Retail2010

Ten years on,
ten years forward

Retail 2010
Review of Retail Futures
by Jones Lang LaSalle 2000

02 • Jones Lang LaSalle Retail 2010
Introduction

Introduction:
The Value of Foresight

It is often said that the future cannot be predicted and, of course, in a
literal sense that is absolutely true. No one has a crystal ball and life
has a way of coming up with unpredictable events and outcomes.
However, it would be wrong to conclude that, because of this, you
should not try. Some things are knowable, for example, demographic
forecasts tend to be rather accurate, based on actuarial calculations.
Other trends can be seen and measured today – and their growth in the
future is fairly evident. For example, the feminisation of society or the
rise of China. Finally, if you know where to look, certain weak signals
indicate that something which is minority today, will become much more
widely diffused in tomorrow’s world e.g. use of mobile apps.
Frequently, then, the future is not foreseen simply because few attempt
to anticipate it – and not because it is absolutely unknowable.
Jones Lang LaSalle has, for many years, understood the importance
of foresight and has dared to look into the future for the benefit of its
clients. We have launched several initiatives to anticipate the world to
come. In 1999 we ran a scenarios exercise and a year later, published
a robust study of 10 consumer and economic trends for the decade
ahead, called Retail Futures, 2010. Most recently, we analysed the next
decade i.e. 2010-2020 in our report Retail 2020.
Getting to the future first is an important competitive advantage and
requires companies to have the most accurate assumption base about
tomorrow’s world. But how to convince others about the quality of
Jones Lang LaSalle’s retail foresight?

Introduction

The most robust method is to review the quality of past forecasting and
to assess the degree of success in predicting the future. This is what
this Report is all about. By looking back on the 2000-2010 Retail Futures
Report, we can take stock of what we got right and what we missed.
Following a top-line summary, this review falls into two parts:
1. An analysis of the accuracy of the 10 socio-economic trends
underlying the Report
2. A review of our predictions concerning the impacts of these trends
on retail and retail property.
Finally, a word of caution. As you read through this Report and its honest
assessment of our predictions, remember that these foresights were made
back in 2000. It is easy from today’s vantage point to look at predictions
about, for example, the growing service economy and say: “well, anyone
could have seen that coming”. Once again, the skill (and courage), back in
2000 was to go live with these trends where others feared to tread.

Introduction

Top Line Summary

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 correctly highlighted:
- three holistic socio-economic scenarios
- globalisation
- polarisation of markets
- the emergence of complex household structures
- the new wave of conscientious consumption
and socially responsible companies
- the strong emergence of experiential retailing
- the siphoning of spending to services
- the role of brands as status symbols and as shortcuts to decision making
- an increasing interest in well-being markets
- emerging clever consumption patterns
- shopping as a pleasurable leisure activity
- the fact that the recession at the start of the decade would not be prolonged
- the influence of globalisation on price deflation
However, we underestimated:
- the full impacts of new technologies and the internet
- the growth in consumer credit
- the explosion of impulse purchasing behaviours
- the dominance of retailers such as Tesco and the Inditex Group
Meanwhile, we did not predict:
- the great boom conditions for retailers from 2003-2007 fuelled by easy credit
- the end-of-decade recessionary disaster
Nevertheless, whilst you can’t get it all right, we are rightfully proud of
our previous report. It provided a solid map from which to navigate the
unfolding 2000-2010 retail environment and gave timely guidance to our
clients who read and used it to help them anticipate retail impacts.
And, of course, we aspire to do even better for our Retail 2020 Report.

Retail 2010
The accuracy of the
10 socio-economic trends 1
Retail 2010

The accuracy of the 10 socio-economic trends

The accuracy of the
10 socio-economic trends

1. Polarisation and Sacrificial Consumption
What we said: “Income distribution continues to polarise and European
comparisons show that this trend is accentuated in Great Britain. This has
implications for the middle market which is seeing erosion of its customer
base. This is reinforced by the emergence of a sacrificial consumer willing to
trade down on some aspects of consumption in order to trade up on others.”

