JLL Ch1 Retail 2020 Executive Summary - BID Leamington

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JLL Ch1 Retail 2020 Executive Summary - BID Leamington

1

Retail 2020

Executive Summary

Change is coming.

Are you ready?

Retail 2020


02 • Jones Lang LaSalle Retail 2020

Introduction

Introduction

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

Introduction

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

Executive Summary

Executive Summary

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

significant rewards.

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

Executive Summary

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

for convenience.

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

Executive Summary

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.

MySpace?

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

retail2020@eu.jll.com

www.retail2020.com

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