic, technological and socio-cultural trends. Bringing this together, we have then analysed the knowns, taken a view on the unknowns and derived a plausible vision of where retail banking is going internationally, and what the knock-on effects will be for real estate markets. Read Global Retail Banking 2020 to find out more