Income inequality in Britain is much higher than By 2009, Britain had a Gini coefficient of 0.36
in Continental Europe as indicated in our analysis. compared to Sweden at 0.23; Germany 0.28;
and France of 0.33.
The Gini coefficient is a measure of income
inequality where zero corresponds to complete Meanwhile we were right to predict that income
equality and one is complete inequality. polarisation would continue:

The gini coefficient measure of overall income inequality in the UK
is now higher than at any previous time in the last thirty years
Gini coefficient for disposable household

40
incomes after deducting housing costs

30

20

10

0
80 85 90 5/9
6
0/0
1
5/0
6
19 19 19 9 0 0
19 20 20

Source: Households Below Average Income, DWP (1994/95 onwards) and the Family Expenditure Survey (earlier years) obtained via
data published by the IFS; UK; updated Aug 2009


Whilst middle income groups’ earning power held up, Of course, anecdotally, we know that discounters like
it was the very lowest income group which saw Aldi and Netto and low price operators like Primark
relative declines across the decade. Middle income and H&M have done very well over the decade.
earners also had access to cheap credit which Meanwhile, luxury brands have also had a strong
supported their spending. decade. This stands in start contrast to more
We were completely accurate in our view about mid-market retailers like Woolworths and Pier Import
sacrificial consumption behaviour and its impact on which have closed their doors and C&A which
middle market retailers. pulled out of the UK.

Source: McKinsey, 2005 Sacrificial Consumers re-evaluate price/quality: the mid-market is disappearing

8
1999-2004 CAGR% (UK)

4 High end

Value

0

Middle market
-4

-8


2. Globalisation – a Solution to Margin Pressures
What we said: “Retailing has been relatively immune to the pressures
of globalisation. However, global networks will grow. Meanwhile
globalisation will lead to price deflation due to greater price transparency
and increased competition.”

After many false starts in the 1980s and 1990s, Meanwhile, has a globalised world led to price
the 2000-2010 decade was when retail really went deflation as we predicted? You bet! Here’s what
global – as we predicted. respected journalist Jeremy Warner had to say
about the influence of China on world prices:
Wal-Mart is, today, the world’s largest retailer with
“In a number of respects China has been extremely
stores in 15 countries. Second in the international
good for the developed economies over the past five
list is Carrefour with stores in some 36 countries
years. By producing an ever expanding quantity
by 2010. Next comes German-based Metro with
of cheap goods, it has helped keep prices low.
stores in 32 countries. Britain’s Tesco is fourth
This deflationary effect has allowed central bankers
biggest with supermarkets in 13 countries. All told,
to maintain low interest rates, which in turn has
the message is clear. To be the biggest, you need
allowed consumer demand to remain high.”
to be very international.
(The Independent, 2008)
And the move abroad continued well into the
second half of the decade. Jones Lang LaSalle’s
research from 2009 identified that the number of
movements by retailers entering a new market for
the first time increased by 28% between 2006 and
2008 alone.


3. Shifting Core Competencies within the Value Chain
What we said: “Increasingly, the factors that were a Unique Selling Point
for companies within industries have become perfunctory. To differentiate
retailers must innovate and this may require them to move away from their
core competency towards a new value chain based on brand and service
delivery. This leads to solutions being consumer driven.”

for example. Most retailers have an internet strategy
today, even a social media venture – and these
competencies were not at all developed in 2000.
Recognise that these are not simply multi-channel
strategies but brand-as-portal initiatives. Most recently,
Tesco have launched a fully fledged banking concept
and a mum’s to be social site (mumsnet.com).
Other retailers have stretched their brand into sport
(Printemps), well-being services (Boots The Chemist)
and home planning (IKEA).
To an extent, retailers have stuck to doing Meanwhile, because of changes to the value chain,
what they do best over the last decade: sourcing brands themselves have become retailers, some
value for money goods, delivering these to store examples being National Geographic, Apple and
with ever more efficient logistics, driving down Puma – and there are many, many others.
store operating costs, finding customers and
We have witnessed all sorts of innovation in
keeping them happy.
Shopping Centres too. We now have a wide leisure
Nevertheless, it is also true that retailers and and catering offer sitting besides retail in most new
shopping centre managers increasingly have gone builds. From aquariums to climbing walls and from
beyond their core competencies. It is certainly not ice-rinks to libraries, the offer has moved on
uncommon to see in-store coffee shops and restaurants, substantially over the decade.

Retailers and
shopping centre
managers have
gone beyond their
core competencies


4. A ‘Forever Young’ Society
What we said: “Society is ageing. However, the behaviour and aspirations
of this group of society’s elders is unlikely to conform to that of the previous
generations - these are the swingers of the 1960s.”

Socio-cultural studies amongst Baby Boomers (the
generation born between 1945-1965 and therefore
between 45-65 years old in 2010) do indeed
demonstrate that they do not share the values of the
pre-War generations. The table shows the ways in
which they have ‘forever young’ values.

