IN DEPTH: Making a move to the shopping mall

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Jewellers on slick shopping centres versus high street regeneration.

Dozens of major shopping centre have opened in the past decade, promising year-round climate controlled shopping and a cluster of the country’s biggest retail brands. But are they a certain winner for jewellers in search of higher footfall, sales and profits, or can higher costs in the malls, coupled with regeneration of town centres, make staying put on the high street a better option? Rob Corder finds out.

UK shoppers have gone through three ages of consumption over the past 30 years, retail analysts believe.

For a decade, from 1983 to 1992, retailers floated through a period of carefree consumption, as real incomes surged and successful home ownership drove up confidence. Shoppers went from carefree to careless in the next 10 years up until 2002, as exuberance in the housing market encouraged consumers to fund increasingly extravagant lifestyles by loading up on debt.

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2003 was the start of an age of careful consumption, with households beginning to realise that the party funded on credit cards and equity release from their properties could not go on forever. The financial crisis of 2008 and the recession that it triggered has made shoppers even more conservative.

In figures and findings published in a report called The Reshaping of Retail, which was commissioned by retail real estate giant Hammerson, and written by research firm Conlumino, it was revealed that the average annual growth rate for retail spending has slowed across these three decades, from a peak of 9.5% in 1986 to a low point of 0.6% in 2009. The 10 years until the end of 2012 represented an average annual retail growth of just 1.9%, most of that accounted for by essentials at the supermarkets.

So, what does the next decade hold for retailers? Will it be a return to the carefree 80s, the careful noughties or something else entirely?

We are entering the age of considered consumption, argues the Hammerson/Conlumino report. The next 10 years will be characterised by consumers who are less concerned with the pure acquisition of products and more concerned about the nature of those products and their real value.

The considered consumer will also take more time to research purchases, will be less impulsive and more selective. Music to the ears of jewellers is that the considered consumer is likely to make fewer, but perhaps more expensive purchases than shoppers in previous decades.

Retailers may also want to consider their target market, with the majority of retail growth in the next 10 years expected to come from a much older segment of the population, with purchasing by shoppers aged 55 to 64 forecast to grow by about 65%.

The way people shop is also changing, with retailers being urged to adopt multichannel sales strategies. In 2001, more than 80% of purchasing decisions were made using just one or two channels (for example, in store and via a catalogue). By next year, almost one in 10 purchasing decisions will have involved five channels, including stores, websites, mobile apps, social media and interactive TV.

These new channels are complex and frightening to many traditional jewellers and, with growth forecast to pick up in the coming decade, high street shopkeepers may be tempted to sit tight and hope for a return to the booming 1980s and 1990s. That would be a mistake, the Hammerson/Conlumino report suggests. Between 2010 and 2020, the total number of stores across the country will decline 10.3%, with retail space falling 5.7%. The closure of shops will be felt most acutely in traditional high streets, where it is forecast that store numbers will fall by 31%.

According to the report: “The watchwords for retailers are fewer, bigger, best. This means better merchandised, better supported by multichannel capabilities, and situated only in the best locations.” 

Destination shopping is today’s buzz term. This means a greater concentration of sales taking place in shopping centres and out-of-town retail parks. It also means shops have to become destinations in themselves – focusing on design, layout and service that reinforce the retailer’s brand values.

The battle for footfall has led to jewellery multiples such as Fraser Hart and Ernest Jones being challenged for the prime locations in shopping centres by monobrand multiples like Thomas Sabo, Links of London and Pandora.

TH Baker falls into both camps – the family retailer has 11 outlets across the country, and the company also runs 10 Pandora franchise stores. The business also occupies sites in town centres as well as shopping centres. “Our decision is based on where the highest footfall is in the area,” explains TH Baker director Phillip Higgs.

But it is not all one-way traffic. In Walsall, for example, TH Baker is planning to move out of the Saddlers shopping centre and into the town’s high street. “The conclusion would be that the most important factor of locating a store is the footfall, rather than being in or out of a centre, although in a lot of cases we find shopping centres to be much busier,” Higgs says.

