Change is coming.
Are you ready?
02 • Jones Lang LaSalle Retail 2020
It has been ten years since Jones Lang LaSalle published its Retail
Futures, 2010 Report. Retail, 2020 is our new look into the future.
The timing is perfect. For many, the last two-three years have been
about ensuring that their business had a future at all. Now that we may
reasonable expect the worst of the Great Recession to be over (although
the probability of a double dip remains at 20% according to some
economists), the question is: how to win in the post-recessionary market?
This report covers all the bases, taking a 360° tour of the horizon. It looks
at economic, technological, socio-demographic and socio-cultural change
and asks: what are the trends and how will they impact the retail industry?
Essentially, we cover European retail from an owners and occupiers
perspective. We look at the shape of retail to come (covering such
dimensions as: sectors, locations, formats, offers, geographies, offline/
online) and we look at profitability (growth and costs, the business model).
Our method has been to be as rigorous as possible in our research
and to take a very disciplined approach to thinking through the
consequences. Our aim has been ambitious: to arrive at the most
pertinent assumption base around European retail futures, anywhere.
How successful we have been, only time will tell. What we are able to
do is look at our track record. What predictions did we make in 2000
and what did we get right? And with great candidness, what did we get
wrong or miss entirely?
03 • Jones Lang LaSalle Retail 2020
Review of Retail Futures, 2010 Report*
No one has a crystal ball but,
by identifying and drawing upon
ten key trends, our last report
was particularly prescient. We
got a lot right and successfully
predicted many of the forces
shaping the consumer and
retail landscape between
2000 and 2010. Many themes
were anticipated where events
proved us right. We highlighted:
globalisation, polarisation of
markets, the ageing of European
populations and emergence of
complex household structures,
the new wave of conscientious
consumption and socially
responsible companies, the
strong emergence of experiential
retailing and the siphoning of
spending to services, the role of
brands as status symbols and as
short-cuts to decision making,
increasing interest in well-being
markets, clever consumption
patterns and shopping as a
leisure activity. Not bad!
Economically we had more
mixed results. We successfully
alerted readers to the fact that the
recession at the start of the decade
would not be prolonged but then
missed the great boom conditions
for retailers from 2003-2007
and, indeed the end of decade
disaster. Allied to this was our
underestimation of the growth in
consumer credit and the explosion
of impulse purchasing behaviours.
We were also guilty of
underestimating the impacts of
new technologies and the internet.
At the time of writing the dot com
bubble had just burst and, whilst we
believed that e-commerce would
rebound, we short-changed the
movement online. As we now know,
internet sales made significant
strides right across the decade and
people were increasingly attracted
to price-comparison sites.
And as for misses, we missed the
influence of China on keeping
inflation down; we hardly
mentioned the reappraisal of
value due to discounting, low cost
activities and freeloading - and we
forgot to mention the rise and rise
of star retailers such as Tesco and
the Inditex Group.
Nevertheless, whilst you can’t get
it all right, we are proud with our
previous report and are convinced
that it provided timely guidance
to our clients who read and used
it. And, of course, we aspire to do
even better in this 2020 Report.
*A full review of our predictions made in 2000 are available in a separate report.
05 • Jones Lang LaSalle Retail 2020
In terms of the economy, retail will remain a significant sector providing
growth, jobs and dynamic new environments for consumers. It will
continue to shape townscapes and will have an on-going role in bringing
modernity to the heart of people’s lives.
Nearer to home, huge opportunities are presenting
themselves in markets in Eurasia and the Middle-
East. Spotting the next ‘hot spot’ and being ahead of
the crowd will be vital - as always - but many know
well how to play this particular game and will reap
Shopping will remain popular across the period
2010 - 2020. Today, 30 million people visit the Colombo
Shopping Centre in Portugal annually and Centres like
Westfield, London show that innovation is not dead.
However, looking forward the landscape for retail will
not be anywhere near as benign as the decade we
are leaving behind and new dynamics will make life
tougher for both owners and occupiers.
Change is accelerating and the retail response will
need to be faster – for both retailers and landlords.
There will be both winners and losers and those
actors having the best assumption base about the
future, and the confidence to engage in, sometimes
radical, change will come out on top. As always,
defending the status quo will kill companies.
The low hanging fruit will continue to come from
expansion into the new consumer markets to the East.
China and India will be near the top of the list - but
some will look back from 2020 with regret; too slow
and too cautious to have really benefited.
Over the next decade, the retail industry will come to
appreciate that the balance of power is changing –
and its ability to maintain margins will diminish. For one,
clever consumers are taking matters into their own
hands and are increasingly armed with weapons
which are able to damage retailer’s hegemony.