BABY BOOMERS BABY BOOMERS
45-65 yo in 2010 65+ yo in 2010

Optimistic Pessimistic To take a couple of other examples of ‘forever
Expressive Constant
Consumerist Saving not spending young’ attitudes:
Modernity Tradition
- one study of health clubs found that membership
Down with hierarchy Hierarchy
Belief in Choice Status rates amongst the over 55s had increased by 562%
Global Local since 1987 and that the over 55s represented 25%
Passive Active of member
Changing destiny Accepting fate
- in 2008, worldwide sales of Viagra were up 10%
Source: Sociovision, Futures Coaching to $1,934,000,000.

Readers will recognise instantly the validity of this
prediction from their own lives. Acquaintances,
colleagues and family members coming up to
retirement invariably have a lot of fight left in them;
not so long ago retirement signalled that death was
just around the corner. Not in 2010. Fifty is the new
30, as they say, 60 is the new 40.


5. New Lifecycles and New Income Patterns
What we said: “Social change is also creating much greater volatility
in disposable income patterns over the adult lifecycle. Factors such
as remarriage, second families, older dependents and adult children
delaying leaving the parental home will decrease the traditionally high
disposable income of, what were the 50-something empty nesters. In
contrast, young adults staying at home benefit from lower costs and
higher spending capability.”

Looking into the detail, the picture is mixed. It remains Meanwhile, according to Saga, the cost for
true that, on average, the over 50s are wealthier than 50-somethings of looking after a dependent parent
the under 50s. According to British Actuary data, the could be as much as £20,000-£30,000 today,
over-50s account for 42% of all adults, and have a particularly if a care home is involved. Clearly these
collective pot of £175 billion disposable income, 30% kind of figures dent disposable spending capacity.
more than the under-50s. Some 85% have private
In fact, this trend of 50-somethings finding their
pensions and the group also accounts for 80% of all
incomes squeezed now has its own name: they are
private wealth.
being called Babygloomers.
However, it seems that we were on to something
Surprisingly, we were wrong to predict that family
very significant when forecasting the impact of adult
life was getting more heterogenous with remarriage
children who do not leave the family home – or who
rates rising for example. Taking ONS data for
come back after a short period away – the so called
England & Wales, the number of marriages fell from
‘Boomerang Generation’.
2000-2007 by 12% but remarriages fell by more – 17%.
According to data from Britain, 28 per cent of parents It seems that the stronger tendency these days is
have to take drastic and unexpected financial measures to be single. For example, in France the number of
to help their 18 to 30 year old children. The latest figures single person households climbed 17% between
suggested as many as half of parents borrow the money 1999 and 2006.
needed, with almost all parents (93%) paying at least
something towards their children’s finances.
Half of over 50s say that their pension is not sufficient for
retirement and yet they are feeling the financial squeeze
of funding both their own children and their parents – and
so are putting their own financial futures on the line.
Two thirds of parents said they have had to or will
reduce their day-to-day living costs to fund their adult
child, from shopping more economically for food, selling
their cars and monitoring the use of heating and lighting
at home. (Source: Daily Telegraph, 17 February, 2010)


6. Conscientious Consumption
What we said: “There is growing concern as to the downside of
globalisation and consumerism, particularly child labour and exploitation
of third world economies and the smart consumer requires legitimisation
of their consumption behaviour. This is neatly provided for by green and
ethical consumption.”

As we predicted, there was an explosion in the
purchasing of ethical products and services over the
period. The chart below graphically illustrates how
strong this trend has been.
Overall, the ethical market in the UK was worth
£36 billion in 2008 compared to a mere £13.5 billion
in 1999. In France up to 40% of consumers say they
consider ‘la consommation responsable’ when
making purchases – and by 2007 this represented
4% of all purchases – still low but a dramatic
increase from the start of the decade.
This is one trend which was unequivocably proven
over the period.

Conscientious Consumerism in the UK 1999-2008 – Ethical sector
£16m
1999 2008

12

8

4

0
K ME EL AL TY CE
IN AV NI
DR HO ON TS U AN
& EN TR RS DUC MM FIN
OD E O- PE O
GR EC PR CO
FO


7. Experience Retail – Want not Need
What we said: “As society ages and adults mature towards self-actualisation,
consumers will be increasingly as satisfied by a service as by a product.
This is evidenced by the growth in the service economy over
manufacturing, as well as the proliferation of coffee bars and attractions.”

