Retail Revolutions

Retail Revolutions
 
Retail's response

28 June 2017, by Tom Whittington

A closer look at top shopping centre brands

 

 

What are the brands most prevalent in the shopping centre sector and what is their growth story? This infographic shows the brands with the largest number of stores located across the shopping centre market and identifies how their portfolios are split between different kinds of shopping centre.

FIGURE 11

Key shopping centre brands, their growth and their shopping centre location type distribution

 
Figure 11

Source: Savills Research / Ellandi

What is clear is that Secondary shopping centres, which includes the sub-sector Community shopping centres, provide the core location type for most of the top 50 shopping centre retailers (including the 32 shown here); accounting for 57% of their shopping centre locations. Note that the total brand store counts and portfolio change is across each retailer’s entire estate, whereas each chart shows only the makeup of their shopping centre locations.

While some portfolios have seen a marked decrease in portfolios since the GFC, particularly in the fashion sector, this was not to the level expected by commentators.

The consequence is that these brands require large portfolio’s of stores, with a strong reliance on Secondary shopping centres in order to reach their customers.


The role of convenience and value continues to evolve in the retail place

The challenges of the last decade affected many retail brands in different ways. While there have been a raft of failures, there were a significant number of opportunists too.

Responding to a drive for smaller baskets and more localised spending habits, the biggest supermarket brands increased their Convenience offer by 1,600 stores 2009/16.

During the same period, by responding to demand for a more sensitive price point, the Value and Discount goods sector has increased by over 5,000 stores. In fact, Value retail goods and services have accounted for 87% of all brands store growth since 2009.

Convenience no longer refers to grocery alone. Any brands that provide an affordable, essential and increasingly local offer can fall under the umbrella of Convenience.

One specific sector that falls into this category is Value Fashion. Supermarkets realised this trend even prior to the GFC, successfully shaking up the sector to sell affordable fashion goods that would support less affluent shoppers, as well as wealthier but prudent shoppers looking for cheap essential clothing that may then allow more indulgent fashion purchases to be made elsewhere.

The merging of Convenience and Value has ultimately altered the retail landscape beyond recognition. It has also made a clearer distinction of how many store locations different brands need in order to reach their customers and in turn the kind of locations they need to trade from.

Aspirational fashion, which is not a Convenience or Value based purchase, is the main stay of the regional mall, or prime city centre destinations, accounting for around 42% of retail brands in those locations, while Value Fashion accounts for less than 15%. In both Secondary and Community shopping centres however, Aspirational Fashion falls to below 10%, while Value Fashion increases to 55%/65%, respectively.

FIGURE 12

Proportion of fashion units by VAMP for different kinds of shopping centres

 
Figure 12

Source: Savills Research / Geolytix

The type of fashion goods sold is different and so is the reliance on fashion as the most significant sector represented. In regional malls and major city centres, fashion accounts for 40% of tenants, whereas this is only 18% in Community shopping centres.

It has often been suggested that post GFC and the arrival of ecommerce, all brands require portfolios of less than 80 stores. While possibly true for Premium brands due to their offer being experiential and destination driven, this fails to recognise the way that many retailers engage with their customers. The drive for more local and needs-based retail, means that many brands require far larger portfolios and it is not surprising that brands with more than a few hundred stores are predominantly Value and Mass market retailers.

The demand for a more functional retail offer, to purchase more locally on high streets and in smaller shopping centres is a trend that has driven the Value and Discount market since the downturn. Given the number of high streets and shopping centres serving a more local shopper, this means that some brands need large portfolios in order to reach their customers, with the immediacy of product and focus on value demanding local physical presence. The growth in the discounter, sportswear, opticians and coffee shop sectors are all tied to this evolution.

While there has been significant consolidation of store portfolios for some brands, particularly in the fashion sector, this has not been to the degree anticipated, with many of the UKs strongest brands still operating from several hundred stores. There are also many growth stories, such as Poundland, Wilko, Card Factory, Sports Direct, Specsavers and Pandora, increasing their portfolios by the hundreds.

The need for larger store portfolios inevitably means a strong reliance on shopping centre locations in more local markets.

FIGURE 13

Store portfolio sizes by VAMP

 
Figure 13

Source: Savills Research/Geolytix

Retailers in many local retail schemes are performing well compared to prime retail destinations, but what of the threat from online?

There is also increasing evidence that suggests a Value and Convenience based retail offer is less impacted by ecommerce than the retail offer of larger destination schemes. It is a challenge to replicate immediacy at low cost on-line and local shops are well positions to meet the ‘needs-based’ culture of the modern consumer.

Furthermore, there has been some press coverage that suggests Click & Collect can be higher in local markets due to its convenience factor, and therefore has the potential to be a complimentary offer. Card Factory, The Works and The Entertainer are good examples of businesses that have grown rapidly despite online competition. Each brand has a significant proportion of their portfolios located in Secondary and Community shopping centres that offer cost effective space with ready access to cost sensitive customers.

FIGURE 14

Key sector growth since 2009*

 
Figure 14

*2009 used to reflect bottom of the market

Source: Savills Research / Geolytix

placeholder

Key Contacts

Tom Whittington

Tom Whittington

Director
Retail Research

Savills Manchester

+44 (0) 161 244 7779

 

Subscribe to Savills research

 

Would you like to be notified via email about new research?