Martin Summerscales, head of retail consultancy, CBRE, says the battle for retail spend is moving from the high street to out-of-town retail parks
Out-of-town retail parks have become an essential ingredient in the UK economy. The sector provides employment for a vast amount of people, it produces a staggering amount of revenue and it lowers costs for retailers while enhancing the shopping experience for customers. Until recently, these parks have played second fiddle to high street stores, but thanks to changing shopping habits and technological advances, the emphasis is shifting. Demand from both customers and retailers has tipped the scales and the sector has taken on a new lease of life.
A change in consumer behaviour has turned out-of-town parks into an essential cog in the UK’s retail wheel. The annual revenue these sites produce is estimated to be at around £94.7bn, just narrowly behind the revenue annually produced by high street stores, currently £107.2bn. To add to this, last year we saw an increasing diversity in occupiers and a significant drop in retail park vacancy rates. So what’s behind the wave of success?
One major attraction is that these parks are perfectly aligned with the click-and-collect revolution currently transforming the retail industry. Click-and-collect allows customers to buy or order goods from a store’s website and collect them from a local branch. By buying into this modern convenience-focused concept and using out-of-town parks to realise it, retailers can hugely increase the reach of their network, with the parks’ outlets serving perfectly as distribution centres. The standard layout of these facilities also lends itself well to the click-and-collect model. As everything is built on one level, products can be wheeled from the door to the car with minimal effort and maximum efficiency for both parties.
Having these outlets dotted around the country also means delivery and customer pick-up times can be drastically reduced, so the purchaser is able to collect their chosen item within just a few hours of clicking ‘confirm order’ on the store’s website. Clearly, this makes the location of these sites crucial, which is why we’re increasingly seeing retail parks spring up close to major junctions and transport links. Retailers also recognise this model allows them greater control, as they no longer have to rely on third-party delivery companies, which occasionally fall below the standards of customer service a brand is aiming to achieve.
It’s not only their ability to make delivery and pick-ups more efficient which has led to a surge in demand for out-of-town units. Dedicated click-and-collect desks are extremely cost-efficient to operate as the rent per sq ft can be up to 50% lower than a prime high street store. This means they can have far larger storage and service areas without worrying about the impact this will have on front-of-house operations. The extra square footage also provide space for three times as many people working behind the scenes to deal with online orders as they have working out front for the walk-in customer. This shift in staff allocation is an inevitable step but is by no means a bad omen for employment.
Figures from CBRE’s recent Accessible Retail Report show that on an average day, retail parks employ a staggering 725,000 people in the UK. Incidentally this dwarfs the 597,300 working worldwide across the big four banks: Lloyds, HSBC, Barclays and RBS. The average retail park workforce can range from teenagers and university students to working parents and those nearing retirement. It can include those with little higher education to those with university degrees and professional qualifications. In this sense, the industry provides one of the broadest sources of employment in the UK.
As well as providing huge levels of employment and massive benefits to retailers, out-of-town parks also enhance the customer experience. Shoppers no longer have to fight their way into town centres or struggle to find expensive parking spaces. As click-and-collect tends to operate outside the standard 9-5 working day, shopping becomes far more manageable for working people or busy parents.
The industry recognises that efficiency is everything and vital to this goal is perfecting your multichannel offering. Whether it be physical stores, online stores, mobile stores, mobile app stores, telephone sales, a customer browsing, buying or returning goods, the experience should be no different and the quality of fulfilment should not be affected.
The benefits of using out-of-town parks to enhance this multichannel offering is clear – but the transition is by no means straightforward. Companies need to ensure their IT systems are robust enough to support the demands placed on them. They need to be able to identify when products are out of stock, so they can offer customers the option of having an item shipped from one store to another in a matter of hours.
Currently, many brands will still have legacy systems. For large-scale retailers, these must be replaced if they want to make effective use of the outposts created by out-of-town sites. In the past, companies have treated their online businesses as separate entities but their store and web operations must be completely integrated. Some recognised this – John Lewis, for example, predicts that the majority of its sales will be online within three years. Streamlining and perfecting the multichannel offering should now be the number one priority for most big brands.
Sainsbury’s has made clear its ambitions to achieve this with the recent purchase of Home Retail Group. By turning former Argos Extra stores into Sainsbury’s distribution warehouses, the retail giant will greatly expand its click-and-collect operation, reducing the need to hold vast amounts of stock centrally. Sainsbury’s is aiming to compete on some level with the distribution service offered by Amazon Prime, and the move is just one phase of what will become a key battle in retail over the next five years. This is, the quality of the full-scale integrated online and store experience. Getting the right product to the right customer, on time, using the benefit of property portfolios to maximise capabilities. Out-of-town parks will play a key role in this battle.