Neighbourhoods and the new local, wearable tech and next-level experiences are just three of the trends on the radars of three retail experts…
The National Retail Association forecasts a record $60 billion will be spent in shops and online this festive season. While online spending is expected to soar by 51 per cent to $8.2 billion over Christmas alone, overall sales are expected to increase by a robust eight per cent on last year.
Beyond the Christmas “sugar hit” what can we expect for 2022?
We asked three retail experts – BDO’s national retail leader Salim Biskri, Colliers national director of retail investment services James Wilson and Sandhurst Retail and Logistics managing director Vivek Subramanian – for their take.
- Omni-present, omni-channel
While Covid-19 has driven a sharp uptake in online shopping, more than 87 per cent of all retail spending in 2020 was in a physical store. When omni-channel sales, such as click-and-collect are included, QIC estimates that around 92 per cent of all retail spending still involves a physical store in some capacity.
Consumers now interact with bricks-and-mortar in multiple ways, says Biskri. In-app and online purchasing, kerbside pickup, store delivery, drive-thru and instore pick-up are some of the “signs of bricks-and-mortar’s newfound versatility”. Each of these touchpoints is an opportunity to build brand loyalty. “Accurate orders, quick fulfillment, a smooth in-app experience are all ways to maximise new brick-and-mortar channels,” Biskri notes.
- Essential retail rocket
Supermarkets and hardware stores were always valuable anchor tenants. “But their new-found ‘essential service’ status has made them even more highly prized,” says Wilson, Colliers. Positive growth prospects for essential retail is driving “intensive competition” for neighbourhood centres, freestanding supermarkets and hardware stores, along with the sharp compression of yields. “The strongest compression has been seen in supermarket-anchored neighbourhood centres, which have compressed by 85 basis points from 2018 to October 2021,” Wilson says. Neighbourhood transactions totalling $1.77 billion in 2021 surpassed the last three years of turnover.
- Investors on the hunt
Institutional investors have “amped up” their investment in neighbourhood retail over the last 18 months, Wilson says, as non-discretionary retailers trading through progressive lockdowns offered secure and ongoing returns. “The last time we saw institutional capital actively targeting essential retail at this level, in the $10 to $80 million bracket, was in the mid-2000s.” As institutional capital doubled in the sector, private investors decreased from 63 per cent in 2019 to 39 per cent this year, Wilson adds.
Sandhurst Retail and Logistics has a portfolio of retail assets in fast-growing urban centres and Subramanian says people are becoming “increasingly dependent” on local centres. “Whether that’s because of a five-kilometre travel limit or because they no longer want to commute after two years of staying local, people are discovering their own neighbourhoods – and we expect this to be permanent.”
- Experience first
Physical stores are poised to make a big comeback in 2022, with many big brands already saying post-pandemic pent-up demand is bringing customers flooding back to stores for new shopping experiences.
‘Experiences’ is the key word, says Biskri. “Experiential retail should enable consumers to test out products in ways that deepen the customer experience and build confidence in the brand.” He points to Casper Sleep in New York, which offers nap appointments so customers can road-test mattresses, sheets and pillows. In some cases, experience is evolving into ‘retailtainment’. “Vans stores allow customer to watch a movie, enjoy live music, skate on an indoor ramp and, of course, buy their favourite Vans’ products.”
Subramanian says all retail centres must provide reasons to visit other than shopping, but especially neighbourhood retail. “Otherwise people just treat the centre like a pantry.” He likes community-focused activities, such as medical clinics, childcare centres, yoga studios and even swim schools that “increase dwell times”. Subramanian expects a stronger focus on design quality to emerge. “As we place greater importance on civic and public spaces, standard shopping centre design must evolve.”
- Tech transformation
The adoption of contactless payment during the pandemic has given shoppers more confidence in digital wallets, and Biskri says we are rapidly moving towards an environment where customers can walk into a store, choose and item and simply walk out without the need for checkouts. This “hands-free” shopping experience, in which the entire journey “from browse to buy” is completed with a wearable device, “has a direct impact on the aesthetic and size of the shop”.
Biskri points to London’s CornerShop concept store, which offers a mix of virtual products on large screens and physical items. The retail area is completely free of staff, who instead work upstairs in a command centre that monitors the store and prepares items for collection or dispatch.
Subramanian, who is speaking at the Property Council’s Retail Outlook lunch in Melbourne on 17 February, is optimistic about retail’s future, especially in greenfield and growth areas, once international borders reopen.
“While there is a lot of focus on quality residential – and that’s important – communities are much more than houses. There needs to be an equal, if not greater, focus on quality community amenity – and retail is at the heart of that.”
