ARCADIS • RETAIL OPERATIONS INDEX
RETAIL OPERATIONS INDEX:
WHERE IN THE WORLD COULD YOUR
RETAIL PORTFOLIO THRIVE?
U
nderstanding how to flex and adapt your
branch portfolio is a critical success factor for
modern retailers. Relying on customer base,
brand strength, and market confidence alone will not
guarantee success. Retailers need to be empowered with
data and insight that not only takes these elements into
consideration but also reviews the varying factors that
impact portfolio success. This will not only ensure risks
are successfully mitigated and managed, but will also
lead to higher returns from retail investment.
The Arcadis Retail Operations Index offers insight into
which locations are most and least difficult to execute,
scale and flex large retail programs based on
an in-depth analysis of the global retail market over
50 countries.
Looking at market demands, economic climate, quality
of infrastructure, and ease of establishment and
operation, we have identified both the key challenges
and the opportunities faced by the world’s largest
retailers when opting to expand or reshape their store
portfolios.
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ARCADIS • RETAIL OPERATIONS INDEX
HEADLINES AT A GLANCE
H
M
arket demand
in the US
strengthens
with interesting
polarisation in certain
retail categories and
specific locations.
CONTENTS →
T
he majority of
the Western
European countries
are concentrated in
the top half of the
index, indicating that
the well-established
retail markets
continue to present
sound opportunities
for optimizing store
performance.
T
ong Kong tops the ranking as the easiest
market for retailers to enter.
In spite of this, the latest market insight suggests
that increasing operating overheads such as high
property costs and softening sales will likely have
an impact on local performance in 2015.
I
he UAE
ranks highly
overall with both
a strong quality of
infrastructure and
a robust economic
environment.
D
espite being the largest
consumer market in the world,
China’s significant barriers to entry,
including strict regulations, economic
slowdown and a fragmented market
structure, have led to a lower rating
on our attractiveness scale.
B
razil has a growing
market demand due
to a rapidly growing middle
class and increased foreign
interest. However, its low
position in the index is
reflective of the challenges
of an over-regulated labor
market, low degree of trade
transparency, high inflation
and currency depreciation.
2
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CONTENTS
4
THE REVOLUTION OF
THE RETAIL STORE
6
OUR
RESEARCH
12
21
ASIA
THE USA
17
EUROPE
25
WHAT CAN RETAILERS DO TO ENSURE
OPTIMUM RESULTS FROM THEIR STORE
PORTFOLIOS ACROSS THE GLOBE?
24
22
LATIN
AMERICA
28
CONTACT US
THE
MIDDLE
EAST
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ARCADIS • RETAIL OPERATIONS INDEX
THE REVOLUTION OF THE RETAIL STORE
Evolution is part of the fabric of life within the retail world. However, the retail store environment has seen little change over
the years – that is, until the birth of the digital world and, more importantly, the explosion of mobile technology and social
media that has pushed evolution into revolution.
The net result is that retailers have had to cope with and respond to both the technology enabling change and to the
consumers who are dictating it. The challenge is then compounded by cultural and developmental differences across the
world making it impossible to adopt a single solution.
The key to keeping pace with this revolution is adaptability, flexibility and an absolute focus on really knowing your consumer.
THE IMPACT OF DIGITAL
Online retail revenues are expected to double over the next four
years, led by China and the US. Asia has overtaken the USA in
online sales for the first time and Europe and emerging markets
are growing exponentially. Retail property portfolios are expected
to shrink by 30% over the next 10 years as retailers are under
more pressure to maintain performance in their bricks-and-mortar
assets. So how will this affect portfolios in the future?
This depends heavily on the type of retailer you are and the multichannel strategy adopted. But we can certainly expect a heavier
emphasis on flagships for brand building and showcasing products,
supported by a variety of flexible store formats driving core sales
through localized access for the consumer. There will be a greater
need for lower cost, flexible, reusable store formats that can be
relocated to suit a rapidly changing environment. This is already
being played out through the explosion of the ‘Pop-Up’ store
environment.
Retailers with a heavy focus on services, such as retail banks and
mobile phone operators, will be equally challenged as their own
services continue to trend towards increasing online transactions.
The number of bricks-and-mortar touch points for these types of
retailers are likely to reduce and be focused on premium locations
and premium customer experiences. They will offer higher levels
of service to their VIP customers to generate the returns required
from such premium locations.
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ARCADIS • RETAIL OPERATIONS INDEX
OMNI-CHANNEL IS CRITICAL
There is a race on to find the optimal omni-channel solution but it would fair to say that there is no single model for success. Determining
exactly how to provide customers with the most efficient seamless balance between in-store, online and mobile shopping experiences
remains one of the biggest challenges for most retailers.
Perhaps one of the best pioneering examples of successful omni-channel retailing could be found with Apple where the consumer experience
is absolutely consistent. Even their physical store networks have a blend of high impact city flagships surrounded by an ecosystem of smaller
distributor stores and kiosks providing tremendous flexibility to shape their retail real estate portfolio quickly and efficiently.
CONVENIENCE IS KING
In this rapidly changing environment, the consumer is demanding convenience throughout the experience. Now, more than ever before,
convenience is truly a critical success factor for retailers.
Retail stores and branches will need to be multi-functional and accessible as the brand experience touch-point for consumers in the real
world. The seeds of the revolution were planted many years ago, perhaps as long as three decades ago when catalogue and mail order
companies pioneered what has become ‘Click-and-Collect’. In a pre-digital age, this provided catalogue customers with the ability to place
orders and then collect in store at their convenience.
