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Global trends in online shopping
- 1. Global Trends inOnline Shopping March 2017 Implications for Listed Property
- 2. The rise ofonline shopping is reshaping the retail industry, and consequently the listed property market. It’s expected that online shopping will increase by 162% in the next five years. And while the South African market lags somewhat behind its international counterparts, that’s no reason for large retailers and malls to ignore this global trend. In countries such as the UK, South Korea and China online shopping currently makes up 16% of total retail sales, while in South Africa it currently occupies 0.97% of total retail sales and has decreased by 7.1% in the past ten years. This could be due in part to the consideration that the success of online retailers depends on having a technologically-sophisticated society, with high levels of internet access, credit cards and formal sector shopping. While consumers who shop online find it a preferable experience when it comes to speed, information, quality and convenience, they feel that in-store is better for refunds, customer service and enjoyment. Along with this, speed of delivery and technical website failures when checking out are further gripes against e-commerce experiences. And while the majority of purchases are expected to stay in brick-and-mortar stores, more and more retailers are realising that the key to retaining shoppers is to ensure that the customer enjoys the shopping experience. One way in which international retailers, particularly in the UK and Europe, are seeking to achieve this is through the integration of technology in the shopping experience. Whether it’s mobile applications (apps) that make parking and finding a vehicle easier, or being alerted to shopping specials and items on your shopping list while walking through a mall. Apps for friends meeting up at coffee shops make the retail experience more pleasurable, while 58 European retailers have used events and game features of the popular Pokemon Go to increase footfall and attract young adults. Technological features like free WiFi, charging stations and electric car charging ports will serve to attract consumers and increase the time they spend shopping. These changes are already being rolled out in retail spaces overseas. Retailers can also use data analytics to perfect their tenant mix and increase footfall in their centres. Experiential retailing is the way of the future. This means consolidating retail spaces into multi-channel destinations with more lifestyle-focussed features, such as gyms. To some extent this has already started happening in South Africa, with examples like flagship Woolworths stores (such as in the Mall of Africa) and Exclusive Books, which has branded itself as not only a book store, but a social hotspot where one can enjoy food, coffee and reading. With online shopping projected to grow exponentially over the next five years, embracing technology and integrating it into the shopping experience is critical for retail landlords. STANLIB is an authorised financial services provider By: Keillen Ndlovu, STANLIB Head of Listed Property Global trends in online shopping and the implications for listed property
- 3. 2 The Rise ofOnline Shopping Source: Google
- 4. 3 Online Shopping inSouth Africa 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % Growth year-on-year 15.3% 12.4% 11.7% 4.9% 7.0% 9.1% 8.7% 6.7% 7.4% 7.6% 8.2% On-line as % of total retail sales 0.17% 0.20% 0.23% 0.29% 0.35% 0.41% 0.50% 0.62% 0.76% 0.88% 0.97% Source: National Treasury, World Wide Worx, Deutsche Securities March 2017
- 5. 4 E-commerce as a% of total retail sales across the world Source: Bank of America Merrill Lynch , Euromonitor June 2016 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% China South Korea United Kingdom Asia Pacific USA North America Germany World Western Europe Japan France Australia New Zealand Eastern Europe India Russia Brazil Spain Italy Latin America Canada Mexico Indonesia Middle East & Africa
- 6. 5 2016 US Performanceby REIT Type Industrial Outperformed and Malls Underperformed Source: Deutsche Bank, SNL December 2016 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0 Average 30.6% 27.2% 23.2% 21.6% 17.1% 14.3% 10.7% 9.2% 4.9% 4.9% -4.9% -7.5% 8.6%