People also tend to spend more in shopping centres. “The average spend is up due to the stores having better brands than we had previously, such as TAG Heuer, Breitling and Gucci. The customer profile does differ, but this is probably due more to the better brands than the actual location,” Higgs suggests. “The centres can have higher rental levels, but this is countered by higher turnover and profits.”

Ed Ferris, managing director of Swag, which runs multibrand jewellery stores as well as Pandora franchises, has been building up a portfolio of shopping centre outlets for almost 20 years. “In the mid 1990s we decided to concentrate our business in shopping centres due to the increased footfall,” he recalls.

“We could see the town centres shifting as the malls opened and pulled the town towards them. At the stores we moved into town centre malls, we saw our turnover double overnight.”

However, Ferris says there is no hard and fast rule that says higher footfall delivers higher profits. “It isn’t that there aren’t any good high streets left. If you find the right town and the right pitch, often the end reward is better because of the lower rents.”

In recent months there has also been a small swing back towards town centres. In the three months from June to August this year, the BRC recorded that high street footfall rose 1.1% compared to the same period a year ago, while shopping centre footfall fell 2.5%. Footfall in malls has been down every month since August last year.

The arrival of a brand new shopping centre in a town or city centre always has a dramatic effect on the surrounding area – but not usually a negative effect. When the WestQuay centre opened in Southampton in 2000, it drove down rents in the neighbouring shopping streets, but actually drove up overall spending, according to research by Hammerson, which owns the shopping centre. This was also coupled with a major regenerative affect across the whole retail landscape of the area. Southampton ranked just 27th as a city in national retail rankings before the opening of WestQuay. It now ranks 19th.

The opening of the Bullring shopping centre in Birmingham in 2003 brought 90 new retail brands into the city and raised its ranking as a UK retail destination from 12th to third.

There are also broader economic and social benefit to cities with new shopping centres, the Hammerson/Conlumino report found. Around WestQuay, crime has fallen by 60% over the 10 years since the centre opened.

In Birmingham, 37% of retail jobs created by the opening of the Bullring went to people who were previously unemployed. And 85% of all jobs created went to people living within 20 miles of the centre.

For jewellers, this has meant more money in the area, whether they are in the shopping centre or not. Despite displacement of revenue and footfall towards the Bullring, surveys found that retailers outside the mall enjoyed an 8% rise in sales after it opened.

German jewellery brand Thomas Sabo has been on a constant search for high traffic locations for its outlets. This has led it to open concessions in department stores including Harrods, Fenwick, House of Fraser and Selfridges, along with branded stores in shopping centres including Meadowhall in Sheffield and the Victoria Centre in Nottingham. Its highest profile opening in recent years was in the Westfield mall adjacent to the Olympic park in east London.

“The approach of Thomas Sabo has been to ensure that we are located in the best shopping locations throughout the UK,” explains Jon Cossick, managing director UK & Ireland for Thomas Sabo. “In many cities that does mean looking to the major shopping centres. The mix of high footfall, good spending customers, and good adjacency possibilities are good for both brand visibility as well as good for turnover.”

The company’s analysis of each retail location extends to a search for other stores nearby that Thomas Sabo expects will attract customers likely to buy its jewellery. “We do look at adjacency, and look to be amongst like-minded fashion stores that also generate good quality footfall,” Cossick says.

Thomas Sabo operates with a mix of its own branded stores, department store concessions, and also with shop-in-shops within independent jewellers. Do these independents suffer when the brand moves into a major shopping mall with its own store? No, says Cossick. “Brand visibility in the shopping centres helps with the overall brand visibility in the region. This in turn can help our wholesale jewellery partners in that particular region.”

The choice to relocate to a new or existing shopping centre is never simple and, even if it is near certain to increase sales, the higher costs mean that better profits are far from guaranteed. As Cossick confirms: “As long as the location and size is right, there is a good chance a shopping centre will work, but there is never a guarantee and you have to be sure that the maths works. It is not a license to print money, and needs careful consideration and realistic forecasts.

This feature was taken from the November issue of Professional Jeweller. To read the issue in full online, click here.
 

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