Most major retailers are adapting their existing store formats to incorporate a form of ‘Click-and-Collect’ allowing their online shoppers to not
only collect goods at a convenient time and location, but also to handle returns, resolve customer service issues and make cash payments.
Although “Click-and-Collect” is less common in Asia where consumers are not as likely to drive to stores, it is becoming an increasingly
popular retail concept in the Americas and Europe where the car still dominates. Many have increased sales by embracing an adapted “Clickand-Collect” concept. The UK department store John Lewis, for example, has leveraged its sister company, supermarket Waitrose, adding
almost 320 collection points across the region. Reducing the necessity for customers to make longer journeys into major towns has made
the experience more convenient and attractive to consumers. Changes such as this can result in an increase of up to 20% in online sales.
Online retailers are also seeing a growing need to adapt. When Amazon opened its first store early in 2014 in the US, its entry into the ‘real
world’ bricks-and-mortar environment was an irony not lost on many. Amazon had pioneered the demise of many high street retailers,
particularly music, video and bookstores. But the core intention was to provide a physical touch-point with the consumer, a place to
experience the brand physically, and to pick up and drop off goods; proof to many that even the digital world requires real world stores in
order to satisfy the consumer.
THE FLEXIBLE PORTFOLIO
Most retailers have developed a toolkit of formats ranging from flagships and brand centers to kiosks and corners. Modifying an existing
portfolio of formats requires a ground-up approach incorporating the needs of the chosen multi-channel strategy, demographic and
customer research, and detailed local knowledge in each market.
The virtual modelling of this data using different formats in various densities and locations will generate scenarios upon which these
formats can be fine-tuned, together with real performance metrics from stores.
The variety of formats needed will differ significantly between retailers depending on many factors including range and geography. But
key to the formats is the ability to rapidly change and flex in response to performance and opportunity.
The rapid depreciation of the capital cost of store developments has also become a priority, pressured further by a need to be
opportunistic and an ability to respond to higher property costs. These factors all point to an increasing demand for a highly cost
efficient and rapidly deployable arsenal of store formats at the disposable of retail executives.
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OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
OVERALL TOTAL RANKINGS ← START
ARCADIS • RETAIL OPERATIONS INDEX
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CONTENTS →
7
OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
INFRASTRUCTURE RANKINGS VIEW OVERALL TOTAL RANKINGS ►
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ARCADIS • RETAIL OPERATIONS INDEX
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CONTENTS →
8
OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
EASE OF GETTING UP-AND-RUNNING RANKINGS VIEW OVERALL TOTAL RANKINGS ►
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ARCADIS • RETAIL OPERATIONS INDEX
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CONTENTS →
9
OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
MARKET DEMAND RANKINGS VIEW OVERALL TOTAL RANKINGS ►
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ARCADIS • RETAIL OPERATIONS INDEX
I
CONTENTS →
10
OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
ECONOMIC ENVIRONMENT RANKINGS VIEW OVERALL TOTAL RANKINGS ►
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ARCADIS • RETAIL OPERATIONS INDEX
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CONTENTS →
11
OUR RESEARCH
When determining how to develop and optimize store portfolio
for maximum performance, retailers need to consider a number of
factors. Knowing where to locate stores, the size and volume of the
footprint needed, the right channel mix and the local demographics
are all key components to getting the balance right. The use of a
number of different store formats which can be applied to different
locations types and demographics can then provide a framework
upon which to move forward.
The Retail Operations Index offers some insight into how easy or difficult
it is for retailers to scale or flex their portfolios in response to changing
market conditions by considering the following five key factors:
CLICK HERE TO VIEW OVERALL RANKINGS ►
1.Infrastructure - quality of transportation, such as ports, roads and rail links.
CLICK HERE TO VIEW RANKINGS ►
2.
Ease of getting up-and-running - quality and quantity of local suppliers, rules on Foreign Direct Investment (FDI) and
business freedom.
CLICK HERE TO VIEW RANKINGS ►
3. Market demand - level of disposable income, domestic market size, passenger cars and competitive environment.
CLICK HERE TO VIEW RANKINGS ►
4. Economic environment - labor costs, inflation and availability of technologies.
CLICK HERE TO VIEW RANKINGS ►
5.
Ease of operating - prevalence of foreign ownership, trade
freedom, labor freedom, logistics performance and freedom from corruption.
CLICK HERE TO VIEW RANKINGS ►
EASE OF OPERATING RANKINGS VIEW OVERALL TOTAL RANKINGS ►
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ARCADIS • RETAIL OPERATIONS INDEX
ASIA
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SPOTLIGHT ON: HONG KONG ► SINGAPORE ► CHINA ► INDIA ► INDONESIA ►
Asian countries feature at all points across the index, illustrating the
differing opportunities and markets, with Hong Kong sitting at the
top of the ranking and Indonesia, India and Pakistan occupying the
bottom.
HONG KONG
South Korea
27 China
16
Hong Kong
43 India
33
Sri Lanka
Thailand
21
1
4 Japan
12 Taiwan
41 Vietnam
13 Malaysia
36 Philippines
2 Singapore
42 Indonesia
11 Australia
Hong Kong in the top spot means that it offers the best conditions
in the world for retailers to operate within. Hong Kong provides
some of the most advanced infrastructure in the world through
world-class air and seaports, state of the art telecommunications
and efficient local and regional transportation. It also benefits from
stable and efficient business operating conditions and a strong
economic climate supported by a high influx of Chinese mainland
visitors taking advantage of tourism and access to international
and luxury brands at tax free prices. As a result, most international
brands have established multiple high-end flagship stores here.