For varied economic and social reasons, manufacturing Employment in the Manufacturing Sector
is in long term decline across the Eurozone – the drop
has also been severe in the UK as well outside Eurozone Index vs Q42000 = 100
of Europe such as in Japan. UK
Japan
As we expected, the job growth has been almost 120
entirely fuelled, across Europe, by a growth in the
service sector. From hotels to leisure parks,
80
restaurants to retailing, there are more and more
people engaged in providing services. Clearly, the
40
supply has grown but this is driven by consumer
demand, again as we anticipated. The table below
0
shows the rise in service consumption.
01 03 05 07 09
We will see the impact that this growth in services 20 20 20 20 20
has had on retail and retail property in Part 2. Source: Experian, IHS Global Insight 2009

Source: IHS Global Insight 2009 Proportion of Service Consumption from Total Consumption, 2000-2010

2000 2010
50%

40%

30%

20%
ND ND EN AN
D OM NY AI
N EY IU
M CE ND LIC IA LY AL RY
LA LA ED GD MA SP RK LG AN LA UB SS ITA UG GA
R FIN SW EL N R TU FR PO P RU T N
T HE IR KI GE BE RE OR HU
D P
NE ITE EC
H
UN CZ


8. Brand as Belief System
What we said: “The knowledgeable and confident consumer still requires
guidance given the level of choice available on even the blandest of items.
Consequently, brands have been described as the new religion, and those
which communicate strong, clear beliefs and an original perspective are
more likely to be successful.”

In a study in America consumers who were shown It is evident that brands are enjoyed and loved by
24 different types of jam were only a tenth as likely consumers – but do they help choices?
to make a purchase as those shown just 6 types
A.G.Lafley ex Chairman, President and Chief Executive
(Source: Sheena Iyengar, Columbia University).
of P&G, clearly thinks they do: “The best brands
The message is clear. Hyper-choice paralyses even
consistently win at a crucial moment of truth: at the
clever consumers and kills sales.
store shelf when a consumer decides whether to buy
So, can brands cut-through as we predicted back one brand or another”.
in 2000?
Kevin Roberts CEO Worldwide of Saatchi and Saatchi
Clearly, the decade saw the biggest brands produce confirms: “The number one job for any marketer these
enormous results for their holding companies. days is competing for attention” and he goes on to
Interbrand publish a ‘Best Global Brands’ ranking explain how forming a deep emotional connection
every year. Here are some of the staggering growth is necessary by creating ‘Love marks’ – the stage
rates between 2001 and 2009. beyond brands.

BRAND VALUE VALUE CHANGE And one more expert, Kevin Randal, of the Brand
$m, 2001 $m, 2009 % Channel: “Branding today is a strategic tool that
helps the supplier cut through the morass of the
Nike 7 589 13 317 75 market, get noticed, and connect with the customer
IKEA 6 005 12 004 100 on many levels and in ways that matter. A strong
Amazon 3 130 7 748 148
brand becomes the customer’s “shorthand” for
Source: Interbrand making good choices in a complex, risky, and
confusing marketplace.”
All told, we were right when we asserted brands

It is evident that would be a growing and powerful guide to help
consumers navigate and that brands with strong

brands are enjoyed identities would do much better.

and loved by
consumers – but do
they help choices?


9. Consumer Apartheid
What we said: “In terms of profitability, all customers are not equal and,
as a result of store cards, retailers are in a privileged position of identifying
different categories of customers. We are only at the beginning of the
process of identifying and differentially serving customers – but this will
lead to high levels of customer complaints in the future.”

The trend towards customer loyalty cards has certainly
increased across the period and it now seems like
most garden stores, supermarkets, clothing stores
or perfumeries offer a fidelity programme. Today, it
is estimated that 85% of British households hold at
least one loyalty card.
To an extent, possessors of a loyalty card are given
certain privileges that walk-in consumers do not have.
They may receive vouchers, get sent special mailings,
be invited to an exclusive discount evening. All these The truth is that, even today, money cannot buy better
devices and more are what we were getting at when we grades of service from most stores – and most
talked about the trend towards consumer apartheid. retailers continue to adopt a very democratic service
And whilst consumers may not appreciate it, hot policy – everyone is treated equally.
lines are often mechanistic about their filtering of So, whilst it is true that consumer complaints have
consumers. When consumers are asked to give
gone up, as predicted, over the decade - the cause is
their card number, the highest value clients get
less due to feelings of consumer apartheid and more
answered quickest. It’s Darwin’s evolutionary
law – or, at least, survival of the richest. down to higher expectations and more determination
to assert consumer rights.
On the other hand, the floodgates have not opened
to bare-faced discrimination in the marketplace. As an illustration of the increased desire to complain,
For example, few supermarkets offer a scheme of quicker Britain’s RBS bank is receiving an astonishing 1,600
queuing at the checkouts if the customer pays extra. complaints every day (Source: Daily Mail, 23/04/10).

