Retailers reducing physical footprint

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MORE than half of retailers across the Asia Pacific are expecting a decrease in demand for bricks and mortar space as part of their long term business plans, as a reliance on digital sales surged during the heightened COVID-19 lockdown phase.

That’s according to a CBRE survey that asked 180 businesses between 28th April and 21st May.

The survey also found 60% expect a wait of at least six months for trading levels to return to pre-COVID-19 levels. Loss of sales was the largest concern regarding the pandemic, reported by 87%, followed by 65% for difficulty in meeting financial obligations, 53% in ensuring safety and 35% in supply chain disruption.

Nearly one third of retailers across the Asia Pacific saw digital sales become their core business, and while a consolidation of brick and mortar sales networks is inevitable, 75% still intend to maintain or increase investment in their in-store experience.

Only 10% expect an increase for bricks and mortar space, and 38% are tipping no change.

About 38% of retailers identified increasing online sales capacity as a focus over the rest of the year, and 37% intend for fewer stores or a smaller footprint. Just 11% intends for more stores or a larger presence.

Use of social commerce and investment in online retailing and delivery apps is anticipated by 80% and 78% of respondents respectively.

Nearly 80% of luxury retailers and over 70% of sporting goods companies are expecting to focus on the growing online sales, making them the most likely categories to do so, while about half of grocery stores intend to do the same.

Before the pandemic, 0% of sporting goods stores considered online sales as their core business, but this has surged to 55%, while the increased demand for home meal delivery has seen that number in the food and beverage sector jump from 6% to 38%.

Online was by 80% of companies as part of their business but not the primary source of sales. This has fallen to 40%, and online being considered core business has lifted from 9% to 31%. Online being newly introduced to compensate for disruption to physical stores lifted from 11% to 29%.

Food and beverage (about 50%) and other experiential retailers (nearly 60%) are the most likely to focus on consolidating bricks and mortar stores.

The sporting goods, grocery, lifestyle and health and beauty sectors all reported between 15% and 20% of businesses intending to open more stores or expand their footprint.

Across the retail industry, 65% of businesses have put expansion or new openings on hold; 58% will now employ more stringent evaluation processes, and 48% of site visits have been delayed or cancelled. More than one third (36%) have slimmed down capex for fit outs.

Surrender cases appear to have been limited, at 21%. One quarter of renewals have been delayed.

Rental reductions have been discussed widely, with 84% of tenants saying they have discussed the topic with their landlords. Rental holidays have been brought up between 58% of tenants and landlords, and more than one third of tenants reported discussing longer rent free periods for new leases and conversion to gross turnover rent agreements.

Landlords offered relief measures to 77% of tenants, although 85% of these tenants – 65% of total respondents – said landlords could be more accommodative.

The highest proportion of tenants were satisfied with their landlords’ responses in the Pacific, including Australia, at 25%, Thailand (20%), and Taiwan (17%), while each of these also reported the highest proportions of tenants saying they have not been offered any measures. Thailand recorded 32%, Taiwan 29% and India 26%, and the Pacific 17%.

All respondents in Hong Kong said they had received relief measures but thought their landlords could do more, and a large majority in mainland China and Singapore.