Despite the ranking, retailers should exercise caution in 2015.
Economists predict slow growth in retail sales due to a reduction
in cross-border tourist numbers and a general slowdown in
China. This is already evident as we saw a steady decline in sales
volume in 2014 compared to the previous year. In addition, rents
have continued to rise to unsustainable levels making portfolio
flexibility more important than ever.
Hong Kong key stats:
GDP: $291bn (IMF Oct 2014)
Real GDP growth: 2.5% (IMF Oct 2014)
Population: 7.24m (IMF Oct 2014)
Unemployment: 3.3% (2013)
Consumer Price Index: 4.4% (2014) worldbank.org
Retail Growth: 7.5% growth y/y (Nov 2014) tradingeconomics.com
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ARCADIS • RETAIL OPERATIONS INDEX
ASIA
SPOTLIGHT ON: HONG KONG ► SINGAPORE ► CHINA ► INDIA ► INDONESIA ►
Asian countries feature at all points across the index, illustrating the
differing opportunities and markets, with Hong Kong sitting at the
top of the ranking and Indonesia, India and Pakistan occupying the
bottom.
SINGAPORE
South Korea
27 China
16
Hong Kong
43 India
33
Sri Lanka
Thailand
21
1
4 Japan
12 Taiwan
41 Vietnam
13 Malaysia
36 Philippines
2 Singapore
42 Indonesia
Singapore occupies second place in the rankings as a country
with outstanding ease of operations, business and economic
environment. Grocery stores, primarily NTUC FairPrice,
and Dairy Farm, dominate the retail market together with
major department store operators such as Takashimaya and
Robinsons. The highly successful urban malls have attracted
international brands and created a strong platform for retailers
to operate successfully in Singapore.
However, Singapore is constrained by being a small island nation
and the significant volume of international brands has largely
saturated the market. This success has driven up rents and made
consumers more value focused.
To feed growth ambitions, international brands are being forced
to explore the out of town suburban retail landscape with mixed
results. It has also forced an explosion in e-commerce activity.
11 Australia
A number of foreign retailers with a rigid approach to retail and
unwillingness to adapt to local conditions are struggling to move
to profitability and several have exited.
Whilst recent retail sales have been under pressure and
reducing, the overall local economic conditions are still strong.
Singapore key stats:
GDP: $308m (2014)
Real GDP growth: 2.92% (2014)
Population: 5.47m (2014)
Unemployment: 2.8% (2013)
Consumer Price Index: 1% (2014) worldbank.org
Retail Growth: 6.5% y/y (Nov 2014) tradingeconomics.com
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ASIA
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SPOTLIGHT ON: HONG KONG ► SINGAPORE ► CHINA ► INDIA ► INDONESIA ►
Asian countries feature at all points across the index, illustrating the
differing opportunities and markets, with Hong Kong sitting at the
top of the ranking and Indonesia, India and Pakistan occupying the
bottom.
CHINA
South Korea
27 China
16
Hong Kong
43 India
33
Sri Lanka
Thailand
21
1
4 Japan
12 Taiwan
41 Vietnam
13 Malaysia
36 Philippines
2 Singapore
42 Indonesia
11 Australia
At no 27, China’s ranking is much lower than its regional
counterparts. This is primarily due to the difficulties retailers face
in getting up and running in a challenging business environment.
Tightening of regulations and the imposition of heavy fines
over the past few years has forced some of the luxury retailers,
and grocery stores such as Walmart, to deliver optimisation or
consolidation strategies in China. Other retailers are pulling out of
the market altogether.
Attracted by the size and scale of the consumer base, many
retailers in the past had rapidly expanded in China but in many
cases had not carried out sufficient research on reliable customer
demand to be successful. Potential for growth and domestic
competition had been overestimated. For many, incorrect
predictions have led to portfolio underperformance and, as a
result, investors in stores in China are increasingly cautious.
That said, for many retailers China is viewed as ‘long-play’ where
it is important to be there and build brand awareness and loyalty.
Although it is fiercely competitive, it also holds massive potential for
those who are well prepared and knowledgeable about the market.
Having the right local partner to help navigate the unique pitfalls
and prizes of local markets can ensure a more successful entry.
A principal issue facing retailers in China is its fragmented market
structure: the combination of small and medium-sized retailers
and a large disparity of regional consumer purchasing power
means consumer demand can differ greatly from one end of the
country to the other.
Due to the much higher income levels, the major urban areas of
Beijing, Shanghai and Guangzhou make up the majority of China’s
retail sales. Although international chain stores are growing,
expanding from the major centers has proved very challenging
due to provincial barriers to market and the difficulty in getting
business cases to ‘stack up’. Confidence is easily bruised.
Although as much as 80% of demand comes from the Tier 1 cities,
high rental rates faced in cities such as Shanghai and Beijing are
driving some retailers away from the market altogether.
China key stats:
GDP: $10,360bn (2014)
Real GDP growth: 7.35% (2014)
Population: 1.364bn (2014)
Unemployment: 4.6% (2013)
Consumer Price Index: 2% (2014) worldbank.org
Retail Growth: 11.9% y/y (2014) tradingeconomics.com
A balanced portfolio with flexible formats that can be easily scaled
is the most successful retailer platform.
In spite of these restrictions, there is no denying that China is set to
be one of the fastest growing e-commerce markets in the world but not at the rate of growth that we have previously experienced.
