Future of Retail 2017

Future of Retail | Summary, slides + photos

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Future Of Retail Sponsors Logo 2017 Tight

The outlook for retail includes both uncertainty and opportunity, according to a panel of industry experts speaking at the latest Place North West event.

More than 120 people attended the Manchester city centre conference last week, which was sponsored by the Co-op, DAC Beachcroft and Lambert Smith Hampton.

See below for slides + gallery

Convenience stores

Jennifer Carmichael, the Co-op’s portfolio strategy and insight manager opened the event, saying that the big four supermarkets were quickly becoming overshadowed by discount and convenience stores such as the Co-op. She said:

  • Where once the big four, Tesco, Sainsbury’s, Asda and Morrisons dominated, now one in every £8 is spent in Aldi and Lidl
  • One in four people don’t know what they’re having for dinner until the day which means that convenience stores have a real advantage in encouraging sales. Half of people top up two or three times a week. Therefore, “convenience is a great place to be in the retail industry”
  • Co-op’s convenience stores are focused on residential locations, near universities, transport hubs, where there’s a constant stream of people. This equated to a 3.5% like-for-like sales growth in 2016
  • Most Co-op food stores are around 8,000 sq ft, but there are sites of up to 18,000 sq ft
  • Co-op opened 114 stores last year, and complete at least 15 extensions on current stores each year. It takes around 18 months to find a site and purchase it
  • Co-op uses an algorithm, which looks at all products bought in every basket and assigns that basket into a particular shopping ‘mission’
  • If a person was to buy a meal deal, the algorithm would place that purchase in the ‘eating today’ mission group, which means that the convenience stores can group their food products to the types of ‘missions’ most common for customers. If most customers were found to be on ‘eating today’ food missions, then the store would stock more food in that category
  • Food convenience stores are leaning towards technology more than ever, especially in the form of self-service checkouts as customers don’t want to spend time queuing

Following Carmichael’s presentation, she joined a panel discussion made up of Jane Sharrocks, the chair of Manchester BID and general manager of Exchange Square’s Selfridges; Paul Batho, projects director at St Modwen; Tim Vaughan, managing director of Moorgarth Properties; Toby Sproll, Bruntwood’s head of retail and leisure; and Stephen Proudley, head of retail at Lambert Smith Hampton.

Technology:

Sproll, who leads the letting, development and asset management of Bruntwood’s retail portfolio, said:

  • As a lot of people use ‘click and collect’ from Amazon, Bruntwood is considering where food and drink products can get delivered. This provides an opportunity for retail units to offer storage through embracing technology
  • Food delivery service Deliveroo has kitchens but no actual retail units. If it continues to expand, it might free up high street stores because people will be getting their food delivered, rather than eating out
  • He said Bruntwood is concerned with making people’s lives easier, rather than the building turning into a barrier
  • The company has around 250,000 sq ft of space across 150 different units spread over its portfolio from Birmingham through to Leeds, and plans to double the sq ft over the next 36 months

Proudley, of Lambert Smith Hampton, said that social media technology is key for retail to survive. Referencing social media blogger Zoella, he said:

  • Zoella has a PO box where retailers send her products. The average views for opening one of these bundles on YouTube is 3.65m. Because of this, “we cannot underestimate the influence these people have on brands”
  • YouTube has 500bn videos watched each day, and while this “creates more fickle consumers”, it also “gives an opportunity” for retailers to be on top of their game and embrace technology
  • Brands such as Primark do not have online shopping facilities, but are massive on social media; the retailer depends on people coming into stores to generate profit, and achieves this through advertising their products on social media

Millennials

Sharrocks, of Selfridges and Manchester BID, noted the need for retailers to “get techy”. She said:

  • Authenticity of a brand is so important to millennials and they’re the hardest group to satisfy because they do their research before coming into stores
  • 80% of all sales are still in bricks and mortar stores, but a fusion with technology is needed
  • Amazon next-day delivery was “the next big thing” two or three years ago, but “people want things and they want them now”, hence the rise of same-day delivery
  • As millennials are “the customers of the future”, retailers cannot ignore the need for technology in their businesses

According to Moorgarth’s Vaughan, in order to allow millennials to get same-day delivery, radio-frequency identification, known as RFID, must be rolled out. He said:

  • Retailers are investing in RFID to allow a quicker process of shopping and encourage customers to return to stores
  • RFID uses electromagnetic fields to track locations of the same product a customer is after, if it is out of stock in the current store
  • By phasing out barcodes and introducing RFID, it means customers can return within an hour to the same store and find their previously out of stock product ready for them to purchase

Retail regeneration

Paul Batho, projects director for St Modwen in the North West, added that in order for retail centres to survive, regeneration is necessary. He said:

  • Delivering accommodation that will have a dramatic regeneration effect in towns is essential
  • Kirkby is close to announcing a large new food store, which is the first big four commitment to an additional store in some time
  • St Modwen is looking for 25% growth year on year through a combination of buying new sites but also expanding what it’s already got in its portfolio
  • There is too much retail space in the UK situated in linear style roads such as high streets. St Modwen has had success working with public bodies to rationalize this, by prioritizing and deprioritising areas over others

Vaughan agreed that retail regeneration was essential, but commented that entertainment was the means to achieving this. He said:

  • “We’re in the entertainment business now. It’s no longer retail, it’s a whole plethora of different things and we have to get ready for it”
  • Having stages and entertainment in shopping centres makes it more attractive for customers to come in, rather than sitting at home and ordering online
  • Moorgath buys centres that need turning around, and Vaughan admits that “we are in a different market so we have to have something appealing to get retailers in with a selection of products”
  • After buying the Bolton shopping centre, Moorgath has seen 75 deals, creating a “destination rather than a boring old shopping centre”
  • Footfall has also increased from 3.5m to 6.5m and turnover from the site has increased by 59%. He admitted, though, that sometimes a “soft deal is needed” to make sure there is a mix of shops
  • While often retailers complain that trade is not booming, if you go into their stores you find it is “just dull”. What’s needed is an environment where shopping centre owners can work in partnerships with retailers

Proudley stated that merging the food sector with retail could help regeneration. He said:

  • The Next store in Manchester’s Arndale, currently undergoing refurbishment, is due to reopen in November with an in-store prosecco bar
  • Food and drink has almost become its own use class and it “can anchor the retail sector”
  • By linking food and drink with retail, shopping becomes more of a luxury experience which will entice people to engage with the store
  • More people are dining out, and flats are now being rolled out without kitchens
  • This enables food delivery services to grow their profit

Manchester:

Sharrocks noted that the BID is up for renewal in December. She said:

  • The current scheme is in its fifth year and starts from Exchange Square, progressing up Market Street and ending by the Town Hall. Within that area there are approximately 380 businesses
  • As 60% of visitors to Manchester are from the ABC1 bracket, which is the term used to describe consumers from one of the three higher socioeconomic groups, the BID renewal will prioritize encouraging more members from this sector to visit, by focusing on entertainment
  • By offering entertainment outside of key events, influencing more family-friendly activities should build on the £900m the city centre turns over each year
  • 25% of all sales in Selfridges come from international clients, so emphasizing events such as the Chinese New Year should see greater sales across all of Manchester’s retail sites

The slides from the presentation by Jennifer Carmichael of the Co-op are available here

Click any image below to launch gallery

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