a.s.r. real estate

Shoppers return to inner cities

When the number of COVID-19 infections rose sharply last year, people followed government recommendations to avoid crowded places and the formerly bustling inner cities became eerily quiet. Online purchases soared (22% higher revenue in Q2 2020 compared to Q1 2020, source: Statistics Netherlands) and reports quickly surfaced in the media about the expected impending demise of high street retail. If visitor numbers and purchases in recent weeks are any indication, this worst-case scenario is now off the table. On the first day the restrictions were eased, the RMC research firm registered over 40% more visitors to high street shops. ING research shows that since the restrictions have been lifted, card payments in shops and cafés, bars and restaurants have increased by dozens of percentage points.

When you remove the need to visit a brick-and-mortar shop, the consumer’s desire to visit one also disappears, critics claimed. But will this prediction come true? As far as we’re concerned, this statement grossly underestimates the love of the consumer for shopping and the appeal of inner cities. Going into town together, going from one shop to the next, having a cup of coffee on a terrace on a historic town square, being pleasantly surprised by a sales person’s service and being titillated by the smells and colours of the merchandise on offer: all of this separates physical retail from their online counterparts.

Although online shopping offers comfort, it also leads to polluting delivery vans in the streets, lots of unnecessary packaging, and purchases that sometimes fail to arrive on time due to a deluge of orders. Many online shops have reported that last year was their best year ever in terms of turnover. Amazon’s turnover more than tripled during the lockdown period. At the same time, many others were unable to make a profit last year or only for the first time, like Zalando.

Before the coronavirus crisis, shopping featured high on many people’s list of favourite things to do and that will not change because of one year of forced abstinence. What’s more, the feeling of finally being allowed to go shopping again makes consumers even more willing to accept additional discomfort such as long queues in front of stores and having to wear a mask. This was demonstrated by the high visitor numbers after the easing of the restrictions in recent weeks.

Of course we cannot deny a partial shift in turnover from brick-and-mortar to online. This trend started over 10 years ago and has sped up as a result of the pandemic, temporarily eclipsing inner city shopping. A more natural balance will be restored in which smart retailers know how to retain customers with a clear presence both in the most popular shopping streets and on online platforms.

Last year was definitely one of the worst years ever for many retailers. Primark, with only brick-and-mortar shops, lost over a billion in revenue due to forced closures during the lockdown. Many retailers were forced to reinvent themselves during forced closures. Click & collect, personal shopping, a good website: those who did not have these affairs in order last year, now do, allowing them to compete with retailers only operating online. There is a light at the end of the tunnel for those who have survived the crisis and updated their business operations.

The city’s popularity as the place for interaction and entertainment has remained unrivalled over the centuries. Now that societies are slowly emerging from lockdowns, inner cities are once again demonstrating their appeal as the place to be for people to congregate. We have no doubt that those inner cities with a rich history and culture that have weathered many storms will show their resilience. These inner cities are the perfect place for retailers with both an initial brick-and-mortar shop or an online presence to now ensure they create strong relationships with their customers.

In the next fund newsletter, a.s.r. real estate will include a follow-up article, explaining their vision on the prime shopping areas of the future.

For more information about the ASR Dutch Prime Retail Fund, please contact Edwin van de Woestijne.

Edwin van de Woestijne
managing director and fund director
ASR Dutch Prime Retail Fund
T: +31 (0)30 257 26 54
E: edwin.van.de.woestijne@asr.nl

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