8th March 2019
GLASGOW CHAMBER OF COMMERCE EVENT MARCH 2019
Chief Executive, Chris Geaves, presented his insight and opinion on the evolution of retail and how traditional bricks and mortar will continue to dominate in 2019.
And this is what he had to say...
Some of you might say “what is he doing here, he hasn’t got the right accent and what does he know about Glasgow?” Well, I am pleased to say that I have always had a very fond affinity with the City and have been quite active over the last 20 years having put together and advised on the development, implementation and leasing of the original Buchanan Galleries development for Pearl Assurance (AMP Asset Management); acquired and developed the Old George Hotel, which I am sure some of you will remember at the top of Buchanan Street and Sauchiehall Street; and a number of key blocks at the lower end of Buchanan Street for the Prudential, Taylor Clark and one or two others. So, when the opportunity arose to acquire St Enoch Centre, with our partners, I was very excited.
There is no doubt that 2018 was a challenging year for retail, with the demise of outlets such as Toys R Us as well as troubled times for many others including House of Fraser and New Look.
Many are predicting continuing doom and gloom and whilst no-one has a crystal ball to know exactly what lies ahead - particularly with the UK’s uncertain political landscape - I firmly believe that we are entering a new and dynamic era for the sector.
When St Enoch Centre first opened its doors in 1989, Tim Berners-Lee had just founded the World Wide Web, a development which has become one of the biggest factors in the evolution of the retail industry.
The advancement of technology has brought with it a change in shopping habits and with the internet has come a new breed of consumer - one that has more power. Now there is more choice than ever before, delivery times are even quicker, people can shop 24/7 – even on Christmas day – and access to brands and products has significantly widened.
The UK is the largest online retail market in Europe and the third largest globally. In 2017, 20% of total comparison goods spend in the UK was online (£45bn). This share is forecast to increase to 31% (£103bn) by 2026.
Despite the fast growth in online sales, the proportion of comparison goods spend offline will still be significantly larger than online spend, indicating that physical retail is and will remain the dominant sales channel in the next decade.
What’s more, 29% of online purchases touch a store, whether by research or collecting in-store.
In total, physical stores contribute to 86% of comparison goods spend across the UK. The store has an absolutely pivotal role to play and it is by no means anywhere near the end for physical space.
However, the internet has fundamentally changed retail forever and it is not just individual retailers that have been impacted, shopping centres have and will also see huge change. These outlets which have been unchallenged for years have suddenly found new competition for both their customers and their tenants who are now demanding more.
The change for retailers is unique to each brand but all share the common starting point that they are looking to create a point of difference in order to drive sales.
Technology is clearly one of the key differentiators and China is currently leading the way in this field particularly when it comes to using AI to change the shopping experience. Shoppers can now experience smart clothes recommendations powered by an intelligent fitting room in stores such as Jack & Jones and Vero Moda. Using facial recognition technologies, a ‘magic mirror’ allows customer to view themselves in the clothes they select and these can be swapped without constantly needing to go back to clothing rails.
Similarly, in the UK, Net-A-Porter is using an AI personal shopper which has been designed to select clothes for consumers based on their future plans, while Amazon Echo is working with Vogue and GQ; customers can use the device’s AI stylist to get fashion suggestions from the magazine by uploading photos from their smartphone. The magazines will also host weekly content on the Echo Look app’s home screen where customers can click through and buy items.
As a result of this constantly evolving technology, retailers now have to frequently revisit their business model and continually revise and refine to ensure they are in tune with their customers.
In general, this has seen retailers investing in a small number of stores however these stores tend to be larger. However, this isn’t being seen across the board with brands like Primark bucking this trend by growing its store network.
Consumers also no longer think in terms of online v bricks and mortar, so the sector also needs to understand that sales from all channels are now intertwined.
The UK is a nation of shoppers, who recognise that physical retail space remains key – and we know from our experience with St Enoch and our other centres– that it brings elements to the shopping experience that simply can’t be matched by the internet.
We shop with our senses; we like to touch, feel and see items and ultimately base many of our purchasing decisions through this emotional connection. This is particularly evident for specific categories and according to recent research by REVO*, only 8% of clothing and footwear sales and 12% of music sales that are researched in store are then made online.
