The retail sector is undergoing a seismic change.
Trading conditions on the high street remain challenging, with predicted Christmas footfall at its lowest since the credit crunch.
Sluggish wage growth, high levels of inflation and Brexit uncertainty have damaged consumer spending power and confidence, although retail sales continue to grow year-on-year at subdued rates.
This past year has been dubbed ‘the year of the CVA’, retail properties have on average fallen in value by 10 per cent and middle market department stores struggle to survive.
This marks a rotation away from tired retail formats in what has been referred to as ’Retail Darwinism’ – those that evolve with trends thrive and those that resist struggle to survive.
Physical in the age of digital remains a theme for 2019, with omni-channel retailing becoming the norm with chatbots and other artificial intelligence strategies becoming more prevalent.
Future of connected retailing
‘Clicks and mortar’ customers are the future of connected retailing, with digital and physical retailing working in tandem, supported by the launch of 5G technology in 2019.
A dramatic transition in the retail landscape will continue in 2019 with the physical store reflecting ever changing consumer needs but remaining a fundamental part of the shopping experience, influencing over 85 per cent of spend.
Increasingly flexible spaces, embracing the ‘showroom environment’ and customer engagement areas will be vital for the new wave of tenants.
Currently there is a 17 per cent over-supply of retail space in the UK, and we are faced with a legacy of the same retail concept in every town and city, delivered irrespective of consumer requirement and local market forces.
In 2019, some towns may be better suited to a convenience and value-led model, whilst other locations will still attract high profile retailers, bring in new leisure offers and expand their catering offer to enhance their experiential credentials in an increasingly polarised shopping centre world.
Indeed, some shopping centres may need to be repurposed entirely.
The sector’s transformation will provide an opportunity to bring city centres back to life, to the extent of a remodelling akin to rebuilding Britain post-war.
“The retail sector is expanding, not failing, in a constantly evolving landscape in which we must embrace change and prepare for upcoming trends”
To deliver the needs of the digital generation, flagship shopping centres of the future must look radically different.
Multi-experience, urban destinations combining leisure, sport, food and beverage and healthcare are the blueprint for future developments and cities.
The outdated concept of the insular shopping centre which ignores its context must be abandoned and in 2019 we should take a lesson from the outlet world, which embraces its surroundings to become part of an overall tourist attraction, generating high footfall and sales densities.
Lifestyle destinations are the future based upon the premise that time is the ultimate luxury and consumers want a higher return on their investment of that time, so as a sector we need to create compelling reasons to visit physical spaces.
These are unified, mixed-use communities where people want to live and work with retail as a vital component.
Collaboration between retailers and landlords will increase in 2019 with joint responsibility for performance being assumed by measures such as turnover rents, flexibility in operation and destination marketing budgets.
We hope that an online sales tax and further reduction in business rates will be considered by the chancellor to support the current climate.
The retail sector is expanding, not failing, in a constantly evolving landscape in which we must embrace change and prepare for upcoming trends that will continue to transform the industry in 2019 and beyond.
Our clients will merge or specialise as our sector collectively strives to fulfil consumer needs. The current transformation brings opportunity to modify existing real estate and create new destinations, supporting the changing face of retail.
Sara Boonham is head of retail developments / city centre mixed-use at Gleeds