Overall, China anticipates a moderate retail sales growth of 8%
over the next five years and a positive growth in middle-income
earnings. Such growth forecasts point to China surpassing the US
in retail sale volumes over the next few years and, therefore, is still
very much a country in the spotlight for retailers.
Casual and fast fashion retailers such as H&M and GAP, sports
apparel retailers and many international automotive retailers are
all underway with large-scale expansions and a focus on the lower
tier cities. To operate successfully, retailers will need to plan their
portfolios carefully, understand the market conditions for the sector
in which they operate and undertake thorough due diligence studies
around customer sales demand. Above all, China is a long-term
investment and expectations should be tempered accordingly.
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ASIA
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CONTENTS →
SPOTLIGHT ON: HONG KONG ► SINGAPORE ► CHINA ► INDIA ► INDONESIA ►
Asian countries feature at all points across the index, illustrating the
differing opportunities and markets, with Hong Kong sitting at the
top of the ranking and Indonesia, India and Pakistan occupying the
bottom.
INDIA
South Korea
27 China
16
Hong Kong
43 India
33
Sri Lanka
Thailand
21
1
4 Japan
12 Taiwan
41 Vietnam
13 Malaysia
36 Philippines
2 Singapore
42 Indonesia
11 Australia
A poor economic environment score leaves India at a very low
43 in the rankings. This may appear a surprising result when
comparing the position of other Asian countries, especially with
India’s burgeoning middle class and a consumer culture. However,
challenges regarding the operating environment together with
high inflation have created a difficult environment for retailers to
expand.
In the past, India has been restricted by a lack of quality mall
space outside of the major cities as well as on-going regulatory
challenges for foreign retailers. In spite of this, retailing records
healthy growth due to rising income levels in the middle classes
and an improvement in the presence of consumer marketing,
which has boosted the awareness of brands and products and
supported growth during over the past year.
The Indian government through Prime Minister Modi
is recognizing the regulatory issues FDI companies are
experiencing and is starting to relax these, introducing free trade
and beneficial tax initiatives to promote retail growth.
The Indian retail market reached US$490 billion in 2013, 69% of
which came from food. In recognition of this, India is identified as
a hot spot for expansion, specifically in grocery, with Metro and
Spar experiencing significant growth and Walmart and Tesco
planning ambitious rollout programmes. Alongside this, Internet
retailing of non-grocery products is seeing strong growth and is
now posing huge competition to store-based retailing. Retailers
remain undeterred with Ikea, Uniqlo, Burger King and other food
and beverage retailers planning expansion into India during
2015. Therefore, given the positive outlook of this country, we
expect India’s position in the ranking to climb during 2015.
India key stats:
GDP: $2,067bn (2014)
Real GDP growth: 7.42% (2014)
Population: 1.267bn (2014)
Unemployment: 3.6% (2013)
Consumer Price Index: 6.4% (2014)
Retail Growth: 13% forecast to 2018 ibef.org.
worldbank.org
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ARCADIS • RETAIL OPERATIONS INDEX
ASIA
I
CONTENTS →
SPOTLIGHT ON: HONG KONG ► SINGAPORE ► CHINA ► INDIA ► INDONESIA ►
Asian countries feature at all points across the index, illustrating the
differing opportunities and markets, with Hong Kong sitting at the
top of the ranking and Indonesia, India and Pakistan occupying the
bottom.
INDONESIA
South Korea
27 China
16
Hong Kong
43 India
33
Sri Lanka
Thailand
21
1
4 Japan
12 Taiwan
41 Vietnam
13 Malaysia
36 Philippines
2 Singapore
42 Indonesia
11 Australia
Slower economic growth and diminishing purchasing power,
especially for the lower income class, has dampened any potential
retail growth in Indonesia. Nevertheless, throughout 2014, major
retailers continued to expand into developing cities to capture the
growing middle class. One example is Ikea who established their
first store in Indonesia last year and are moving ahead with further
stores.
As the economic recovery gains some pace, retailers should
expect to see sales growth of at least 10% this year and this
is being recognized by new international retailers who have
entered the market, including H&M and Uniqlo,who recently
opened their first stores in Jakarta.
For many, barriers to entry make the only route of entry into
Indonesia through a joint venture or franchise model, which can
be a lower risk but often less successful model. It is our opinion
that caution should be taken when considering entering the
market, however, due to challenges with importing materials and
products where regulations and transparency issues continue to
impact time and cost.
Looking ahead, we expect slower yet positive sales growth across
Indonesia, and although there are uncertainties around the
economic environment we should expect it to remain positive due
to increasing consumption and the expanding presence of leading
brands.
Indonesia key stats:
GDP: $889bn (2014)
Real GDP growth: 5.02% (2014)
Population: 253m (2014)
Unemployment: 6.3% (2013)
Consumer Price Index: 6.4% worldbank.org
Retail Growth: 18.6% y/y (July 2014) euromonitor.com
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ARCADIS • RETAIL OPERATIONS INDEX
EUROPE
The well-established retail markets of Europe present sound
opportunities for optimizing store performance. Many countries
benefit from strong supply chains and our results demonstrate that
overall the ease of doing business and becoming operational is far
easier across Europe than in other regions.
That said, the recent economic crisis within the Eurozone has left its
mark on the retail sector; on-going uncertainty over interest rates,
employment levels and overall economic stability are still weighing
heavily on the continent with, perhaps unsurprisingly, Greece and
Italy performing comparatively poorly. Only time will tell how long
it takes the individual European economies, and consequentially the
Sweden
retail sector, to achieve something by10
way of
recovery.