This reliance on senses can also be seen in the growing demand for ‘experiences’ from today’s consumers who are looking for more than just material objects. It is this change that has led to the latest redevelopment at St Enoch Centre which will see the addition of a nine screen VUE Cinema and new restaurants as part of a £40 million pound investment into enhancing its leisure offering.
Its interesting to pause for a moment here and reflect how during the 30 years St. Enoch has continued to change with the times to ensure that it remains relevant and at the forefront of retail in a city - from upper floor retail to ice skating rink to food court and now the leisure redevelopment of one of the main anchors and substantial refurbishment of the food court.
We have unrivalled experience within the city and we remain focused on ensuring that St. Enoch Centre continues to change for the future.
We understand that retail and leisure no longer sit independently and we’re creating a space where consumers can come and spend time, not just shopping but socialising – whether that is grabbing a coffee or dining out with friends and family or even picking up shopping from the centre’s supermarket. The centre is focussed on creating a single space that conveniently meets the diverse needs of today’s market.
As such, bricks and mortar will continue to play a pivotal role and will remain the dominant sales channel in the next decade. However, the closure of a number of well-known high street brands during the last 12 months has highlighted that retailers need to look at how they can make best use of the channels available to them and landlords need to recognise the requirements of their tenants and shoppers alike.
This approach needs to be multifaceted and as well as looking at how physical space can be made more experiential; the successful retailers will be the ones that embrace the internet and technological advances and incorporate it into their operations. According to a 2017 report from Cambridge Economic**, for every £1 spent on the internet, £8 is spent on bricks and mortar, with initiatives such as Click and Collect resulting in increased spend. Similarly, REVO found that as many as 60% of click & collect purchasers make another purchase on their shopping trip.
This presents a strong opportunity for retailers to adapt their physical space with the addition of dedicated click and collect spaces and facilities such as changing rooms for click and collect customers. As part of the overall experience retailers also need to look at how their physical space is being used and maintained. It’s no longer enough to add a lick of paint and expect an increase in footfall. Brands need to look at how they interact with consumers across all touch points, from location and parking facilities to selection of products offered as well as the actual design and layout of the store, working with landlords to ensure a consistently strong offering.
While many other retailers and landlords are holding back during these uncertain times, St Enoch continues to see the importance in investing in and adapting its physical space. The centre may be 30 years old but we understand the need for flexibility and have already undergone two significant developments, and most recently investing £1 million into its food court, the biggest and busiest in Scotland.
There has also been significant investment on Buchanan Street and 2018 saw the arrival of a number of dynamic brands including Victoria’s Secret, Levi and Nespresso, highlighting confidence in the City.
These developments not only benefit the centre, but also the City, which is renowned for retail. For as long as I can remember, Glasgow has always been No 2 in the charts, after London’s Oxford Street in terms of performance. Glasgow has not been exempt from the challenges faced by UK high streets and it has also encountered its own difficulties with major fires on Sauchiehall Street but the City continues to perform well and the developments taking place within the centre and the surrounding streets will only strengthen the City’s offering. The major office and residential projects off Argyle Street and along the river bode well for exciting times ahead.
One minor negative. It is unfortunate that the City Council have not recognised the benefits that we feel a redevelopment of the Argyle Street frontage between the Centre’s entrance and H&M will bring. We had hoped to deliver a redevelopment of this block creating an exciting, modern and contemporary design for some new flagship stores, but the Council (in their wisdom) feel that the existing building should be retained, and as a consequence we are to be refused planning consent. The Historic groups in the City seem to hold quite an upper hand and as frustrating as this is, given the precedence of redevelopment that has taken place elsewhere in the City, we will not be downhearted and we will be coming forward with a retention refurbishment solution which will substantially upgrade what is there and hopefully attract some new names which will enliven this important part of the street – so watch this space.
Notwithstanding this minor setback, the east end leisure development is progressing really well, and as you can see the new structure is beginning to take shape, so it’s an exciting time for St Enoch and Glasgow, and as we press on into 2019 it will be interesting to see what comes next and what retail will look like in the next 30 years.