Preparing retail actors for the new normal
Without a doubt, our world will be forever changed by the COVID-19 pandemic. Economic data suggest the Belgian economy will be severely hit in 2020 with a GDP decline around 7.8% External Link. The economy is expected to rebound in 2021 with an GDP growth of 5.6%, though risks and uncertainties on the downside remain high due to the current evolution of the sanitary crisis and its consequential partial containment measures. Concerns about unemployment remain high while consumers confidence is at this lowest level over the last two years.
In this context, total retail spending is set to decrease in 2020 compared to 2019 with a direct impact on the turnovers of retailers. The evolution of the COVID-19 crisis and the recent containment measures decided by the Government until the 13th December the soonest will also hit the retail market, and more specifically fashion and food & beverage activities.
Retail activity is under pressure
Year-to-date, roughly 300,000 sq m of take-up is recorded on the Belgian retail market, a 10% to 15% decrease compared to same period last year, with very different impacts depending on the sectors and/or retailers’ typology.
Some key takeaways are namely:
Shift to stores closer to home
Out of town retail is doing better than main streets and shopping centres
Fashion is struggling while sports & leisure products are booming
Food & beverage operators embrace takeaway and home deliveries
Retail footfall on a rollercoaster
The lockdown of March till May had dramatic consequences on the retail footfalls, with almost no traffic in the streets, shopping centres or out-of-town retail. While gradual encouraging signs were observed with footfalls “only” 20 to 30% below 2019 levels in October, the new containment measures currently in place put a new stop to this recovery and will negatively impact retailers activity and turnovers.
Growth of online retail
According to latest figures on online retail released in August 2020, Belgians rather shop in a physical store. However, online retail is exponentially growing (mainly thanks to a larger choice and better prices) since many years and witnessed a strong boost during the first lockdown, especially for fashion and accessories which observed a 20% growth. Food retailers also benefit from this rise of the online retail.
Still according to this report, close to 50% of the consumers favor brands which have developed an omnichannel strategy External Link, combining online sales with a physical store as they are considered as trusted brands.
Rents on the downside since the beginning of the year
Downward movements were already observed in 2019 in different Belgian retail high streets. The COVID-19 crisis contributed to reinforce this trend and also downgraded the prime rental levels of the shopping centres and out of town retail. They stand respectively 15%, 10% and 5% lower than the same period last year.
Prime Rents (€/sqm/year)
Situations are obviously very different depending on the city, the street and even the location within the same street or the shopping centre. In some specific cases, rental levels are 30% to 40% lower and the bigger units have more difficulties to find new tenants.
However, if rental levels are expected to remain relatively stable next year, we still forecast increases as from 2023. Actually, even if experiencing unprecedented challenges, the physical store is set to survive as it is part of a consumer’s engagement and online sales are only a complement.
Restoring retail confidence
The COVID-19 crisis accelerates the reshaping of the retail industry. The growing shift towards online retail, changing consumers’ patterns, demographic shifts… are constraining retailers to better understand their customers, to reinvent themselves and to develop new strategies.
In this moment, it is critical that retailers look forward and deploy new strategies. As retailers develop plans to re-open, re-engaging the consumer is going to be more complex, involving new safety and health standards, and developing a greater sense of mutual trust. Brands should begin to build communications and operational plans as from now to be positioned for success when they can reopen doors.
To be prepared for the new “post COVID-19” world, retailers should need to consider:
- Addressing the Store Environment: Retailers will need to review every aspect of the store environment from its size to fixture spacing to ventilation. A safe shopping experience means no more tight aisles, repositioning of high traffic areas and developing strategies to adjust for the number of customers in a store at one time. The challenge will be returning to normal levels of productivity while balancing the safety of customers. Click & collect or shipping from local stores will need to be successfully implemented to help drive physical sales.
- Integrating and Implementing Technology: Understanding how to provide a “touchless” environment in order to mitigate the spread of germs is going to be paramount. Touchless technology will need to be integrated into the store experience and check-out process. Artificial intelligence and virtual reality will help consumers see themselves in everything from clothing to eyeshadow and lipstick. These investments will need to be thoughtfully integrated to increase and enhance a brand’s experience.
- Utilizing Data and Analytics: CRM, mobile, and industry data will be critical to understanding the consumer’s preparedness to return to stores, malls, gyms, and movie theaters. Using this data, brands can engage consumers, listen to their concerns, and proactively address their needs. Data from third-party providers will give retailers advantages in the marketplace. This includes loyalty insights on products to drive inventory efficiency and margins, labor and operational statistics to reduce store costs, and portfolio optimization and store rationalisation.
- Introducing flexibility: retailers and retail owners need to work together to find the most relevant solutions to go through this unprecedented crisis. Introducing more flexibility regarding the leases and/or the rents could be profitable for both.
The new normal for the retail landscape
It is certain that the world will forever be changed by this pandemic. It is also certain that retailers will re-strategise, re-engineer, and re-invigorate their business to meet new standards and expectations.
Forward-thinking brands who start making these considerations now will be poised to win when consumers enter stores again. As our admired Fred Rogers said, “Often when you think you are at the end of something, you are at the beginning of something else”.
Despite this particular context, we can help preparing retail actors for the new normal thanks to our set of high-performance tools and our unrivalled market knowledge.
Discover our different packages below if you want to rethink your retail strategy, improve your portfolio optimization, talk about rental renegociation and much more...
Customer and Market Mapping
A visual display of the optimal locations for an occupier, identified by an assessment of demand, supply and competition. Detailed customer analysis to help brands understand who they are targeting and where similar, potential customers are located. Include:
❖ Catchment areas and drivetimes
❖ Population, demographic profiles, expenditures
❖ Market segmentation
Store performance and/or site specific assessment
Framework to understand key drivers of performances and efficiently assess the store or site performances and market potential based on different data items. Complementary to the Starter package, the Premium package includes:
◆ Location type, demand and supply, competitor and complementary operators
◆ List of recent comparables
◆ Rental analysis
◆ Hotspot maps showing areas of saturation and gaps of opportunity
Comprehensive market knowledge to support the decision-making process (market entry, expansion and/or portfolio optimisation). Complementary to the Premium Package, the Ultimate package covers our full range of services:
✤ Optimal rents definition depending on the location and retailers’ specificities
✤ List of recent comparables
✤ Weighted ranking matrix of individual markets based on a combination of data items
✤ Commentary on availability of properties
✤ Analysis of actual sales data from existing retail units to quantify the value of custormers by average spend and sales by category / channel (collaboratively with the retailer)