United Kindom
The Netherlands
5
9
7
22 Poland
Germany
France
14
26 Hungary
23 Italy
20
18 Spain
Portugal
37 Greece
UK key stats:
GDP: $2,941bn (2014)
GDP growth: 2.55% (2014)
Population: 65m (2014)
Unemployment: 6% (Aug 2014) (lowest since 2008 and
largest annual fall)
Consumer Price Index: 1.5% (2014) imf.org
Retail Growth: 2.7% y/y (2014) reuters.com
databank.worldbank.org
I
CONTENTS →
17
SPOTLIGHT ON: UNITED KINGDOM ► GERMANY ► POLAND ► THE NETHERLANDS ►
UNITED KINGDOM
The United Kingdom ranks fifth overall, reflecting a retail market
in growth mode once again, driven primarily by the gradual
economic recovery.
There is major structural change underway with most large
scale retailers reducing or halting their network expansion
programmes for larger formats. Demand for innovative retail
experiences will continue to grow in popularity, perhaps driven
harder by the recent issues faced by major UK supermarkets
who are challenged by over-sized and inefficient store footprints.
Investment capital is being spent on improving and remodelling
existing stores to protect market share (against tougher
competition from the hard discounters Aldi and Lidl), and growing
the convenience store-base. But some commentators argue that
there is overcapacity amongst the major grocers and it remains
to be seen whether further consolidation activity occurs. This will
test the flexibility and adaptability of their formats.
Even though e-commerce is rising in popularity in the UK, 90%
of sales revenue is still generated in the physical store with food
retailers continuing to dominate the market in 2015. Tesco
maintains that their ‘in store picking’ approach for online shopping
remains the only way to operate profitability.
Despite its high ranking, the UK is let down by its infrastructure,
scoring 18 in that category. This is primarily based on negative
public perception of issues such as road congestion that is
affecting traditional out of town malls, and limited public transport
investment. This is then impacting more recent town center
schemes, resulting in the construction of fewer new shopping
centers.
The rise of “super regions” shopping centers such as Bluewater,
Kent, the Trafford Center, Manchester, and the two London
Westfield centers is attracting trade away from regional or
neighbourhood shopping centers. As a result, local retailers
and owners need to reassess their retail proposition and target
customer demographics to re-align these assets to the available
market.
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ARCADIS • RETAIL OPERATIONS INDEX
EUROPE
The well-established retail markets of Europe present sound
opportunities for optimizing store performance. Many countries
benefit from strong supply chains and our results demonstrate that
overall the ease of doing business and becoming operational is far
easier across Europe than in other regions.
That said, the recent economic crisis within the Eurozone has left its
mark on the retail sector; on-going uncertainty over interest rates,
employment levels and overall economic stability are still weighing
heavily on the continent with, perhaps unsurprisingly, Greece and
Italy performing comparatively poorly. Only time will tell how long
it takes the individual European economies, and consequentially the
Sweden
retail sector, to achieve something by10
way of
recovery.
United Kindom
The Netherlands
5
9
7
22 Poland
Germany
France
14
26 Hungary
23 Italy
20
18 Spain
Portugal
37 Greece
I
CONTENTS →
18
SPOTLIGHT ON: UNITED KINGDOM ► GERMANY ► POLAND ► THE NETHERLANDS ►
GERMANY
Germany ranks seventh overall. Annual sales in goods and
services topped €2 trillion in 2014 making it the world’s
fourth largest economy. An area holding back Germany,
however, is its business environment and, in particular, its labor
restrictions with strict regulatory control and high unionisation.
Furthermore, Germany also controls credit card/store card
uptake at source so access to easy credit is restricted.
Like the UK, Germany is experiencing a polarisation effect in
the retail sector. Mid-range retailers are being driven out of
the market due to the growth of the personalised experience
high-end retailers are creating in store. Retailers are optimising
omni-channel strategies as a result of a 0.5% decline in in-store
sales since 2007. With general living costs predicted to rise,
consumer spending may show signs of slowing in several sectors,
although as the economy is in a strong position, the government
may resolve this through easing of taxes over the next few
years. Despite a robust economy, Germany, like all EU countries,
is at risk from a decrease in market demand due to EU-Russia
sanctions and the Eurozone fragility, which leave it vulnerable.
Nonetheless, over the past year the grocery retailers such as
Lidl, Edeka and Aldi have reported strong sales in Germany, as
have pharmaceutical retailers. GDP is forecast to rise 1.6% in
2015, indicating a boost in consumer confidence and a potential
increase in retail sales.
Looking forward, high-end retail is expected to be a driver of
growth in Germany over the next 5 years.
Germany key stats:
GDP: $3,852bn (2014)
GDP growth: 1.6% (2014)
Population: 80.6m (2014)
Unemployment: 5.3% (2013)
Consumer Price Index: 1.5% (2014) worldbank.org
Retail Growth: 2.6% on previous month (Aug 2014) reuters.com
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ARCADIS • RETAIL OPERATIONS INDEX
EUROPE
The well-established retail markets of Europe present sound
opportunities for optimizing store performance. Many countries
benefit from strong supply chains and our results demonstrate that
overall the ease of doing business and becoming operational is far
easier across Europe than in other regions.
That said, the recent economic crisis within the Eurozone has left its
mark on the retail sector; on-going uncertainty over interest rates,
employment levels and overall economic stability are still weighing
heavily on the continent with, perhaps unsurprisingly, Greece and
Italy performing comparatively poorly. Only time will tell how long
it takes the individual European economies, and consequentially the
Sweden
retail sector, to achieve something by10
way of
recovery.