It’s Darwin’s
evolutionary law.
Or at least, survival
of the richest


10. Cars – the ‘Love Bug’ lives on
What we said: “Regarding transport, unsurprisingly the car is the preferred
mode of transport in Europe. It is highest in the UK where shopping
accounts for 20% of all trips and when social and entertainment is
included this increases to 46%. Aside from convenience, the popularity
of the car also reflects the lack of an efficient and reliable substitute.
Accessibility remains critical.”

Our predictions about people’s love affair with the car
turned out to be true for most of the decade, although
cracks in the consensus were seen early on. Of course,
people continued to love the car for its point-to-point
convenience, for its load carrying capacity and for the
social status it can bring. On the other hand, building up
across the decade were concerns about pollution,
frustrations about congestion and the worries associated
with ownership (parking, servicing, vandalism and theft).
All told, the love affair has become challenged and, at One thing continues to ring true with our predictions
the same time, municipal authorities are building some about transport. Accessibility is key. In a survey for
London’s West End undertaken in 2006, 64% said that
acceptable replacements in urban areas – especially
West End shopping was not accessible by car – and
the tram. Cities with much improved tramways include
so 89% used public transport. Clearly, many out of
Paris, Vienna, Istanbul, Stuttgart and Athens.
town shopping centres are only accessible by car;
Given the fall off in support for the car, and given public transport is minimal/non-existent. Consumers
the late decade recession and inflated fuel costs, have therefore taken a ‘horses for courses’ approach
new passenger car registrations fell away from 2007. to transport when going shopping over the last decade.

Retail 2010
Reviewing our predictions about
the impacts of these trends on retail
and retail property 2
Retail 2010

Reviewing our predictions about the impacts of these trends on retail and retail property

Reviewing our predictions about
the impacts of these trends on retail
and retail property

The decade started with the aftermath of the dot.com But as this period of unrestrained growth came to
bubble and a mini recession. Low interest rates a spectacular end, the world tumbled into a sharp
fuelled another bubble, this time in housing and economic downturn which has again caused changes
shares. Once again this burst, most spectacularly in in shopping patterns and reset the bar for performance
2008 heralding the Great Recession at the tail end of in the retail market. The lasting impacts of the
the decade. All told, the overarching sustained pace of recession on the consumer and the implications for
world growth, the rapid growth in complexity and depth retail property are amongst the themes explored in
of credit markets and the progressive loosening of our forthcoming Retail 2020 research.
regulation, not to mention the long period of low,
The ten social and consumer trends we reviewed in
stable interest rates meant that consumer confidence
section 1 provided the backdrop to an appraisal of
grew strongly between 2003 and 2007. The result –
the challenges we felt the retail industry would face
the retail industry could expand rapidly without
over the next ten years to 2010. In our Retail 2010
having to innovate significantly.
Report, we highlighted the opportunities for both
occupiers and owners and here we revisit some of
our predictions and assess their accuracy.

Source: European Commission, Jones Lang LaSalle Global Events impacting European Consumer Confidence

10
EU Consumer Confidence Index COLLAPSE OF GLOBAL
HOUSING BUBBLE,
Long Term Average LIQUIDITY SHORTFALL
0
9/11 TERRORIST
DOT.COM ATTACKS
BUBBLE
BURST
-10
LEHMAN
BROTHERS
COLLAPSE

-20

-30

00 02 04 06 08 10
20 20 20 20 20 20
N N N N N N
JA JA JA JA JA JA


Internationalisation of Operations
We said: “Globalising operations is a further way of increasing volumes
whilst at the same time reducing procurement and logistics costs. It also
has the effect of keeping retailers on their toes in terms of reinventing
and differentiating their offer from competitors whilst maintaining
service quality. Nevertheless, organic growth is expensive. This suggests
an increase in M & A activity or of retail co-opetition associations.”

