Online sales have not - as long feared - proved to be the killer of store-based retail, though certain traditional department stores are falling victim to failure to innovate, a PropertyEU panel discussion on the Future for retail heard at the Provada real estate fair in Amsterdam.
The collapse of the 129-year-old Vroom & Dreesman (V&D) in the Netherlands and British Home Stores (BHS), founded in the UK in 1928, were cited as the latest examples of traditional department stores in Europe that have failed to innovate to keep pace with the fast-changing world of retail.
Clerys, the well-known retail destination founded Dublin in 1853, is another example of the demise of an established department store concept. Like V&D and BHS, the ownership structure and management of Clerys has been a point of discussion, but all three are also seen as having tired formats and of being guilty of failing to innovate their offering and come to grips with the rise of ecommerce.
The faltering of iconic department stores comes paradoxically at a time when consumer spending is on the rise and confidence among retailers is booming. 'Even during the financial crisis retail real estate was in demand as it was seen as a stable asset for institutional funds particularly if you compared it to offices and other asset classes,' said Martin Eberhardt, head of the German business at Dutch investment manager Bouwfonds.
Fellow panellist Marije Braam-Mesken, head of EMEA retail research at CBRE Global Investors, said retail fundamentals are currently very strong. 'We have seen very strong improvements over the last year reflected in consumer confidence and sales in our shopping centres, leading to retailers asking for a lot of new space in our shopping centres.' Investors, she said, see retail property as a mature asset class run by people who a 'good track record and know what they are doing'.
Increased consumer sales and rising tenant confidence was yet to translate into rental growth across the board, but rents are doing better in 'better positioned, dominant shopping centres,' the briefing heard. Landlord incentives for retailers are also on the decline.
The difference in performance between different retail types is particularly clear in the Netherlands, said Bart Stek, senior consultant at Colliers International's Dutch business. 'The supermarket business is performing quite well, as DIY and house-outfitting shops - which were hit hard during the crisis - are benefitting from the pick up in the residential market,' he said. 'There are major differences in the fashion sector as some formats have performed well, while others have gone into bankruptcy.'
Stek agreed that respectable researchers have estimated by up to 20% retail real estate in the Netherlands is obsolete, but he expressed doubt that the actual figure is this high.
Online retailing
Nevertheless, online sales, the briefing heard, has been the number-one disruptor for the retail sector in the Netherlands and across Europe in recent years. While there are noticeable differences between countries, going online is a European-wide trend, Braam-Mesken said.
But Braam-Mesken told the retail briefing in the International Business Lounge in Provada that the increasing popularity of online sales is not the only reason some retailers have run into difficulties or even gone out of business. 'There are clear segments where retailers are struggling as they did not invest enough to catch up with the latest trends,' she said.
There is also the question of whether retailers view online sales as a separate channel. 'I think the successful retailers who are really outperforming today are those that integrate all their sales channels. Online is very important to them and not seen as something they need to do as well,' Braam-Mesken said. 'If you start to focus on online, you have to do it really well, and your service for the online channel must be very good. I think many international retailers made mistakes in implementation in different countries, for instance, by not communicating in the local language. Mistakes like this ensure the online channel does not take off,' she said.
Department stores
Online isn't the only culprit as traditional department stores began to get into difficulties before the internet peak. 'The Netherlands is now experiencing the V&D collapse while we have faced the same crisis in Germany for the last 10-15 years and a lot of famous German department stories have disappeared,' said Eberhardt, a German national heading the German business at Bouwfonds.
But ill fortune for one retailer can spell opportunity for another. Last year, Hudson's Bay Company (HBC), the Canadian retail giant that includes Saks of Fifth Avenue in New York in its portfolio, acquired Kaufhof, the largest Department store in Germany and owner of Belgium's only department store, for €3.9 bn. A renovated Kaufhof model is to be the foundation of HBC's business in Continental Europe's largest market. HBC is also expanding into the Netherlands with a pipeline of 20 stores, some of which will be based in properties previously leased to V&D.
Erberhardt said that aside from online sales, demographics is a major factor effecting the retail sector, including department stores. 'The babyboomers are retiring within the next few years and they have their own demands in relation to how and where they shop.' The same applies to younger generations who have grown up with the internet. 'And in terms of the multichannel question we need to consider what to do as real estate people not retailers,' he added.
Multi-brand and F&B
Braam-Mesken said that CBRE Global Investors had seen the trend coming that department stores were not performing as strongly as they had in the past when they had fewer competitors. The decline of the department store concept, she said, could lead to rising vacancy in shopping centres. But retailers like Inditex, who have several fashion brands, are asking for more space. 'They operate different labels which they want positioned next to each other in a shopping centre. So, they can fill space that has become vacant and they can become the new anchor tenant,' she said.
Dominant shopping centres, Herman Kok, head of research at Multi Corporation noted, are also transforming themselves into multi-functional market places that offer consumers more than just a place to shop. The right Food and beverage (F&B) offering is becoming increasingly important for shopping centres to attract and keep the public for longer, he said.
