Physical store expansion remains key to retailer's strategies despite growth in online sales
Growing online sales will not deter retailer’s physical store expansion plans in 2016, reports CBRE in its seventh edition of “How Active Are Retailers Globally?”, a study of over a 150 major international brands based in Americas, Asia Pacific and Europe, Middle East and Africa (EMEA).
The survey findings show that 83% of brands suggest their physical store expansion plans will not be affected by the growth in e-commerce in 2016, although this is likely to vary from market to market and only 22% of the brands are concerned about stiff competition from online retailing as a threat to the market in 2016. Out of those questioned, 17% have large scale ambitions with many retailers looking to open more than 40 stores (up from 9% in 2015) in 2016. The vast majority (67%) are looking to open up to 20 stores.
Despite the backdrop of economic uncertainty and the popularity of online shopping growing year on year, a physical store presence in key locations is still critical to the strength of a brand’s presence. Stores still need to create an emotional affinity with a shopper and customers still feel a need to go into store, physically touch a product and enjoy the feel-good factor associated with a particular brand experience. The store is integral to the shopping journey and can be used in a number of different ways, such as to click and collect, research of the product or brand or to test the product. It isn’t solely about the transactional side.
Core Western Europe is at the top of retailer’s expansion targets, Germany proving most popular with 35% of retailers looking to expand there, France, 33% and the UK, 29%.
China is the top Asian market with 27% of retailers looking to expand there and a quarter of retailers are looking to the US as a retail destination in 2016.
Mark Burlton, Global Executive, Retail Occupier team, EMEA commented: “Retailers continue to find confidence in the tried and tested retail strongholds of Europe. All three countries are home to cities with good consumer spending power and steady levels of tourism. Germany offers retailers the opportunity to target six key cities all with large populations and significant purchasing power, while France and the UK are two of the major global fashion capitals, where a retail presence alone guarantees significant brand exposure. European brands still see significant potential within their own regions and are as such still focusing their expansion ambitions within their own borders.”
Despite the positive headlines, retailers are remaining ‘cautiously optimistic’ in 2016. When questioned about the risk factors for them in in the coming year, similar to last year, real estate cost escalation (56%) and unclear economic prospects (42%) continue to be at the forefront of their minds.
Street shops (76%) and regional shopping malls (72%) were cited as the most popular formats for expansion with an increasing number of brands looking to travel hubs. A fifth of brands, largely from the Americas and EMEA, stated their intention to expand into travel hubs in 2016 as this will give them access to high footfall, highly frequented locations. Burlton continues: “The challenge now is for retailers to build an engaging offer that encourages people to stay longer and spend more.”
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.