New York, Paris and London have 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, according to Savills Retailer Attractiveness City ranking. This was produced as part of its 2022 global Impacts research programme.
SEE ALSO : Korea’s online shopping ranked second highest
“These cities all benefit from affluent domestic markets and have already demonstrated far higher levels of resilience over the last 18 months,” said Marie Hickey, director of retail research at Savills. “New York (ranked 1st), suffered relatively less during the pandemic due to a robust domestic tourism market and a lower penetration of ecommerce in Paris (2nd) has steered customers to its bricks and mortar luxury stores.”
Savills’ ranking of the world’s cities is determined by the size of their retail market, international visitor appeal, domestic affluence, online penetration and growth prospects. Higher scores are also given to markets with lower online penetration.
In comparison, cities which are dependent on a steady stream of inbound tourism that forms a key pillar of the city’s economy, such as Hong Kong (4th), have faced sharper declines and ultimately have a longer road to recovery. Savills’ research data also shows Hong Kong’s prime street shop rents fell by 27 percent from Q4 2019 to Q3 2021. Simon Smith, Regional Head of Research & Consultancy at Savills Asia Pacific comments, “While Hong Kong’s road to recovery may be protracted, the report demonstrates that the city possesses many of the key attributes which make it a retail destination with global appeal.”
Moving up in the rankings is Shanghai, with significant growth prospects alongside the scale of its retail market. Its resilience is down to a few key drivers, explains Nick Bradstreet, Head of Savills Asia Pacific Retail. These include “the lack of outbound travel fuelling luxury spend, the emphasis of the government on supporting domestic consumption and also the emergence of new retail sectors gaining traction, including more demand for sport and outdoor retailers and new energy vehicles (NEVs).”
“A stringent Covid-19 containment policy in China 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,” added Nick Bradstreet.
By sparking this mixed recovery among a number of emerging markets in key destination cities primarily across the Middle East and Asia, Savills reveals how the pandemic has created opportunities for retailers. While several brands struggled to sustain sales throughout the pandemic, some sectors really performed despite the circumstances, namely athleisure, homeware, wellness, F&B and electric vehicles.
“Some successful brands within these sectors are capitalising on their strong revenues during the pandemic. With a rebasing of rents in some markets, and units in great locations being available and far cheaper than in 2019, now is an opportune time to acquire new sites and grow their physical footprints. Additionally, for dynamic luxury brands, the current market may make it possible to relocate existing stores to larger units in stronger locations, as well as providing opportunities for new luxury entrants,” said Sam Foyle, co-head of Savills Prime Global Retail team.
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 fuelled this trend. “In an increasingly digitised consumer landscape, physical stores are now becoming aspirational destinations that straddle leisure and entertainment too,” continues Marie Hickey.
SEE ALSO : Study shows half of Hong Kong consumers prefer unmanned stores
“Covid has created inevitable changes for the retail industry, predominantly with the structural shift towards soaring levels of ecommerce activity,” added Sam Foyle. “However, the ramifications of the pandemic on consumer behaviour have served to accelerate previous trends and the resilience of many of these destination cities infers that physical retail remains an essential component of a brand’s strategy to reconnect with customers, enhance exposure and ultimately drive sales.”