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Understanding retail in a multi-channel world

In a time where you can buy almost anything online in a matter of seconds, how are ‘clicks and bricks’ existing and thriving together in the retail world?

On 21 September, Boodle Hatfield hosted a panel of retail industry experts to discuss the future of the sector in a multi-channel world.

On the Boodle Hatfield panel were:

  • Katherine Russell, Head of Property, John Lewis
  • Rebecca Ruddle, Head of Showrooms, Made.com
  • Joanna Lea, Director of Retail, Grosvenor
  • Karen Mason, Partner and Head of the Retail Team, Boodle Hatfield

John Lewis operates what could be considered a more traditional omni-channel model, with online sales growing to a significant proportion of total sales. While its stores continue to form the backbone of its strategy, its approach to its physical assets is far from static. It is constantly reviewing, evaluating and innovating, with the ultimate aim of creating desirable places to visit.

Made.com launched its online offering in 2010 and its first physical store in 2012. Its strategy is slightly unconventional, seeking out interesting and unusual buildings and locations for its physical showrooms. One of its successful showrooms can be found in a converted mill in Batley in West Yorkshire, while another was created by the transformation of a small 500 sqm house in Brighton in January this year.

Grosvenor, owning 300 plus acres of London, mainly in Mayfair and Belgravia, approaches things from yet another angle. The scale of its ownership and its history allows it to take a long view, creating an interesting and vibrant tenant mix, supporting its retailers and investing in the public realm and streetscape.

Retailers and landlords

The session began with the panel addressing the question of whether the property world truly understood the collaboration between the digital and physical retail worlds. In many cases, it was asserted, it seemed to be the retailers, rather than the landlords, driving innovation.

Customers, said John Lewis’ Katherine Russell, have more choice at their finger tips than ever before. It can be difficult for in-store staff, or 'partners' as John Lewis calls them, to keep up. One strategy which John Lewis has employed to help tackle this issue involves providing its partners with tablet devices so they can better help its customers when in store.

She also discussed some of the real benefits to the collaboration of the two worlds, such as the halo effect that comes with ‘click and collect’. Those that collect in store often spend more both in store and with neighbouring retailers, and their use of this feature makes John Lewis a particularly desirable tenant.

Made.com’s Rebecca Ruddle added she would welcome the opportunity to work in collaboration with more innovative landlords, as this would afford her company the opportunity to drive activity to new levels, to the benefit of both.

Grosvenor’s Joanna Lea offered a different perspective, pointing out that the online and in-store retail boundaries were becoming increasingly blurred. One example of this was delivery services such as Deliveroo and UberEATS where orders placed online were collected from restaurants’ premises, greatly increasing the number of covers served. This blurring, along with greater access to data from retailers affiliates and partners, was driving a renewed interest in turnover rents which allow landlords to capture the success, and, at times, share the pain, with tenants.

Turnover rents

Karen Mason of Boodle Hatfield echoed the point. Turnover rents, where an occupier’s rent is directly linked to its turnover, have long been considered in decline with their demise the result of online retailing, she said. Omni-channel retailing with increasingly blurred boundaries between in-store and online purchases has, however, led to a renewed interest from both retailers and their landlords.

When asked whether they thought turnover rents were likely to become more commonplace as landlords sought to capture a reflection of retailers’ trade both in-store and online, 71% of the delegates answered 'Yes'.

Yet there remained some difficult discussions for landlords and retailers, said Katherine Russell. John Lewis has invested many millions in Magna Park in Milton Keynes and in its other distribution and fulfilment hubs. Is it right, asked Katherine Russell, for landlords to take a share on sales that are not fulfilled in-store? And should landlords be encouraged to invest or perhaps joint venture on future retail infrastructure?

Infrastructure

Omni-channel retailing will increasingly rely on high speed broadband connections, enabling shoppers to seamlessly transfer between online and in-store shopping. When  asked whether the Government was doing enough to support digitally enabled retailing by creating high speed broadband, 89% of the delegates disagreed. Clearly something more needs to be done.

Crystal ball gazing

Today, non-food retailing accounts for approximately 15% of total online retail spend. When asked what percentage of this spend will be attributed to non-food in three year's time the majority of delegates, 68%, predicted it would increase to 30%. The remainder were fairly evenly split between an increase of 20% and an increase of 40%. There was a clear consensus that non-food online retailing would increasingly be an extremely important part of retail landscape and that retailers' approaches to their physical spaces would need to continue to adapt accordingly.

The overall conclusion of the evening was that retailing has changed dramatically over the past two decades and that journey is not yet complete. While clicks may never fully replace bricks, retailers and landlords will need to think creatively and work together to ensure the continued existence of vibrant shopping areas.

Boodle Hatfield works with property which enables retailing in a wide range of settings. To view a snapshot of the range of work we carry out in the retail sector, please see our Retail Brochure.

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