Physical store expansion remains key to retailer’s strategies despite growth in online sales, reports CBRE

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Growing online sales will not deter retailer’s physical store expansion plans in 2016, reports CBRE in its seventh edition of “How Active Are Retailers Globally?”, a study of  over a 150 major international brands based in Americas, Asia Pacific and Europe, Middle East and Africa (EMEA).

The survey findings show that 83% of brands suggest their physical store expansion plans will not be affected by the growth in e-commerce in 2016, although this is likely to vary from market to market and only 22% of the brands are concerned about stiff competition from online retailing. Out of those questioned, 17% have large scale ambitions with many retailers looking to open more than 40 stores (up from 9% in 2015) in 2016. The vast majority (67%) are looking to open up to 20 stores.

Mark Disney, executive director, CBRE shopping centre development & leasing, said: “The evidence from major shopping centres and the strongest high streets supports the findings with increased investment in physical stores sitting alongside growing online sales. Demand from retailers is stronger than for several years with a substantial number of global brands looking to expand in strategic locations or upgrade their stores to improve customer experience and showcase their brand. This comes in the form of new sites or existing stores being enlarged or upgraded to include further lines or collaborations that retailers may be pursuing. The stores need to support the range that can be found online, and vice versa.”

Core Western Europe is at the top of retailer’s expansion targets, Germany proving most popular with 35% of retailers looking to expand there, France, 33% and the UK, 29%.

China is the top Asian market with 27% of retailers looking to expand there and a quarter of retailers are looking to the US as a retail destination in 2016.

Mark Burlton, global executive,  retail occupier team, EMEA, said: “Despite the backdrop of economic uncertainty and the popularity of online shopping growing year on year, a physical store presence in key locations is still critical to the strength of a brand’s presence. Stores still need to create an emotional affinity with a shopper and customers still feel a need to go into store, physically touch a product and enjoy the feel-good factor associated with a particular brand experience. The store is integral to the shopping journey and can be used in a number of different ways, such as to click and collect, research of the product or brand or to test the product. It isn’t solely about the transactional side.”

Despite the positive headlines, retailers are remaining ‘cautiously optimistic’ in 2016. When questioned about the risk factors for them in in the coming year, similar to last year, real estate cost escalation (56%) and unclear economic prospects (42%) continue to be at the forefront of their minds.

Street shops (76%) and regional shopping malls (72%) were cited as the most popular formats for expansion with an increasing number of brands looking to travel hubs. A fifth of brands, largely from the Americas and EMEA, stated their intention to expand into travel hubs in 2016 as this will give them access to high footfall, highly frequented locations. Burlton continues: “The challenge now is for retailers to build an engaging offer that encourages people to stay longer and spend more.”