- 7. 6 Global Online Penetrationby Category 0% 5% 10% 15% 20% 25% 30% 35% Apparel and Footwear Specialst Retailers Beauty and Personal Care Internet Retailing Electronics and Appliance Specialist Retailers Home and Garden Specialist Retailers 2000 2014 2019E Source: Bank of America Merrill Lynch , Euromonitor June 2016
- 8. 7 How Consumers ViewInternet Versus Physical Shopping for Different Aspects 80.7 73.8 73.1 70.6 67.2 59.2 49.3 29.9 28.9 18.4 18 14.2 6.3 8.1 8.6 14.4 15.9 17.2 33.8 36.9 18.5 44.4 32.1 47.5 0 10 20 30 40 50 60 70 80 90 Easy to compare prices Price Range Convenience Browsing Product info Speed of purchase Enjoyment Product quality Customer service Trust in Retailer Refunds Regular store shopping is better The internet is better Source: Bank of Merrill Lynch Real Estate Industry Overview, June 2016
- 9. 8 Use of Appsto Enhance the Shopping Experience Source: Wayfair
- 10. 9 Westfield – Oneof Largest Retail Landlords Globally Identified 6 Shopper “Tribes” in the UK in 2016 Source: Bank of Merrill Lynch Real Estate Industry Overview, June 2016
- 11. 10 Move Towards More“Experiential” Retail Means Retailers may Consolidate into Larger Flagship Stores Source: Westfield Corp October 2016 Presentation
- 12. 11 Westfield: Leisure Componentof Retail Sales Experienced the Highest Growth Speciality Retail Sales Period Ending 31 December 2016 Flagship Regional 12 months 3 months 12 months 3 months Specialities 3.5% 5.5% 0.5% 3.0% By Category Fashion 2.2% 3.5% (1.2)% (0.1)% Jewellery 1.9% 3.0% 5.1% 5.3% Leisure 5.1% 8.9% (1.3)% 6.0% Food Retail 1.4% 3.4% 1.3% 2.7% General Retail (0.8)% (3.9)% 1.4% 6.4% Source: Westfield Corp Full Year Results Presentation 2016
- 13. 12 Unibail: Leisure ComponentAlso Generated the Highest Growth Source: Unibail Full Year 2016 Results Presentation Fashion Bags, Footwear & Accessories Culture, Media & Technology Dining Health & Beauty Entertainment +0.6% -1.0% +0.8% +4.4% +5.1% +5.3%
- 14. 13 Addition of LifestyleComponents to Shopping Centres This Trend has Started in South Africa Source: Westfield Corp October 2016 Presentation
- 15. 14 How Unibail isUsing Technology to Simplify the Shopping Process Identified pain points Source: Unibail Full Year 2016 Results Presentation Services offered to kill them Learning more about our customers Finding one’s way Is stressful Shopping as a group Is difficult Routine kills discovery Smart Park Meet my friends Smart Map Your app automatically memorises the location of your car Find your friends in the centre via the app Discover and localise Loyalty offers of stores You don’t know Frequency and duration of stay Interests and Social behaviour Shopping preferences and product interest
- 16. 15 Use of ShoppingCentre Apps to Target Marketing Material to the Relevant Shopper Source: CNBC Retail May 2015; Unibail-Rodamco Results Presentation February 2016 Meet My Friends Smart Map Smart Park
- 17. 16 Introducing Electric CarCharging Ports to Parking Lots Attracts consumers and increases centre dwell time Source: Unibail Full Year 2016 Results Presentation 224 electric car charging stations 4 sites with Tesla chargers 20 sites targeted in 2017
- 18. 17 Using Games likePokemon Go to Attract Footfall Particularly Useful for Attracting Young Adults Source: Unibail Full Year 2016 Results Presentation Deploying game features and events in 58 Shopping Centres Exclusivity in Continental Europe Footfall Customer Engagement Enriching Customer Experience
- 19. 18 Use of DataAnalytics to Fine-Tune Tenant Mix
- 20. 19 Landlords Taking anOmni-Channel Approach to Enhance the Shopping Centre Experience Amazon pick up lockers at Drake’s Circus Shopping Centre in Plymouth (British Land) Quick check-out handsets at Waitrose, Plymouth Source: STANLIB Research November 2016
- 21. 20 Occupancy Rates ofListed Mall Landlords in Key Markets Source: Bank of Merrill Lynch Research, Company Data, June 2016 100% 90% 80% 70% 60% 50% 2007 2008 2009 2010 2011 2012 2013 2014 Average listed Australia mall operators Average EU listed mall operators Average US listed mall operators Dead mall danger zone
- 22. 21 Rental Growth forMall Landlords in Key Markets 0% 1% 2% 3% 4% 5% 6% 7% Source: Bank of Merrill Lynch Research, Company Data, June 2016
- 23. 22 Problems Encountered WhenBuying Online 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Speed of delivery slower than indicated Technical failure of website during ordering or payment Wrong or damaged goods delivered Difficulties in finding information on legal rights Complaints difficult Final Costs higher than indicated Foreign retailer did not sell in my country Fraud Source: Eurostat 2016