Large numbers of retailers have extended their Globalisation has led to increased competition
networks considerably during the decade and there rather than industry consolidation. This increased
have been significant increases in cross-border competition, coupled with the influence of low cost
movements in Europe. As we saw earlier the number Chinese production helped restrain inflation in the
of movements by retailers entering a new market for majority of Western European markets. The
the first time increased by 28% between 2006 and continued development of the internet as an
2008 alone. Star retailers H&M and Zara have been information gathering and price comparison tool
amongst the biggest exporters to new territories. also contributed towards this.
But the industry remains largely fragmented. In our The implication, as correctly identified in our report,
report ten years ago we estimated that by 2009, 40% has been for retailers to become more savvy with
of global retail sales would be shared by the world’s their cost bases, e.g. through procurement and
Top 25 biggest brands. In reality this figure is only efficient economical logistics, in order to enhance
around 10% which is similar to the level in 2000. profit margins – and therefore facilitating growth in
rental levels for their landlords.
An increase in M&A, particuarly in the food sector
has occurred over the decade – the Rewe purchase
Source: IHS Global Insight 2009
of the Plus Discount stores in the Czech Republic
and Carrefour of the Artima chain of supermarkets in Average Annual CPI Growth % 2000 - 2010
Romania are but two examples. This has allowed
expanding retailers to take advantage of existing 6

supply chains and accelerate their local progress.
4
Retailers entering new markets via franchise has
also been an active trend with New Look (Poland),
2
Liu Jo (Czech Republic) and more recently Desigual
(Slovakia) amongst those expanding via this route.
You will notice that these examples are all going into 0
Central and Eastern Europe – no coincidence given the NY CE UK LY AI
N ND RY
MA AN ITA SP LA GA
growth prospects but lack of retail maturity in the region. GE
R FR PO HU
N


New Anchors & New Owners?
What we said: “Visitor attractions, displays and exhibitions may become
the new retail anchors. The metamorphosis of retailing into leading visitor
attractions may require a new breed of investors and or partnerships such
as film studio and exhibition centre operators.”

Leisure now comprises a larger part of shopping The primary reason for this is the cost of space.
centre floor space than ten years ago. The catering Retailers have on the whole experienced healthy
offer in particular has taken huge strides – the food turnover over the last 10 years and rental growth
offers at Westfield London and Istinye Park, Istanbul has therefore been strong which has driven asset
are successful and unique focal points. But, in all values. Owners have been reluctant to sacrifice
honesty, the incorporation of large ‘destination’ leasable space to low rental generating attractions
attractions into Europe’s shopping centres has when the demand for retail units has been so high.
been fragmented. Fit out costs for leisure attractions are also
notoriously high, with little guarantee in way of long
term income security. And let’s not ignore the
growth of personal/home entertainment either
which has strengthened competition away from
other leisure attractions.


Where large scale non-retail anchors have been concepts that have been integrated into shopping
developed the focus has continued to be on the centres. (see graphic below)
Multiplex Cinema – a proven winning formula. Some
As for the new breed of investors and partnerships
developers however have searched for ‘the next big
to finance, manage or own the new leisure anchored
thing’ over the decade and the high growth markets
schemes – this hasn’t materialised as we had
largely led the way with this in terms of innovation.
speculated. Institutions and specialized retail funds
2003 saw the opening of the SnowZone anchored
have remained resistant to leisure.
Xanadu shopping centre in Madrid. And at the very
end of the decade, Forum Istanbul opened featuring Owners have however become savvy to the benefits of
175,000 sq m of retail floorspace as well as Turkey’s utilising the space not initially intended to be leased such
first major Aquarium and large exhibition space to as internal thoroughfares and car parks. Car displays, or
host cultural and artistic events. IMAX cinemas, Ice indeed Harley Davidson exhibitions became a popular
Skating rinks and Casinos are amongst the other interest, footfall and dwell time driver.

Source: Jones Lang LaSalle Leisure Provision in New Schemes* 2007-2008, East vs Western Europe**

EAST WEST

80%

60%

40%

20%

0%
MA AX IN
G O ON RE E
IC G ’S O M/ RD
/
NE IM L BI
NG ITI A AT EN T SIN GY UB IA OL
CI OW IB REN HE AT
IN DR MEN CA CL LL PO
B H
EX A
T IL N BI
SK CH TAI SS
ER NE
NT FIT
E

* New scheme openings relate to analysis carried out by Jones Lang LaSalle in 2008, assessing 21 new European shopping centres with
a GLA of 30,000 sqm or greater opening between January 2007 and February 2008. Russia was not included in the analysis.
** Eastern Europe refers to the contemporary geographic definition of Central and Eastern Europe, including Greece and Turkey. Western
Europe is defined as all countries to the West of Germany, Austria and Italy inclusive. Russia was not included in the analysis.