The fast, accessible internet is proving to be a great
leveller of information and liberator of consumer
power. Real time information, particularly around
price, will thwart retailer’s ability to increase prices
whilst new demands for better facilities, vastly
improved customer services, convenient technologies
and crowd-pleasing experiences will add new costs.
The next great game changer will be the mobile
internet. Retailers beware: the end of fixed pricing
and impacts on in-store staffing will inflict great
damage on retailing profit and loss accounts.
Suppliers, too, will get in on the act as they trade
with consumers directly on line and establish
flagship outlets. So, whilst we will not see retail
dis-intermediation, the momentum will be in that direction.
Retail will get smarter as a consequence.
For example, retailers will rise to the new wants
generated by a retiring Baby Boomer population
and a smaller (but very demanding) Gen Y cohort.
We can predict senior care centres emerging for
the former and a shift from young fashion brands
due to declines in the latter.
06 • Jones Lang LaSalle Retail 2020
Paradoxically, getting smarter will also mean
going back to basics to ensure that retailers really
are meeting consumers’ most fundamental needs
adequately – needs for safety, for mobility and
Shopping Centre Managers, meanwhile, will have to
step up and start to coordinate a retailer fightback –
creating the kind of unique environments and exciting
pleasure domes where consumers want to shop and
spend without counting.
Overall, consumers will continue to become more
confident and complex. They will not unlearn their
clever consumption behaviours from the last decade;
on the contrary, they will reach higher levels of
maturity, daring to do as they please and demanding
the highest standards from retailers.
The challenge of keeping consumers happy will get
more difficult. Consumers want more genuine and
emotional connection with the things they have and do
in their lives and, in the West, going shopping simply
to acquire more stuff is unlikely to bring enough
meaning to some people. Other things need to be
added to the ‘day-out’ mix and the retail sector will
give a lot of focus to what that might mean.
Markets will splinter further and new retail formats will
emerge to profit from the many segments that form.
Meanwhile, the multiplication of consumer groups will
mean that Shopping Centre targeting will become a
necessary, rather than optional, solution.
It will become clearer over the decade how far we
are living through a new online gold rush. There is
raging retail innovation everywhere you look – if your
are looking online, that is. Unfortunately, for many
incumbents, the spoils of radical innovation are being
shared by non-retailers and this is unlikely to change.
We are witnessing an irreversible paradigm change –
a once in a lifetime shift of platform and, despite
multi-channel strategies, many legacy operators will
not deliver an adequate response to online retail.
When the platform changes, leadership changes.
The internet truly alters everything and new
technologies and consumer’s use of their
potentialities is a recurrent theme throughout the
Report. We will see a ramping up of the many
impacts and implications across the decade.
Going shopping simply
to acquire more stuff is
unlikely to bring enough
meaning to people
07 • Jones Lang LaSalle Retail 2020
Probably the biggest impact, however, of the internet
on retailing is this: in the future, competition will shift
from being about location and price to consumer
relevancy and experience. Put another way, there
will be a rather rapid shift from store as the epicentre
to the brand as the epicentre.
Physical retail will reply to this challenge, partly by
going beyond retail and delivering art-of-living offers
to consumers. We will witness declines in ‘clone
centres’ as the industry starts to understand what
a new focus on experiences and services actually
means. Retailers will have to become entertainers,
compères and butlers - and throw off the purely
transactional image. It follows that what happens
in-store will increasingly determine a retailer’s fate.
To some extent, the battle is going to be fought on
the sales floor not in the boardrooms.
Retail will also respond by entering the conversation.
Silent no more, retail will reach out to consumers,
sharing information, planning their shopping and
being part of their communities. The battle for
permission to enter consumer’s lives in this way
will be a key determinant of retail success going
forwards. However, retailers must be aware that
the only way to achieve this relationship is by being
prepared to lose some control of their brand.
The onus will be on Shopping Centres to take this
stride too. Mall managers will have to come of age
and leave behind the industrial era; the future lies in
experience, service, information and communication.
Finally, retail will invest to make shopping an easier
process – taking out pain and inconvenience and
defining itself unambiguously as a pleasure industry.
Despite all these initiatives, the context of economic
austerity (debt repayment, rising taxes, higher
unemployment etc.), means that the next ten years
will be a highly testing period for the industry and its
business model. If the last decade was party-time
for retail, the period ahead will be the hangover.
A perfect storm is brewing where growth will
be low and cost pressures high. Internet
substitution and new entrants add to a gloomy
picture. Retail sales will flat-line and some
companies will even start to reappraise their
raison d’être; outsourcing will roll back retailer’s
core competencies still further.
The best companies will actually welcome these
straightened times and the shake out opportunities
they will undoubtedly bring. Poorly positioned
and managed companies, simply, will not see
it through to 2020.
If you have any questions about this
report, please contact us at:
Paul Guest, Head of EMEA Research
+44 (0)20 3147 1925