- 24. 23 Vast Majority ofRetail Sales Should Continue to Occur in Stores Source: Bank of Merrill Lynch Research, Euromointor, Company Data, June 2016 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2020E Online Retail Sales Brick and Mortar Sales 9.6% 10.2% 11.7% 13.2% 14.9% 24.8% 90.4% 89.8% 88.3% 86.8% 85.1% 75.2%
- 25. 24 Impact of DroneDelivery on Both Retail and Logistics Properties Source: Bank of Merrill Lynch Real Estate Industry Overview, June 2016 Amazon Prime in action DHL Packstation with SkyPort and Parcelcopter
- 26. Manufacturer Retailer landscape inthe past Retailer landscape now Importer Regional Distribution Unit Local Distribution Unit Retail Stores Consumers Manufacturer Importer National Distribution Unit Local Distribution Unit Retail Stores Consumers Delivery parcel (returns) 25 Evolving Retailer Landscape Modern supply chain now consumer facing Source: LondonMetric 2016
- 27. 26 US Industrial Vacanciesat All-Time Lows Source: Prologis March 2017 350 250 150 50 (50) (150) (250) U.S. Square Feet, Millions 10 9 8 7 6 5 4 3 2 1 0 % 1991 1993 1995 1997 1999 2001 2003 2007 2009 2011 2013 2015 2016 2017E 2018F Completions (L) Net Absorption (L) Vacancy Rate (R)
- 28. 27 Prologis (PLD) –Significant Opportunity to Increase Logistics Space 0.000 1.000 2.000 3.000 4.000 5.000 6.000 US Europe China Japan Other PLD Regions Additional Modern Stock Required Today Current Modern Stock Modern Logistics Space Square Feet, Millions Source: Prologis March 2017
- 29. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2010 2011 20122013 2014 2015 2016E 2017F 2018F 2019F 2020F 28 Global E-Commerce Sales Projected to Grow by 162% Between 2015 and 2020 Source: Prologis March 2017 14 12 10 8 6 4 2 0 % Modern Logistics Space Square Feet, Millions E-Commerce Sales (L) E-Commerce as a % of Total Retail Sales (R)
- 30. 29 Shopping Centres arethe Ultimate Multi-Channel destination Source: Hammerson Plc February 2017 In-Centre sales 1 2 3 1. In-store multichannel Additional click and collect sales, ‘in-store online’ channel and net effect of online returns +10% 2. Retail halo Incremental market share of online sales catchment +5% 3. Collection kiosks Integrate pure online retailers into centre +1-2% (1) (2) (3) Productivity of the centre extends by a further 17%
- 31. 30 STANLIB Global PropertyFund Top Retail and Industrial Property Holdings Industrial • US – Prologis • UK and Europe – Prologis – LondonMetric – Segro • Asia – Prologis – Global Logistics Properties • Australia and New Zealand – Goodman Group Retail • UK and Europe – Hammerson – Unibail Rodamco – Westfield • Asia – CapitaMall Trust – Hongkong Land – Wharf Holdings • Australia and New Zealand – Scentre Group – Westfield • US – Westfield – Simon Property Group – General Growth Properties Source: STANLIB February 2017
- 32. 31 STANLIB Global PropertyHoldings by Property Sector Retail REITs, 31.30% Industrial & Office REITs, 27.04% Residential REITs, 14.28% Specialty REITs, 13.76% Real Estate Holding & Development, 5.99% Diversified REITs, 4.50% Hotel & Lodging REITs, 1.61% Cash, 1.50% Source: STANLIB February 2017
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- 34. 33 Disclaimer Collective Investment Schemes(CIS) in Securities are generally medium to long-term investments. An investment in the participations of a collective investment scheme in securities is not the same as a deposit with a banking institution. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from STANLIB Collective Investments (“the Manager”). Commission and incentives may be paid and if so, would be included in the overall costs. Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Liberty is a full member of the Association for Savings & Investment SA (ASISA). The Manager is a member of the Liberty group of companies. The information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the suitability or potential value of any information contained herein. STANLIB Wealth Management Limited does not expressly or by implication propose that the products or services offered in this document are appropriate to the particular investment objectives or needs of any existing or prospective client. Potential investors are advised to seek independent advice from an authorised financial adviser in this regard. STANLIB Wealth Management Limited is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (Licence No. 26/10/590)