United Kindom
5
9
7
22 Poland
Germany
France
14
26 Hungary
23 Italy
20
18 Spain
Portugal
37 Greece
Poland key stats:
GDP: $548bn (2014)
GDP growth: 3.37% (2014)
Population: 38m (2014)
Unemployment: 10.4% (2013)
Consumer Price Index: 0.1% (2014) worldbank.org
Retail Growth: 1.7% y/y (Aug 2014) tradingeconomics.com
CONTENTS →
SPOTLIGHT ON: UNITED KINGDOM ► GERMANY ► POLAND ► THE NETHERLANDS ►
POLAND
Whilst Poland sits in the top half of the index rankings, the
country’s downfall is its infrastructure, ranking below even the
developing economies of Thailand and Morocco. Technological
improvements in Poland’s transport systems and more efficient
power infrastructure are desperately required, but funding new
projects is constrained due to high public debt. Alongside this,
Poland’s government remains prone to bouts of instability,
making this country a little risky for major retail investment.
Irrespective of that, Poland demonstrates strong market
demand and the encouraging result in our ‘business
environment’ category shows the potential in this market.
The Netherlands
I
Poland is fast becoming an inspirational target for retailers,
in particular retail banks, who are planning small expansion
strategies underpinned by a strengthening labor market.
Growth has been apparent amongst the discount retailer chains,
particularly in the grocery and apparel sectors due to stronger
consumer confidence. Such discount retail chain expansions
are, however, pushing out many of the independents causing
a corresponding reduction in their store portfolios. There have
been fewer new overseas entrants into the market over the past
few months, primarily due to instability in neighbouring Ukraine.
E-commerce is also becoming increasingly popular in the Polish
market with a steady growth in online revenues. But it is the
closing price gap between bricks and mortar and digital sales,
alongside a predicted uplift in market conditions which could
mean a rapid growth in store outlets for the major market
players.
Looking ahead, retailing in Poland is expected to continue
developing in constant value terms. It is our opinion that retail
chains looking for expansion opportunities will need to look more
towards the small and medium sized cities as well as retail parks,
currently dominated by larger homeware stores such as Ikea.
19
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ARCADIS • RETAIL OPERATIONS INDEX
EUROPE
United Kindom
The Netherlands
5
9
7
22 Poland
Germany
France
14
26 Hungary
23 Italy
20
18 Spain
Portugal
37 Greece
THE NETHERLANDS
The Netherlands high ranking in our index is primarily due to
slower market demand and economic environment following the
prevailing influence of Europe’s recession. After a few years of
economic turmoil and cuts in government spending, many Dutch
households have faced financial difficulties that have impacted
consumer spending. Although real GDP has started to show
some signs of recovery, the economic environment for retailers
has remained relatively low as consumer confidence and therefore spending remains modest.
Internet retailing continues to have an impact as major chains
dominate at the expense of independents, and in recent years
this grip has strengthened.
Real GDP is projected to see some growth in 2015, and inflation
and unemployment will likely fall. In light of this, retail conditions
are predicted to improve in the Netherlands. Whilst growth is
predicted to be modest and slow, growth will return as confidence
returns.
The Netherlands key stats:
GDP: $870m (2014)
CONTENTS →
SPOTLIGHT ON: UNITED KINGDOM ► GERMANY ► POLAND ► THE NETHERLANDS ►
The well-established retail markets of Europe present sound
opportunities for optimizing store performance. Many countries
benefit from strong supply chains and our results demonstrate that
overall the ease of doing business and becoming operational is far
easier across Europe than in other regions.
That said, the recent economic crisis within the Eurozone has left its
mark on the retail sector; on-going uncertainty over interest rates,
employment levels and overall economic stability are still weighing
heavily on the continent with, perhaps unsurprisingly, Greece and
Italy performing comparatively poorly. Only time will tell how long
it takes the individual European economies, and consequentially the
Sweden
retail sector, to achieve something by 10
way of
recovery.
I
GDP growth: 0.87% (2014)
Population: 17m (2014)
Unemployment: 6.7% (2013)
Consumer Price Index: 1% (2014) worldbank.org
Retail Growth: 0.7% y/y (July 2014) tradingeconomics.com
20
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ARCADIS • RETAIL OPERATIONS INDEX
THE USA
The USA, the global leader of the retail industry by revenue and third
in our rankings, boasts strong market demand and a good business
environment for retailers to operate successfully. That said, it does
rank lower in the quality of its infrastructure, which is a barrier to
operations. Although recently the price of petroleum has fallen,
easing the cost of logistics and shipping, there has been a reduced
investment in freight rail, roads, bridges and ports relative to other
regions over the past few decades, and journey times in comparison
are long and uncompetitive. As a result, the US has a growing
need to invest in infrastructure, as shown in Arcadis’ report Global
Infrastructure Investment Index 2014, placing the USA tenth out
of 41 countries for the greatest potential for growth and investment
in their economic infrastructure. There is a growing need to renovate
and upgrade existing assets, with costs estimated by the American
Society of Civil Engineers at $3.6 trillion by 2020.
The highly fragmented nature of the US retail market has meant
that its gradual revival is not homogeneous and has generally been
focused in major cities, with many suburban areas still experiencing
downsizing and closure of stores.