New and Experiential Offers
What we said: “There is a requirement for retailers to offer more
experience than product. Blending leisure and retail is not in itself
a new concept; however leisure and retail tend to be offered as discrete
entities that may be housed within the same wider environment.
Experience retailing requires a much greater blurring so that retail and
leisure are indistinguishable. We expect this to develop both in number
and in terms of the virtual reality experience offered.”

gave momentum to the innovators. New concepts
accelerated the move away from ‘hard retailing’ and
a definite shift towards experience was apparent.
Much of this has been community orientated, for
instance Jamie Oliver’s Recipease (the food & kitchen
shop where people can learn to cook) or the de-branded
Starbucks ‘15th Avenue’ concept. US ladies fashion and
homewares brand Anthropologie is one of the stand out
successes in merging the part-retail, part-cultural
We have seen this trend develop but at a slower pace space concept which encourages escapism.
than anticipated. Given the strength of consumer and Shopping Centre developers also began to react
credit markets there was no burning need for the more innovatively. Jones Lang LaSalle’s report from
rapid development of experiential retail. People have Summer 2008 titled ‘European Shopping Centres –
been largely happy to spend their money wherever One Size Fits All?’ explored a shift towards developers
and however. Some retailers such as Swedish creating the ‘Third Place’ by using retail as an anchor
based Monki or US brand Hollister have embraced for community life; creating a place people no longer
innovation and the creation of experience – although go purely to shop, but rather to shop when they’re
remained relatively niche on a European scale.
already out. Mixed use developments, leisure &
As 2010 approached however, the increased entertainment and catering have all been central to
competition felt in local markets through the creation of such Third Places with Princesshay,
globalisation and the onset of the global recession Exeter UK amongst the standout successes.


New Types of Locations
What we said: “With leisure time scarce we may see retail relocate
to destinations where relaxed tourists may be found with the time
and money to consume.”

Developers have moved increasingly out of town,
often strategically locating where footfall is highest –
and to where there are significant numbers of
tourists – such as airports and railway stations.
A unique example of this include Multi’s I Petali di
Reggio shopping centre in Reggio Emilia, Italy
which was developed alongside a football stadium
St Pancras Station, London,
complex. Existing destinations, such as transport
hubs, have also been the focus for much retail
development. A good example is LOOP5 in
Weiterstadt, near Frankfurt Airport in Germany
combining its non-traditional location with a play
towards ‘experience’ by harnessing the aviation
theme throughout the centre design.
In the UK, T5 at Heathrow airport and St Pancras
International rail station are good examples of how high
footfall doesn’t have to restrict the tenant mix to mass
market, with both featuring higher end brands. The likes
of Bulgari, Gucci and Tiffany & Co can be found at T5
whilst Thomas Pink and LK Bennett at St Pancras.


One Size Doesn’t Fit All
What we said: “Leasing and management strategies can no longer rely
on the accepted universal tenant mix. Generally, retail locations have
tended to avoid building brand preferring to abdicate responsibility to
retailers and in this way appeal to the widest cross section of consumers.
However, polarisation and lifestyle clustering require retail locations
to define themselves by target lifestyle groups. The agglomeration
economies of retailing still stand but polarisation requires a more
selective approach to tenant mix. This requires branding and marketing
of the location as an umbrella retail offering.”

We have seen a small shift in the direction we of all new schemes* opened in 2007-8 whilst H&M,
anticipated and landlords have become shrewder in Promod, Levis and Esprit were present at 40% of
their tenant mix strategies. However, clustering retail new schemes. In many respects European shopping
locations by lifestyle group (or even clustering centres and high streets have become increasingly
retailers by lifestyle) is still developing as a concept. cloned from a tenant perspective.
Taking a hard look at the overall retail provision, it is In addition, consumers are also more likely to make
hard to avoid the conclusions that, over the decade, purchases cross border now than ten years ago, with
it became increasingly formulaic across Europe, a quarter of EU consumers having made at least one
reflecting the growing internationalisation of the retail cross-border purchase during 2009 (source: European
sector and a desire to replicate a ‘winning’ formula. Commission). People are spending more on air travel
and seeing different places, but with this comes the
The fundamentals of retail anchor and tenant mix follow
(perhaps sub-conscious desire) for a degree of
a similar pattern based on the developers’ experience of
familiarity. Consumers have started to expect to see
what works and what doesn’t. The influence of Western
the same brands regardless of location or country.
developers and tenants moving East has also acted
as catalyst for this convergence.
Fashion retailers comprise around half of the units
in most new shopping centres and cross border
retailers are becoming increasingly dominant.
Jones Lang LaSalle research has found that Zara,
Pull & Bear and Bershka were present in over 50%

* New scheme openings relate to analysis carried out by Jones Lang LaSalle in 2008, assessing 21 new European shopping centres with
a GLA of 30,000 sqm or greater opening between January 2007 and February 2008. Russia was not included in the analysis.


