Emerging consumer journeys

It is almost a decade since the collapse of Northern Rock bank in 2007 and Lehman Brothers in 2008 saw the start of the Global Financial Crisis (GFC).

Since then a series of economic shocks and concerns have regularly been reported that have implied that UK economic growth is fragile and at risk from both internal and external forces. While there remain many global economic uncertainties (not least, Brexit, the consequences of the hung parliament, or the fall in sterling), the long term threat to the retail and leisure markets has often been overplayed.

UK retail did experience severe challenges between 2008 and 2012, with consumer confidence and real earnings growth slow to recover from the GFC. The period was tough for many retailers with store portfolio consolidation, a swathe of high profile administrations and increased high street vacancy.

However, the retail and leisure market is dynamic and while consumers cut back on many ‘big ticket’ items, they also switched to a more budget mind-set that significantly boosted the importance of Value, Discount and Convenience brands.

Shoppers became more focussed on essential purchases and were less inclined to travel as far to shop. This resulted in a change in the retail mix on the high street in a period that saw several brands grow their portfolios, often taking space made available from retailers that had gone bust. The growth of 99p Stores for instance, saw their portfolio increase from 50–250 from 2008/15 before being absorbed into Poundland’s business.

It wasn’t only the Value sector that benefited from the downturn as there were other sectors that also performed well following the GFC. Consumers cut back on non-essential spending, increasingly using any additional income to spend on retail indulgences and leisure time. No other period in history has seen such growth in the sale of handbags or electronic devices, the opening of coffee shops and casual dining restaurants, or uptake of gym memberships.

These various adaptations and sector growth has fundamentally changed the retail and leisure property landscape. There are many different retail and leisure journeys, and consumers' expectations of experience or functionality vary according to their priority at a given time.

What continues to drive consumer visits to large retail schemes is the notion of a retail trip as a leisure pastime. Shopping has evolved from being considered an activity in its own right to part of a wider leisure experience. Consumers want to access everything from shops and restaurants to cinemas, bowling and other leisure activities in one place, and expect the shopping centre to deliver this. This is a ‘want-based’ activity.

However, one clear consequence of change to the retail landscape is that shopping has become polarised between what we need and what we want and large retail & leisure destinations do not fulfil all consumer journeys.

Furthermore, Geolytix report that the top 50 retail destinations in the UK account for only 13% of Convenience and Comparison Goods expenditure spent in store. What happens to the other 87%?

While destination schemes provide high profile but infrequent retail experiences, most shopping trips take place much closer to home; 78% of consumers visit a local shopping offer more than once a week. This is a ‘needs-based’ shopping trip.

For everyday shopping trips, consumers are time poor, convenience is key, goods purchased are typically essential and bought frequently, with ‘value’ being important both in terms of price point and service experience.

There is clearly a strong relationship with grocery stores and retail services; the rise of the Convenience grocery market in recent years shows how consumers are less willing to travel to large schemes and are more inclined to shop locally more frequently.

However, convenience shopping trips account for more than just grocery goods. Growth in discount homeware and variety stores is one example, but the divide is not always clear by a specific sector. Many fashion goods are functional essential items that consumers are looking to purchase as conveniently as possible, hence the rise in Value/Mass fashion goods, while upmarket fashion is more closely affiliated with destination shopping trips.

The Media often focusses on the best and worst retail stories; regional malls with masses of aspirational and leisure offer, or struggling high streets with high, long-term void rates and too much redundant retail space.

Yet there is a significant swathe of successfully functioning high streets and shopping centres that serve well the needs of local consumers.

Non-prime shopping centres are generally categorised as ‘Secondary shopping centres’ and are often dismissed as being of low value to investors or retailer. Yet, much of UK retail sits within this amorphous category, both shopping centre and high street. It is the backbone to retail in the UK and its importance to consumers should not be underestimated.

Any analysis of shopping centres requires an understanding of their purpose and relevance. Community shopping centres, accounting for over half of the Secondary sector, have a particularly strong focus on meeting functional, essential, convenience led consumer journeys from a locally placed retail offer.

^{Source: Conlumino / Savills Research}

A key influence to the structural change to the retail market includes the rise of ecommerce, which now accounts for 15.6% of retail spend. This market disruptor will continue to affect different retailers and retail places in very different ways. However, with price point and convenience being the driving force behind visitation to local Community shopping centres, there is good reason to believe that they can offer a point of difference over online shopping.

While the economic context of 2017 has many parallels with the uncertainty that began 10 years ago, the key structural changes that have occurred since then means that the retail market is better placed to be able to cushion the blow from further impact. This is particularly relevant to Community shopping centres that have evolved their offer in line with these shopping trends.

The findings of this research demonstrate the importance of this sector to consumers, retailers and investors alike.