Despite a tepid economic recovery in many parts of the US, certain
locations and sectors remain strong. Overall vacancy rates are at
their lowest levels in three years resulting in a corresponding rise in
rental rates particularly seen in the major cities such as Houston,
Chicago, Boston, New York City and San Francisco. Some of this can
be attributed to longer opening hours which are generating higher
revenues, as evidenced in Trader Joes for example, where substantial
customer numbers are frequenting the stores until their 10pm
closing time. Furthermore, we are seeing markets strengthening in
New England, the West Coast, the Gulf Coast, and to some degree,
the South East.
There is real consolidation in US grocery wholesalers that could
change the availability and pricing structures for retailers in
subsequent years. In this market there is shift towards ‘high end’ and
specialty foods that are more profitable, especially in those more
affluent regions.
Many of the food retailers have been traditionally very regional
and we are starting to see expansion beyond their small cluster of
states, such as is evident with Meijer, Marianos and Heinens in the
Mid-West. Contrary to some other retail sectors, many food retailers
are experiencing a shift from destination big box single tenant stores
to convenience locations. Focus is on attracting increased footfall
through creating bespoke customer experiences in an effort to lift
revenues and reduce footprint.
I
CONTENTS →
SPOTLIGHT ON: USA ►
Many of the larger chains (JC Penny, Macys, Walmart, and Sears)
and teen-focused stores (Aeropostale, Abercrombie, Wet Seal
and American Eagle) announced significant closures across their
portfolios in Q1 as post-holiday underperformers are outed.
In contrast retailers such as Walmart, Home Depot and Lowes are
providing a strong online experience. Mobile apps that navigate
stores, find products and direct orders to fulfilment centers are
common-place and growing.
The US retailing environment was irrevocably changed by the
recession and, while parts of the economy look ready to surge
ahead, the picture as a whole is a mixed one.
Retailers should be aware that recent regulatory enforcement
initiatives focused on the retail market at the national and state
levels (US Environmental Protection Agency, Occupational Safety
and Health Administration and equivalent) have also presented
challenges and have the potential to increase operational costs in
the year ahead. However we believe that consumer spending will
grow steadily over the coming months, supported by stronger job
creation, low interest rates and lessening levels of household debt.
To operate successfully in the USA, the retailer should understand
the fragmented nature of its market; much of the consumer
spending will be in food and high-end retail due to increasing
disparities in household earnings. The polarisation affect is driving
out mid-range retail players and this is particularly impacting
the saturated department store retailers in a similar way as the
trends we are seeing in the UK and Western Europe. This should be
considered carefully in expansion or optimization strategies.
3 USA
USA key stats:
GDP: $17,419bn (2014)
GDP growth: 2.39% (2014)
Population: 319m (2014)
Unemployment: 7.4% (2013)
Consumer Price Index: 1.6% (2014) worldbank.org
Retail Growth: 5% y/y (Sep 2014) tradingeconomics.com
-0.3% m/m (Sep 2014) reuters.com
21
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ARCADIS • RETAIL OPERATIONS INDEX
LATIN AMERICA
In spite of fractured markets and continuing economic uncertainty
in Latin America, a growing consumer class has proven resilient
against entrenched corruption, roller-coaster inflation and eroding
currencies. Throughout the majority of the region’s commercial
markets, falling commodity prices and a strong US dollar have
slowed growth in larger cities, notably Sao Paulo, while oversupply
and slow demand continue to push vacancies up and rents down.
Nonetheless, there are positive signs and many retailers are taking
advantage of changing franchise regulations and the lack of
modern formats to push ahead with expansion plans.
6 Canada
I
CONTENTS →
SPOTLIGHT ON: BRAZIL ► MEXICO ►
BRAZIL
With poor infrastructure and economic and business
environments, Brazil nears the bottom of our index at 40.
A principal reason for its low ranking is high tax levels,
particularly import and distribution tax. These taxes combined
make imported goods almost a third more expensive than
equivalent local goods and this understandably is discouraging
consumers and retailers alike. Brazil’s highly regulated labor
market and consumer debt have resulted in low investment
in infrastructure leaving much of the networks in need of
intensive upgrade. Only 1.5% of GDP is invested in infrastructure
development.
However, Brazil’s growing middle class and reasonably
unsaturated retail market is providing some incentive for
retailers. Retailing continued to show healthy sales growth in
consumer goods and midrange fashion as well as electronic
appliances and pharmaceutical retail.
3 USA
The competitive landscape is growing and we are experiencing
greater competition between retailers in Brazil. Multi-channel
strategies are growing in popularity, GDP has increased in recent
years, and despite an uncertain economic outlook, it is predicted
that the retail sector will experience steady growth in 2015.
Although local players dominate much of the market, many
international retailers see this as an opportunity and several of
the grocery retailers, including Carrefour and Walmart, have
experienced successes to date.
25 Mexico
Costa Rica 34
28 Columbia
Peru 31
Brazil 40
The main caution for international players considering entry is
the deficiencies in the country’s infrastructure and a failure to
address complications in regulatory issues for FDI.
Brazil key stats:
GDP: $2,346bn (2014)
47 Paraguay
Chile 19
44 Uruguay
48 Argentina
GDP growth: 0.14% (2014)
Population: 202m (2014)
Unemployment: 5.9% (2013)
Consumer Price Index: 6.3% (2014) worldbank.org
Retail Growth: -0.9% y/y (July 2014) www.arcadis.com
22
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ARCADIS • RETAIL OPERATIONS INDEX
LATIN AMERICA
In spite of fractured markets and continuing economic uncertainty
in Latin America, a growing consumer class has proven resilient
against entrenched corruption, roller-coaster inflation and eroding
currencies. Throughout the majority of the region’s commercial
markets, falling commodity prices and a strong US dollar have
slowed growth in larger cities, notably Sao Paulo, while oversupply
and slow demand continue to push vacancies up and rents down.
