Translation of an article that appeared in Slovenia’s daily financial newspaper on 25th February 2020

eCommerce and its effect on real estate

By Jacqueline Stuart

Retail real estate overtaken by logis;cs in a<rac;veness to investors

Real estate advisor CBRE carries out an annual global real estate investor inten5ons survey. In the 2019 report, less than 10% of respondents cited retail as the most aCrac5ve for investment, whilst nearly 30% cited industrial and logis5cs.

The surge in online shopping has contributed to investor appe5te for logis5cs assets, whilst making retail less aCrac5ve.

A record year for retail investment in Slovenia

Slovenia has bucked the trend, with large transac5ons of retail porIolios in 2019, totalling nearly 400 million euro, including shopping centres sold by Centrice to Immofinanz, Supernova and others; a Tuš porIolio sold by HETA to Heliks Prop; and a Merkur porIolio sold by HPS to LCN Capital Partners.

In fact retail investment in con5nental Europe remains strong for now, with volumes of over 45 billion euro, well above the ten-year average. However 2019 was a weak year for retail investment ac5vity and pricing, with investors shunning retail, and European retail investment volumes down by around 25% on 2018. Investment yields have been stable, but have begun to soXen in a growing number of markets. Changing consumer behaviour has made investors wary of retail.

How big is the eCommerce market?

According to eCommerce Europe, the share of consumers using the internet who shopped online in 2018 ranges from 22% in Ukraine, to 88% in Switzerland; compared to 46% in Slovenia. eCommerce turnover con5nues to grow at around 13% per annum Europe wide, with an es5mated 9.1% annual growth in Slovenia. Most eCommerce turnover is concentrated in Western Europe (66%), whilst northern Europe has the highest spend per eShopper at 2,045€ per annum. Maltese are most likely to order from other EU sellers

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“Slovenia saw retail investment transactions of nearly 400 million euro last year”

Translation of an article that appeared in Slovenia’s daily financial newspaper on 25th February 2020

(89%), compared to 48% in Slovenia, whilst Montenegrins are most likely to order from Sellers from the rest of the world (77%), compared to 28% in Slovenia. In Slovenia most online purchases are made on a desktop computer, with 4% of shoppers using smartphones, and 3% using tablets.

eCommerce revenue in Slovenia reached US$336 million in 2018, and is expected to reach US$475 million by 2022, according to Sta5sta. Slovenia is well placed to benefit from fast eCommerce development, with 87% of households connected to broadband, and an advanced banking system with high use of credit and debit cards. Euromonitor Interna5onal reports that eCommerce in Slovenia con5nues to grow in popularity, with popular products including apparel and footwear, consumer electronics, appliances, media products, personal accessories and beauty and personal care products. People joke that electrodomes5c retailer Big Bang has become the showroom for eShop Mimovrste. Many people in the market for a new appliance go to Big Bang to see it in real 5me, then order it online from Mimovrste at a discount.

Popular eStores in Slovenia include ceneje.si, mimovrste.si, nakupovanje.net, mercator.si, Amazon, eBay, and Ali Express.

Breaking down barriers to eCommerce

The EU is ac5vely working to break down online barriers so that people can enjoy full access to all goods and services offered online by businesses in the EU. Ending unjus5fied cross-border barriers, facilita5ng cheaper cross-border parcel deliveries, protec5on of online customer rights and promo5ng cross border access to online content are cornerstones of the Digital Single Market Strategy. Geo-blocking prevents us from buying from a website based in another EU member state, such as re-rou5ng back to a country-specific website, or having to pay with a debit or credit card only from a certain country. New rules entered into force on 3 December 2018, aimed at ending discrimina5on. Nevertheless, there is s5ll some way to go. Merchandise on the Italian Zara website is s5ll 25% more expensive than the Slovenian website, and it is not possible to order on the Slovenian website for delivery to Italy. Same story with Marks and Spencer in the UK, prices are higher on the Italian website but it is not possible to order on the UK website for delivery to Italy. One can only imagine the effect on the Italian tax take, and the tax take of other high tax jurisdic5ons, once these issues are resolved, and consumers can take advantage of cheaper prices in other countries.

