The report says the mega-trend of digitalisation and the ‘internet of things’2 is influencing massive changes in the retail market and buyers’ behaviour. It notes that growing internet sales are impacting the profitability of physical stores and influencing shop closures, especially outside main retail areas. Savills IM highlights that the impact on the retailers becomes more pronounced once internet sales reaches 5-6% of total retail sales.
Although the trend varies across European cities, in general smaller towns and cities with a low level of shopping experience are suffering, with e-commerce trends likely to put medium-sized shopping centres most at risk compared to larger destinations and smaller convenience centres.
Medium-sized regional centres and major cities with good economic foundations and socio-demographic parameters are better able to withstand e-commerce pressures, Savills IM says, while easily-accessible retail parks are being used as strategic hubs for click & collect and online-order deliveries, or ‘omni-channel’ retail.
Key strategic takeaways for investors listed in the report include:
1 The Evolution of the retail market and buyer behaviour in the age of digitalisation, by Savills Investment Management, November 2016
2The ‘internet of things’ is a network of physical objects or other things embedded with electronics, software, sensors and connectivity to enable objects to exchange data with the manufacturer, operator or other connected devices
Kiran Patel, Chief Investment Officer at Savills IM, commented:
“The role of digitalisation in the retail evolution is perhaps most visible in the tenant mix at shopping destinations. Whereas less space is being devoted to traditional sales, there is a significant increase in leisure and food & beverage space, which coincides with the trend towards eating out.
“Reports of the death of the high street have certainly been exaggerated. Even some pure e-tailers are opening flagship stores on high streets. For example, an online furniture store recently opened a store in Soho in central London and a shoe retailer opened four shops in the Berlin, Frankfurt, Hamburg and Munich city centres.”
Citigate Dewe Rogerson
Patrick Evans / Stephen Sheppard / James Madsen / Alice Stewart
Tel: +44 (0)20 7282 2966
Savills Investment Management