Big luxury names still back physical retail, London, Paris, NYC are key
Major international brands will “continue betting on physical retail to drive sales in resilient destination cities”, a report from Savills said this week. And the retail real estate specialist said New York, Paris and London “rank as the most attractive cities for retailers”.
But in its Retailer Attractiveness City Ranking (produced as part of its 2022 global Impacts research programme) it added that there are “new opportunities arising for luxury store openings in the Middle East and Asia”.
In its new report, it also pointed out that “2022 is an opportunistic time for retailers to acquire new sites in key locations, at a reduced rent compared to 2019 levels”.
So, what is it about New York, Paris and London that keeps them at the top of the global retail tree? Savills said they’ve “demonstrated that they retain the key fundamentals of a successful retail location and are set to bounce back quicker this year than other destination cities”.
Marie Hickey, director of retail research, said the three cities benefit from “affluent domestic markets and have already demonstrated far higher levels of resilience over the last 18 months”. New York (ranked first), “suffered relatively less during the pandemic due to a robust domestic tourism market”, and “a lower penetration of e-commerce in Paris”, which is ranked second, “has steered costumers to its bricks and mortar luxury stores”.
Savills said that in London, “forecasts of a return to pre-pandemic traveller numbers by 2023 look set to underpin a swift recovery, with many retailers already reactivating their requirements in the capital”.
That’s an interesting viewpoint given that British luxury body Walpole highlighted a day earlier how the UK as a whole is falling behind in its recovery due to the cancellation of VAT-free shopping for tourists. It seems that on the shopping front, London continues to stand outside of the overall UK trend and remains a tourist shopper magnet, as well as enjoying that robust demand from locals and UK tourists.
Looking at cities lower down the ranking, Savills said that some are dependent on a steady stream of in-bound tourism, and fourth-placed Hong Kong, for instance, “has faced a sharper decline and will face a longer road to recovery”.
The company sees major opportunities for retailers in a number of emerging markets, primarily across the Middle East and Asia.
In Dubai, many luxury brands are represented by monobrand stores through local franchises but government policy changes mean more international brands are looking to take full control of their stores. Cairo, Saudi Arabia and Bahrain “all have relatively affluent domestic populations and also currently represent interesting opportunities for luxury retailers in this region”, it said.
As for China, Nick Bradstreet, Director, Head of Retail, Savills Asia, said: “A stringent Covid-19 containment policy has fuelled domestic tourism and subsequently the emergence of new retail hotspots. Luxury brands will follow the lead of top developers, which are expanding into Chengdu, Hangzhou, Kunming and Ningbo, among others. Of these, we see the most potential in Hainan, with the full island set to be a duty free zone by 2025.”
It seems that — like New York, Paris and London — post-pandemic, many other cities are pivoting to serve domestic shoppers and globally, the face of luxury shopping has therefore been altered dramatically by the Covid crisis.
Savills also noted how the pandemic has accelerated the trend for stores to become “aspirational destinations that straddle leisure and entertainment”.
Marie Hickey added: “The role of the physical store was already evolving before the pandemic, however the need for brands to reconnect with their customers and a desire for human interaction following long periods in lockdown, has only intensified this trend.”
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