Jun 13, 2019 Real Estate New

From department store to Wanghong

The corner shop, the mail order catalogue, online websites: every era has its own way of shopping. What will the future bring? It may be a mixture of yesterday and tomorrow – and have an impact both on the shopping experience and the real estate market.

  • Consumer expectations have risen significantly.
  • The logistics chain of the future will become highly complex.
  • Retail stores need to upgrade their online offerings.
2 min. to read

53 bio. €

were spent on online shopping in Germany in 2018.

People used to go to the corner shop when they needed to buy something. In the 1980s, the mail order catalogue was popular. Now, online shopping is on the rise. Who knows exactly what shopping will look like in the future? But what we do know is that the changes will affect not just shop owners, but also real estate.

Online shopping is revolutionizing the world of shopping. Almost every German with internet access now uses his or her laptop, tablet or smartphone  to buy clothing, shoes, books and electronics[1]. Last year, German citizens ordered goods worth 53 billion euros online, and the trend is rising[2]. In Europe, only the British and Irish shop online more[3].

Still, shopping via social media channels and platforms still plays a subordinate role here. But the story is changing elsewhere. Young people in China are increasingly shopping via the Wanghong economy[4]. Wanghongs are China’s influencers[5], people who are prominent  on social media and who, for example, give tips on make-up. But whether we are talking about a shopping website or social media commerce, online sales are increasingly challenging conventional business models. And that’s true, too, for retail and logistics real estate.

Logistics and warehousing 4.0

A study by Oliver Wyman, a strategy consultant, shows the scale of what is going on. In 2018, 3.5 billion parcels were delivered to homes in Germany; by 2029 the figure is expected to rise to 9 billion[6]. Warehousing therefore needs to be rethought. . The German retail association, Handelsverband Deutschland, HDE, is already seeing an increase in demand for appropriately equipped properties[7]. In addition to large warehouses in rural areas, there’s a need for logistics centers in cities where dealers can store their products closer to their customers.

Amazon, the online giant, has already opened such distribution centers in Berlin and Munich. The goal is to bridge the last mile more quickly[8] – that is, the last leg of the journey that brings an order to the customer. That last mile usually ends at the customer's front door. But Oliver Wyman thinks this will soon be the exception – because suppliers are facing increasing cost pressure[6]. One alternative is so-called multi-drop delivery, where shipments are collected in packing stations, for example.

Bricks and mortar retail is not dead, but...

The increase in online shopping is not only changing supply chains and logistics real estate. It is also having a massive impact on traditional shopping centers and high streets. It’s forecast that two thirds of purchases will still be made locally in 2030[9]However, bricks and mortar retailers will also have to adapt to the digital expectations of their customers. This means, WiFi needs to be a matter of course, so that current information and special offers can be uploaded to customers’ mobile phones while they are in the shop. One in two Germans already expects that today[10]. Service and flexibility score highly with the customer.

A glance at Milan shows what this could look like in concrete terms. The supermarket chain, Coop Italia, opened a fully digitized branch in Milan in 2015. Fruit and vegetables are displayed on interactive shelves. As soon as customers hold their hand over an apple, a screen displays its origin, vitamin content and calorie count[11]. Sensors make it possible to translate customers’ hand movements into information. 

Another future trend is that  “Microhubs”, where visitors can shop and pick up goods that they ordered online whenever they want[12], could become standard in shopping centers. This is literally a tall order for existing properties. The entrances to traditional multi-storey car parks are often only two meters high and therefore too low for delivery vans[12]. However, the shopping experience in bricks and mortar retail can be a major plus. The old chat in the corner shop will in future be shopping center entertainment. They are likely to become lifestyle hubs,[13] where shopping and communication meet.

66 %

of retail sales are expected to be still stationary in 2030.

A challenge for investors

Shopping is therefore becoming both more convenient for the consumer and an exciting experience. Convenient in the case of online shopping, exciting in the case of bricks and mortar retail. So is it a case of yesteryear versus tomorrow, offline versus online? No, offline will combine with online – and appropriately equipped properties.

For investors, this means incorporating these trends in a future-proof real estate portfolio. That is not so easy either. But it can be tackled by investment funds that incorporate both current trends and potential future ones in their portfolio.

Hand on your heart: why do you shop online?

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1. Source: https://www.bitkom.org/Presse/Presseinformation/Trends-im-E-Commerce-So-shoppen-die-Deutschen-2019

2. Source: “HDE-Online-Monitor 2019”, Handelsverband Deutschland, HDE (German retail association), issued in May 2019, https://einzelhandel.de/presse/aktuellemeldungen/12164-hde-online-monitor-2019-generation-60-plus-entdeckt-den-online-handel

3. Source: “So tickt Europa im Netz (:..)”, IFH Köln, issued in: July 2016, https://www.ifhkoeln.de/blog/details/so-tickt-europa-im-netz-onlineaktivitaeten-im-internationalen-vergleich/,“Die Zukunft des Einkaufens (…)”, Comarch Kantar DNS, issued in February 2017, https://www.comarch.de/files-de/file_53/Comarch_TNS_Studie_Zukunft_des_Einkaufens.pdf

4. Source: “The Future of Shopping is Already Happening in China”, Bloomberg, issued in April 2019, https://www.bloomberg.com/news/articles/2019-04-24/china-s-gen-z-skips-the-stores-and-shops-on-social-media

5. Source Influencer: A person who is well known due to their high presence in social media.

6. Source: “Letzte Meile 2028”, Oliver Wyman, issued in: March 2019, https://www.oliverwyman.de/media-center/2019/mar/letzte-meile-2028-analyse.html

7. Source: “Handelsimmobilienkongress: Wachsender Online-Markt sucht Logistik-Immobilien” Handelsverband Deutschland, HDE (German trade association), issued in: January 2019, https://einzelhandel.de/presse/aktuellemeldungen/11898-handelsimmobilienkongress-wachsender-online-handel-sucht-logistik-immobilien

8. Source: “Der Online-Handel verändert unsere Städte”, Welt, issued in: Januar 2017, https://www.welt.de/print/die_welt/finanzen/article160845585/Der-Onlinehandel-veraendert-unsere-Staedte.html

9. Quelle: The Future of Shopping Centers”, AT Kearney, issued in: April 2018

10. Quelle: So tickt Europa im Netz (:..)”, IFH Köln, issued in: July 2016, https://www.ifhkoeln.de/blog/details/so-tickt-europa-im-netz-onlineaktivitaeten-im-internationalen-vergleich/

11. Quelle: Coop Italia makes its store of the future a present-day reality”, altavia pallas, issued in December 2016, https://www.altavia-pallas.com/coop-italia-makes-its-store-of-the-future-a-present-day-reality/

12. Quelle: Retail meets Logistics”, ZIA, issued: January 2019, https://ziaaufeinwort.com/2019/02/05/wie-werden-shopping-center-im-jahr-2030-aussehen/

13. Quelle: Die Zukunft der Shopping-Center”, Zukunftsinstitut, issued May 2017, https://www.zukunftsinstitut.de/artikel/handel/die-zukunft-der-shopping-center/

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