Looking back at 2016, the Austrian retail market seemed stable: retailers’ turnovers generally grew, more than 100.000 m2 of new retail space were delivered to the market and 37 new brands entered Austria, e.g. Tesla, Rituals, Weekday, Monki and Nyx. Subsequently, Austria has kept its position as one of the leading expansion targets for retailers in Europe.
Nonetheless, one can feel that there is some change happening. The millennials’ shopping behaviour is substantially different compared to that of previous generations, as through being digital natives they are embracing technology and are very much focused on entertainment. In the near future they will reach their prime spending years, representing the majority of consumer spending.
Does this mean that shopping will be predominantly done online and brick-and-mortar stores will become obsolete?
According to a recent study by CBRE more than 70% of millennials still prefer shopping in brick-and-mortar stores. In addition to the obvious reasons for their preference (looking at and trying on the goods, having immediate access to them after deciding to buy them), another strong motivation was that they consider shopping as leisure and use shopping time to socialize. Hence, many online sellers have already opened stores whereby they offer a seamless shopping experience, both online and offline. While pure online business is stagnating, multichannel concepts are growing substantially above market average.
Does this mean that brick-and-mortar stores will not be challenged?
This does not have to be taken for granted. Retailers have to provide a clear incentive for customers to visit their stores, and the same applies to operators of shopping centers. For retailers this means that they have to display their brands in an enticing and contemporary way. Due to this, the investment into store-fit-out, instore technology and multichannel-processes is very high. Consequently, the number of new shops retailers will open is lower than in previous years and the location requirements are much more demanding. We have been analyzing new retailers entering the Austrian market over the course of the last two years and found out that approximately 70 % of them started in a ‘prime’ location (high street or shopping centre). And even in their further roll-out many of them did not compromise as 60 % of their stores were opened in ‘prime’ locations. Looking at retailers coming to Austria in 2017, this trend might even proliferate.
Owners of shopping centers invest a lot into ‘placemaking’ which means creating an environment people want to visit and return to. The examples of Shopping City Süd near Vienna and Plus City near Linz are showing that much more is needed than just refurbishing a scheme. Taking into consideration the emphasis millennials place on enjoying leisure time and socializing, much effort has to be dedicated to the integration of restaurants, bars, playgrounds, sports facilities and similar spaces into shopping centers. These facilities motivate customers to visit a specific shopping center, to stay longer and to spend more. A smart use of technology and a close cooperation with retailers, convincing them to have their most attractive concepts in place, is needed as well.
Summarizing: Future success is not free, but possible. Successful placemaking grows the demography of the visitors - Millennials prefer the ‘Hot Spots’.