Retailers need to adapt or die

The UK is known as a na5on of shopkeepers, but in recent years many household names have gone into liquida5on. The biggest loss to the high street was in 2008 with the closure of Woolworths. All stores were closed, resul5ng in 27,000 job losses. It has since relaunched online. Fashion brands Principles, Jane Norman, Tie Rack, BarraCs, Bri5sh Home Stores, Banana Republic and C&A, all closed or withdrew from the UK market. Same story with electronics, sports, books and toy retailers. The UK is way ahead of most other European countries in terms of e-GDP, (the share of GDP made up by eCommerce sales), with

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“eCommerce is expected to reach US$475 million in Slovenia by 2022, according to Statista”

Translation of an article that appeared in Slovenia’s daily financial newspaper on 25th February 2020

7.94%, compared to northern Europe’s 3.3%, central Europe’s 1.94%, and western Europe’s 3.82%. Retail brands outside the UK should take note. Most retailers are adop5ng a clicks and bricks combina5on giving consumers a choice of whether to buy in-store or online. Zara has been par5cularly successful, providing a seamless service. If your size is not available in-store, you can simply scan the swing 5cket with your smartphone and order it online, with a few clicks. Returns can be posted back or delivered to any store.

Asos is an online only fashion eTailer that has seen exponen5al growth since it was founded in London in 2000. The company sells over 850 brands as well as its own range of clothing and accessories, and ships to all 196 countries from fulfilment centres in the UK, US and EU. In March 2018 Asos introduced a mobile app which allows users to upload images of clothing they like, the app will then suggest matching or similar items that the company stocks. It has been downloaded 10 million 5mes. Asos has revenues of more than 2.8 billion EUR and 4,500 employees.

Retail landlords at risk

According to real estate advisor Cushman and Wakefield, some owners of retail space are more at risk than others. Central and Eastern Europe is more robust than the more mature markets of North West Europe, where online penetra5on rates are higher and there is a greater surplus of retail space. Rents will likely drop in the more mature markets, as retailers adjust their porIolios to suit the mul5-channel world. The most resilient sectors across Europe are major high streets, dominant shopping centres, convenience stores and retail warehouses, as well as leisure and food stores. There is increasing divergence between prime and secondary loca5ons, and between large and small towns.

How are shopping centres responding?

Leisure is now seen as cri5cal to the success of a retail development. Food and beverage offer and experien5al retail is increasingly important. Experiences beyond the tradi5onal ones such as art, live music, virtual reality, lounges, and large video display walls are being adopted by retail marketers. Spar European Shopping Centres’ Aleja Center will open next month in Šiška, Ljubljana. Apart from shops, it will offer a food court, with a variety of restaurants, in over 2,300m2. Visitors will be able to enjoy ea5ng in natural light, thanks to a huge glass dome. A range of leisure ac5vi5es will be offered on the roof, including volleyball and basketball courts, a football pitch, fitness park, running track and outdoor playground. A pump track circuit for bikers will be available immediately in front of Aleja centre. The scheme will also feature Planet Lollipop, a children’s adventure world.

‘Retailtainment’ is being adopted by many brands. Footwear brand Vans has opened a 2,800m2 loca5on in London that combines art, music, BMX, street culture and fashion. The space features a cinema, cafe, live music venue and art gallery, with a concrete skateboarding ramp on the boCom floor. Ikea in the UK brought a unique experience to 100 fans who won a Facebook challenge, lesng them spend the night in its warehouse in Essex. They were able to select the maCress, sheets and pillows of their choice, with the help of a sleep expert. TOMS is a socially

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“Retailers need to adjust to the new multi channel world”

Translation of an article that appeared in Slovenia’s daily financial newspaper on 25th February 2020

responsible retailer of shoes and eyewear. They donate a pair of shoes to a child in need for every pair of shoes sold, and a pair of glasses to a person in need for every pair of glasses sold. They have given 86 million pairs of shoes. In 2015, TOMS placed VR headsets in 100 stores, enabling them to virtually transport customers to Peru to see the impact of their One for One campaign on local people. Not only did the retail experience reinforce their brand values, it also gave customers an unforgeCable and immersive experience combining retail with entertainment. . Contact:

jacqueline.stuart@s-invest.si Voice: +386 (0)590 75 780 Mob: +386 (0)41 251 646 Skype: jax_stuart

Slovenia Invest combines local knowledge with a global perspec5ve to provide a full range of real estate services including sales, acquisi5ons, valua5ons, rentals, tenant rep and research. Our exper5se encompasses office, hospitality, industrial and retail. Our clients include ins5tu5onal investors, developers, high net worth individuals and local financial ins5tu5ons. Our main objec5ve is to build long-term rela5onships by always recommending the best course for our Clients.

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