Retail2020executivesummary

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Transcript of Retail2020executivesummary

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Introduction

It has been ten years since Jones Lang LaSalle published its Retail Futures, 2010 Report. Retail, 2020 is our new look into the future.

The timing is perfect. For many, the last two-three years have been about ensuring that their business had a future at all. Now that we may reasonable expect the worst of the Great Recession to be over (although the probability of a double dip remains at 20% according to some economists), the question is: how to win in the post-recessionary market?

This report covers all the bases, taking a 360° tour of the horizon. It looks at economic, technological, socio-demographic and socio-cultural change and asks: what are the trends and how will they impact the retail industry?

Essentially, we cover European retail from an owners and occupiers perspective. We look at the shape of retail to come (covering such �G�L�P�H�Q�V�L�R�Q�V���D�V�����V�H�F�W�R�U�V�����O�R�F�D�W�L�R�Q�V�����I�R�U�P�D�W�V�����R�I�I�H�U�V�����J�H�R�J�U�D�S�K�L�H�V�����R�I�À�L�Q�H���R�Q�O�L�Q�H�����D�Q�G���Z�H���O�R�R�N���D�W���S�U�R�¿�W�D�E�L�O�L�W�\�����J�U�R�Z�W�K���D�Q�G���F�R�V�W�V�����W�K�H���E�X�V�L�Q�H�V�V���P�R�G�H�O����

Our method has been to be as rigorous as possible in our research and to take a very disciplined approach to thinking through the consequences. Our aim has been ambitious: to arrive at the most pertinent assumption base around European retail futures, anywhere.

How successful we have been, only time will tell. What we are able to do is look at our track record. What predictions did we make in 2000 and what did we get right? And with great candidness, what did we get wrong or miss entirely?

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Review of Retail Futures, 2010 Report*

No one has a crystal ball but, by identifying and drawing upon ten key trends, our last report was particularly prescient. We got a lot right and successfully predicted many of the forces shaping the consumer and retail landscape between 2000 and 2010. Many themes were anticipated Mcre events proved us right. We highlighted: globalisation, polarisation of markets, the ageing of European populations and emergence of complex household structures, the new wave of conscientious consumption and socially responsible companies, the strong emergence of experiential retailing and the siphoning of spending to services, the role of brands as status symbols and as short-cuts to decision making, increasing interest in well-being markets, clever consumption patterns and shopping as a leisure activity. Not bad!

Economically we had more mixed results. We successfully alerted readers to the fact that the

recession at the start of the decade would not be prolonged but then missed the great boom conditions for retailers from 2003-2007 and, indeed the end of decade disaster. Allied to this was our underestimation of the growth in consumer credit and the explosion of impulse purchasing behaviours.

We were also guilty of underestimating the impacts of new technologies and the internet. At the time of writing the dot com bubble had just burst and, whilst we believed that e-commerce would rebound, we short-changed the movement online. As we now know, �L�Q�W�H�U�Q�H�W���V�D�O�H�V���P�D�G�H���V�L�J�Q�L�¿�F�D�Q�W��strides right across the decade and people were increasingly attracted to price-comparison sites.

And as for misses, we missed the �L�Q�À�X�H�Q�F�H���R�I���&�K�L�Q�D���R�Q���N�H�H�S�L�Q�J���L�Q�À�D�W�L�R�Q���G�R�Z�Q�����Z�H���K�D�U�G�O�\��mentioned the reappraisal of value due to discounting, low cost activities and freeloading - and we forgot to mention the rise and rise of star retailers such as Tesco and the Inditex Group.

Nevertheless, whilst you can’t get it all right, we are proud with our previous report and are convinced that it provided timely guidance to our clients who read and used it. And, of course, we aspire to do even better in this 2020 Report.

*A full review of our predictions made in 2000 are available in a separate report.

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Executive Summary

Shopping will remain popular across the period ���������������������������7�R�G�D�\�����������P�L�O�O�L�R�Q���S�H�R�S�O�H���Y�L�V�L�W���W�K�H���&�R�O�R�P�E�R���6�K�R�S�S�L�Q�J���&�H�Q�W�U�H���L�Q���3�R�U�W�X�J�D�O���D�Q�Q�X�D�O�O�\���D�Q�G���&�H�Q�W�U�H�V���O�L�N�H���:�H�V�W�¿�H�O�G�����/�R�Q�G�R�Q���V�K�R�Z���W�K�D�W���L�Q�Q�R�Y�D�W�L�R�Q���L�V���Q�R�W���G�H�D�G��

However, looking forward the landscape for retail will not be anywhere near as benign as the decade we are leaving behind and new dynamics will make life tougher for both owners and occupiers.

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The low hanging fruit will continue to come from expansion into the new consumer markets to the East. �&�K�L�Q�D���D�Q�G���,�Q�G�L�D���Z�L�O�O���E�H���Q�H�D�U���W�K�H���W�R�S���R�I���W�K�H���O�L�V�W�������E�X�W���V�R�P�H���Z�L�O�O���O�R�R�N���E�D�F�N���I�U�R�P�������������Z�L�W�K���U�H�J�U�H�W�����W�R�R���V�O�R�Z��and too cautious to have really benefited.

Nearer to home, huge opportunities are presenting themselves in markets in Eurasia and the Middle-East. Spotting the next ‘hot spot’ and being ahead of the crowd will be vital - as always - but many know well how to play this particular game and will reap �V�L�J�Q�L�¿�F�D�Q�W���U�H�Z�D�U�G�V��

Over the next decade, the retail industry will come to appreciate that the balance of power is changing – and its ability to maintain margins will diminish. For one, clever consumers are taking matters into their own hands and are increasingly armed with weapons which are able to damage retailer’s hegemony. The fast, accessible internet is proving to be a great leveller of information and liberator of consumer power. Real time information, particularly around price, will thwart retailer’s ability to increase prices whilst new demands for better facilities, vastly improved customer services, convenient technologies and crowd-pleasing experiences will add new costs.

The next great game changer will be the mobile �L�Q�W�H�U�Q�H�W�����5�H�W�D�L�O�H�U�V���E�H�Z�D�U�H�����W�K�H���H�Q�G���R�I���¿�[�H�G���S�U�L�F�L�Q�J��and impacts on in-store staffing will inflict great damage on retailing profit and loss accounts.

Suppliers, too, will get in on the act as they trade with consumers directly on line and establish flagship outlets. So, whilst we will not see retail dis-intermediation, the momentum will be in that direction.

Retail will get smarter as a consequence. For example, retailers will rise to the new wants generated by a retiring Baby Boomer population and a smaller (but very demanding) Gen Y cohort. We can predict senior care centres emerging for the former and a shift from young fashion brands due to declines in the latter.

In terms of the economy, retail will remain a significant sector providing growth, jobs and dynamic new environments for consumers. It will continue to shape townscapes and will have an on-going role in bringing modernity to the heart of people’s lives.

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