Whither the German high street in 2020?

Retail real estate has been viewed very much as the undesired stepdaughter of the major asset categories in the past few years, with the assault from ecommerce rendering the sector simply too unpalatable for many investors. With the exception of Fachmarktzentren, or retail parks generally anchored by the big grocery multiples, investors without clear development concepts have been giving shopping centres, and often the high street itself, a wide berth while they look for more predictable yield elsewhere.

However, the doughty Iris Schöberl, who heads up BMO Real Estate Partners in Munich and a veteran in retail, office, and residential investment for institutional investors, is taking a more optimistic view of the retail sector for 2020. We reproduce some of her thoughts here.

She represents the view that many of our city centres are now much more attractive than they were 10 years ago, despite the alleged crisis in the retail sector. The structural transformation in the industry is restoring an urbane mix to city centres with more restaurants, drugstores and food outlets, and just making them more appealing places to spend time. The retail sector itself is the real winner in terms of its quality, nascent commitment and freshly revived creativity – and all for the benefit of its customers, which is absolutely critical, and the direction the retail sector must boldly go in 2020, believes Schöberl.

Co-existence in the high street: impossible without the online sector

There is still plenty of fine tuning to be done between the online and bricks-and-mortar retail sectors. Stores spoilt by successful formats lack the inclination to change and make innovations. An omni-channel approach offers many opportunities to attract customers to the store. Even the notorious online shopper sees the advantage of collecting orders (click & collect) in the store: if the shopper doesn’t like the product, it can be established straight away and the product can be returned without the inconvenience of repacking and a visit to a Post Office. 

Many shops also offer the possibility to exchange goods bought online. And when the customer comes to the store to exchange an item, there is also a possibility that they will find other products which suit them too. For the brands it is critical to generate turnover, but unimportant where and how. The decisive factor for customers is the assortment and diversity of products, coupled with the best possible service. Convenience is key, so why shouldn’t there be a single shopping app for the whole city instead of one for each and every brand - a wide-ranging assortment like on Amazon, but offline? 

Emotionality and trust: the key to the high street

Manufacturers increasingly see a presence in prime retail locations as an indispensable part of their marketing activities, and are prepared to pay for it. Branded showrooms attract customers, who may be undecided and “just want to look around”, but this also serves to boost the attractiveness of retail pitches themselves. Nonetheless, long-term success is only achievable going forward if the salesperson is also more of a qualified advisor. The seller must bring the brand and the customer together like never before. The critical success factor is the added value which the customer takes home from a visit to the store. The seller must be designer, producer and brand ambassador in one, and the store must be both showroom and shopping heaven for the customer.

Fashion and restaurant sectors ripe for a merger 

Irrespective of other Anglicisms, the phrase “experience shopping” means the customer gets advised, entertained and fed. Food makes a significant contribution to the sensuality of the shopping experience. That applies equally to the latte macchiato in a slim glass in the café of the ladies’ outfitters and the hearty suya in the Nigerian restaurant, which now occupies a former shoe shop. Shopping is a leisure activity requiring entertainment and excitement, an experience to be discussed amongst friends. The experience of purchasing a velvet blouse is on a par with the surprising taste of the suya. The retail and food & beverage sectors are now ready to take the next step in their burgeoning relationship and release two sets of potential in one go.

Monogamy – no thanks!

So where do we want to go with this? The high streets of the Top 20 cities will continue to attract customers with their increasing diversity. The commercial objective of the process lies in diversification. The former monostructure with fashion stores across all sales floors will make way for restaurants and services relating to sport, health, technology, household furnishings, mobility and displays and charging stations for e-vehicles with two or four wheels. 

Of course, the high streets will still be the destination for fashion shopping: from the noble gent’s brogue to red-soled stilettos for the ladies. Some of these uses extend to the upper floors, but these areas are also available for use as classic office space - possibly the contemporary co-working variant - or residential space from traditional flats and furnished micro apartments to serviced apartments and a variety of hotel concepts. The use mix would not only exist in a certain location but in each and every property. The use types must marry but there is no reason for them to live monogamously.