Brick-and-mortar retailers are fighting back against competition from the Internet and developing new retail concepts.
Shopping centers and high streets will soon be superfluous because customers will order everything online anyway thanks to online retail. This was the theory of many market observers, but it is now clear that this is not the case. Brick-and-mortar retailers have long since taken measures to counter the competition from the Internet. They are developing new retail concepts and formats that have one thing in common: Stores as we used to know them are no longer really stores.
The trend towards new or modified location concepts prompted the research team at real estate company Catella to look into the question of whether increasing digital retail will make European retail spaces obsolete in the medium term. “The fact is that digitalization and demographic change will change demand patterns and lead to a reduction in retail space,” says Thomas Beyerle, Head of Research at the real estate company, summarizing the results.
The 28 EU member states currently have a total of around 590 million square meters of retail space, 510 to 550 million square meters of which will still be available in 2030 according to Catella’s forecast. So that doesn’t sound like a huge extinction of stores. Retailers are also finding new unique selling points in competition with e-commerce providers – for example, what Beyerle calls the “festivalization” of shopping: more and more providers, especially of high-quality products, are focusing on the experiential nature of shopping. Many retailers are therefore beginning to celebrate the shopping event and the brand in addition to the actual product.
A major project currently under construction in Switzerland, “The Circle at Zurich Airport”, is consistently geared towards such considerations: Riken Yamamoto has designed a building complex for the airport that is not only currently the largest building construction project in the country, but also aims to set new standards in terms of use. “The Circle” is no ordinary airport mall, but is intended to function like a city center, with narrow alleyways, small squares and a high quality of stay.
However, the area in which the retailers are to be located will differ significantly from a typical city center. Consequently, it is not called “Shopping Mall” at The Circle, but “Brands & Dialogue” – because this is not about shopping at all, but rather about trying out new formats for customer loyalty. For example, the luxury watch brand Omega will open a “Brand House” here. The focus is not on selling watches, only a very small store is planned. However, a large part of the 800 square meters will be occupied by a show workshop. Up to 40 employees will introduce visitors to the art of Swiss watchmaking and show how a ceramic movement works or how dials are made.
Another trend topic and unique selling point of the stationary retail trade that real estate professionals are currently talking about is the combination of retail and gastronomy. Many industry observers consider the Italian concept Eataly, which opened its first European location outside Italy last November in the converted Schrannenhalle in Munich, to be a prime example of this. The 4,600 square meter space houses 16 restaurants and food stalls, a shopping area with 10,000 delicatessen products and a cooking school – and even a small store for the traditional bicycle brand Bianchi. Eataly was founded in 2007 and is considered one of the fastest growing and most successful food service and retail companies with a recent turnover of around 400 million euros. The concept combines markets, restaurants, teaching facilities and show productions of Italian food under one roof – and prefers to rent space in prominent locations. The world’s largest branch, Eataly Alti Cibi, is located on Fifth Avenue in New York, directly opposite the Flatiron Building.
Whether watch workshop, restaurant or cooking school – the common goal of these retail concepts is to create a sensual counterpoint to sober online shopping. And the formats are quite space-intensive, usually covering around a thousand square meters or, as in the case of Eataly in Munich, many times that amount. However, the future of retail can also be seen in small spaces, where the connection between offline and online retail is being tested. The sporting goods retailer Decathlon, for example, known for its huge stores near the highway, launched its new concept called “Decathlon Connect” in February 2016 with its first city store on Munich’s Stachus.
In the stores of this format, the focus is on networking with the online store and other digital services: customers can have the sporting goods purchased via the online store delivered to the Connect store. There, the goods can be tested, tried on and exchanged if they are not to their liking when they pick them up. On-site tablets can be used to search for other collections, colors or models, which can also be ordered directly in the store.
Decathlon only needs a comparatively small space for this: The store on Stachus is 220 square meters in size; another Decathlon Connect has since opened on Königstraße in Stuttgart with just 50 square meters of space. Electronics retailer Saturn and toy chain Toys’R’Us, among others, have also introduced similar formats. In view of these new retail concepts, it is reasonable to assume that malls, shopping centers and inner-city shopping streets will change their face in the coming years; Catella researchers also assume this. However, Beyerle is convinced that bricks-and-mortar retail centers will retain one of their most important functions: “Increasing digitalization and constant networking will not replace the need for physical, social contact, but will complement it and demand it more than ever.” In the retail spaces of the future, the aspect of shopping will therefore only represent a partial element. At best, they will be places where urban life pulsates.