Capital Language Solutions | Retail: The death of brick and mortar?

Retail: The death of brick and mortar?

retail-supermarktThe end of traditional, brick and mortar retail has regularly been proclaimed. The seemingly unstoppable juggernaut of online retail, more convenient than ever since the advent of smartphones, tablets and the internet of things, is supposedly driving the last few nails into the coffin of our cities’ shopping streets, malls and out-of-town retail parks. Oliver Samwer, serial eCommerce entrepreneur and co-founder of Rocket Internet, even claimed: “Shops are medieval. People only built them because there was no internet!” So how are Germany’s stationary retailers doing? How are the country’s brick and mortar retailers responding to the “threat” of online sales channels?

  • Retail traffic paints a different picture
  • The rise of click and collect retail services
  • The social importance of retail
  • Retail rents
  • Brick and mortar is the foundation of omnichannel retail

Retail traffic paints a different picture

A recent JLL analysis of retail traffic, or footfall, in 170 of Germany’s major shopping streets revealed that far from deserting the high street, shoppers are as keen on their regular shopping expeditions as ever. Cologne’s Schildergasse, where JLL counted almost 17,000 shoppers in a single hour, is the most popular high street in Germany. It’s mix of department sores and big brand retailers, including Puma, Adidas, Desigual and Tommy Hilfiger, obviously strikes the right chord with the region’s shoppers and moochers. Munich and Frankfurt also have famously bustling shopping streets, with almost 15,000 shoppers in a single hour on Munich’s Neuhauser Straße and just over 14,000 on Frankfurt’s Zeil. Berlin didn’t figure in JLL’s ranking, but that is largely because the city has such a diverse range of shopping streets that it is almost impossible for a single retail destination to score such high footfall figures.
What JLL’s figures show is that the rise of online retail hasn’t really dented the volume of retail traffic on Germany’s major shopping streets. JLL highlights the fact that the figures have remained consistently high over the last few years, and have even increased in certain locations. So what are brick and mortar retailers doing right?

The rise of click and collect retail services

Large-scale retail is no longer binary, no longer either on the high street or online. Germany’s major retailers have launched a range of services and concepts as they battle to tap into consumers’ enthusiasm for online retail. One of the ubiquitous services is “click and collect”, which allows shoppers to search for what they want on a retailer’s website, order from the comfort of their own homes and have their items delivered directly to their local store, where they can then inspect the goods, touch them, try them on and benefit from the retailers normal in-store service. This means that shoppers not only have a bigger range of products to choose from, they avoid the risk of their item being out of stock and can also decide when to collect their purchases, rather than having to wait at home for a parcel to arrive. Many retailers have incentivised the use of such services, offering free delivery options, bonus loyalty card points and discount vouchers. For retailers the benefits are clear: shoppers are still physically present in-store, the logistics of ordering and delivery are streamlined and customer loyalty is enhanced.

The social importance of retail

Shopping is about much more than picking up a few functional purchases. The modern shopping expedition is a social event, often taking up most of a day and not entirely devoted to actually buying things. Only brick and mortar high streets offer families and groups of friends the experience of making shopping fun rather than a necessary chore. After all, it’s not possible to joke around in the changing rooms of an online fashion retailer. The importance of catering to shoppers’ more extended desires is demonstrated by the rise in the number of cafés, fast-food outlets and restaurants on Germany’s high streets. Five years ago, only 11% of Germany’s high street retailers were selling food and drink. This has since doubled, reaching 22% this year. It’s clear that shoppers want an experience, and this experience includes food and drink. There have been enough reports on the importance of balanced food courts in shopping malls, and now it appears that the same applies on the high street, too.

Retail rents

This health of the sector is reflected in the development of retail rents in Germany’s major cities. According to JLL’s latest figures, prime rents in Munich’s best retail locations now stand at €360/sqm (2013: €350), with €320/sqm in Berlin (2013: €280) and €310/sqm in Frankfurt (2013: €290). These rises reflect the fact that Germany’s planning laws are among the most restrictive in Europe, which makes it difficult to develop new malls and retail parks, keeping the supply of modern retail space relatively short. Competition for high-quality space is fierce, and both domestic and international retailers are prepared to pay a premium for the best space in the best locations.

Brick and mortar is the foundation of omnichannel retail

Omnichannel retail basically describes retailers use of a variety of channels to provide customers with a seamless shopping experience. Omnichannel combines physical retail with online stores, mobile stores, mobile apps, interactive technologies such as beacons, personalisation systems and convenient payment options. As mentioned above, traditional store-based retailers have been embracing the online word. The same is happening in the opposite direction as an increasing number of online retailers open physical stores to showcase their products and provide their customers with the real-world interaction that online shopping cannot deliver. Of course retailers want to generate sales, but they also want to attract and retain customers. It seems as if online retailers have finally realised, although they probably won’t admit it, that online is about buying, wheres offline is about shopping – and shopping is much more than spending money, it’s also about spending time, socialising, having fun and experiencing.

Not only is brick and mortar not dead yet, it looks like it still has plenty of life and lots to offer.

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