Polarisation and the Power of Brand
What we said: “Income polarisation coupled with sacrificial buying
behaviour is mirrored in the polarisation of retail operators with mass middle
market players suffering the greatest erosion of their power base. To succeed
retailers and investors need to (re)-define their offer and articulate it
clearly to a defined lifestyle target group derived through socio-cultural
analysis. This links to the power of brand as a means of communicating
a set of values and aspirations to consumers, enabling the retail offer to
contribute to a sense of identity and belonging inherent in the consumer.”

As we saw earlier, the luxury and discount markets Elsewhere, we have also witnessed an increase of
have grown relative to the middle over the decade. brands trading direct to the consumer via standalone
The shift of consumers trading down on some stores – Apple and Nokia for example – breaking
purchases and trading up on others has been down traditional supply chain boundaries. This not
developing steadily and has been recently accelerated only provides increased recognition for the brand, but
by the recession. The line-up of retail administrations opens up an additional revenue stream.
during this period were largely mid market brands
The pop-up store concept is another more recent
such as Morgan (France) and Zavvi (UK).
trend that was predicted and helps create increased
The top 25 global brands by sales include Wal-Mart, brand recognition, although the reason behind the
Tesco, Amazon and Ikea and in total they operate acceleration of this trend is rooted more in the real
from 38,000 stores in 71 countries. estate dynamics during the recession i.e. increased
supply of cheaper leasable space. Nevertheless,
Analysing these brands it is clear that they have
and drawing on our comments from ‘Brand as a
become most successful because they have been
Belief System’ in Section 1, a strong brand has
able to appeal to all socio-cultural groups. Niche retail
become increasingly important for any retail business
has its place and as we know the luxury sector has
and they have developed as powerful guides to help
seen growth over the decade, but the big winners –
consumers navigate their choices.
Tesco for example – have realised that big surfaces
and a diversified offer allows them to have a wide
customer base. Meanwhile, through direct marketing
they are almost able to create the illusion of one to
one marketing, and therefore communicate different
sets of values of the brand to different people.


An Holistic Approach
What we said: “With leisure time scarce and rewards from service provision
high, new holistic formats are emerging that provide a ‘soup to nuts’ menu of
products, services, information and advice for one lifestyle area.
Retailers are recognising that supplying new services to an already
existing consumer base is a means of securing loyalty through better
fulfilling consumer demands.”

We noted earlier a shift in the total economy towards demand for music purchasing but increased demand for
services. The core competencies of retailers, meanwhile, the retail ‘experience’ by diverging into the live cinema
have continued to shift and many now have diverse and music industries. And Decathlon’s Oxylane Village
revenue streams beyond selling physical goods. This concept brings together sporting activities, retail outlets,
largely capitalises on growth in the service economy services and events all on the same site.
which has continued to develop as predicted.
Increasing retail saturation has meant that, gradually,
The big winners in this area have been the retail businesses are having to grow beyond simply
Supermarkets. Over the decade, they continued to grow selling products. The recent recession has compounded
their financial services offer and expand into areas such this trend through accelerating the consumer thoughts
as child registry, telecoms and even optometry. of ‘what do I need’ vs. ‘what do I want’, bringing reward
Elsewhere, HMV in the UK adapted to the softening for those retailers that offer a little extra or different.

The big winners
have been
the supermarkets

Summary

Summary

Change is coming.
Are you ready?

Our review of the Retail 2010 Report has revealed how far it is
possible to get a grip on the future.
Out of ten socio-economic trends identified, most were prescient.
We talked about polarisation of markets, globalisation, shifting
demographics, changing lifestage pattern, the move to services,
ethical consumption, experience society, brand dominance and car-borne
transport. All proved to be dynamics in the market. The one exception
was our prognosis about consumer apartheid which has not really
played out in the consumer’s mindset.
Meanwhile, in terms of retail impacts we were right to talk of retail
cross-border expansion, experiential retailing, new tourist retail
locations, new leisure anchors and an integrated holistic approach
to retail (goods, services, brands, experiences).
In sum, we are proud of our foresight process and the results
it yielded. We have carried this experience into our Retail 2020
exercise – where we anticipate more and deeper insights that
will help anticipate and plan for the future. Time will tell!

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

Retail2010

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