Nonetheless, there are positive signs and many retailers are taking
advantage of changing franchise regulations and the lack of
modern formats to push ahead with expansion plans.
6 Canada
I
CONTENTS →
SPOTLIGHT ON: BRAZIL ► MEXICO ►
MEXICO
Ranked at number 25 in the index, Mexico is proving an
interesting country to watch. A weak economic climate has
typically led to caution in this market historically, but with
a growing middle class, reduction in petroleum prices and
administrative reforms attempting to create a more stable
business environment, we are seeing a trend of foreign retailers
entering the market. Luxury retail, pharmaceutical retail, apparel
and several retail banks are all in competition for prime space.
Where existing retailers, particularly in food, are reaching
saturation in Tier 1 cities such as Mexico City and Monterrey,
plans to expand into Tier 2 cities are underway and here lies the
biggest opportunity for retailers entering the market.
Retailers are up against significant challenges which are
highlighted by the lower scores of infrastructure and economic
environment in our index. These include Mexico’s high
unemployment, income level inequality and elevated inflation.
3 USA
Retailers considering Mexico in their portfolio should also be
aware of, and learn from, mistakes made in China where a lack of
data around sales and consumer statistics led to the closure of
underperforming stores. Plans should most definitely consider
the Tier 2 growing cities but also factor in the challenges around
availability of sales data and infrastructure quality for logistical
purposes as well as closely monitoring the economic recovery.
25 Mexico
Costa Rica 34
28 Columbia
Peru 31
Brazil 40
Mexico key stats:
GDP: $1,282bn (2014)
GDP growth: 2.12% (2014)
Population: 124m (2014)
Unemployment: 4.9% (2013)
47 Paraguay
Chile 19
44 Uruguay
48 Argentina
Consumer Price Index: 4% (2014) worldbank.org
Retail Growth: 1.2% y/y (Nov 2014) tradingeconomics.com
23
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ARCADIS • RETAIL OPERATIONS INDEX
THE MIDDLE EAST
Overall, the retail market is booming across the Gulf Cooperation
Council (GCC). High levels of wealth and disposable income for the
majority of GCC nationals and sections of the expat communities
are driving a high level of spending. Whilst the majority of major
brands are already located in the region, many more are looking
to enter the market and or to further increase their presence. A
growing population, and one that is increasingly fashion conscious, is
attracting all the major fashion brands.
UAE
Automotive retail is enjoying a boost with Infiniti reporting Q2 sales
increase of 31% compared to the same period last year. A surge of
high-end retail malls has also attracted the retailer and this makes
the UAE one of the most lucrative markets for foreign investors.
32
Qatar
15
8 United Arab Emirates
17 Saudi Arabia
CONTENTS →
SPOTLIGHT ON: UAE ►
45
The UAE ranks eighth overall, with a strong economic
environment and infrastructure ranking. Much of the UAE retail
is driven by the tourist industry that further boomed in 2014
due to government efforts to maintain a wide number of tourist
attractions, and a high calibre infrastructure in the country. A
healthy performance is forecasted and consumer confidence
will be boosted as a result of economic stability, which will in
turn lead to more spending, higher employment and increased
numbers of expats and tourists.
Retailers entering or optimising portfolios in the UAE need to
be aware of these demographics and market demands and
tailor their portfolios accordingly. Most retail categories are
expected to thrive, with the exception of grocery retail which
has been constrained by government price controls that protect
consumers from inflation of imported foods. This in turn has
affected revenues for the grocery retailers.
Kuwait
I
Key stats:
GDP: $402bn (2014)
GDP growth: 3.61% (2014)
Population: 9.45m (2014)
Unemployment: 3.8% (2013)
Consumer Price Index: 2.3% (2014) worldbank.org
Retail Growth: 5% (2014) gulfnews.com emirates247.com
24
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ARCADIS • RETAIL OPERATIONS INDEX
I
CONTENTS →
WHAT CAN RETAILERS DO TO ENSURE OPTIMUM RESULTS
FROM THEIR STORE PORTFOLIOS ACROSS THE GLOBE?
Retailers will have detailed information on sales per store and
on various fixed and variable operating costs, but the key to a
successful portfolio is in understanding the variables that affect
these figures and the relationships between them.
These variables include:
■ Location
■ Footprint
■ Functionality
■ Flexibility
■ Fiscal Impact
■ Design Impact.
■ Socio-economic market dynamics.
Knowing how to optimise these variables, and comparing them
for each store across an entire portfolio, can lead to faster
and more accurate decision-making, and consequentially to
achieving greater and more sustainable financial returns.
The graph below illustrates areas for portfolio optimization by
highlighting the highest and lowest performing stores against the
highest and lowest flexibility scores to potentially improve sales.
The flexibility score measures the retailers ability has to change
property attributes of a location e.g. ability to relocate, terminate
or sub-let).
100
ASSESS
ASSESS
CLOSE
RENEW LEASE/ ACQUIRE
PROPERTY FLEXIBILITY SCORE
The success of a retailer’s portfolio lies in integrating
demographic and market information into a robust
omni-channel strategy based around consumer
preferences.
0.0
SALES PER STORE
BEFORE TRANSFORMATION
AFTER TRANSFORMATION
100
25
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ARCADIS • RETAIL OPERATIONS INDEX
I
CONTENTS →
CASE STUDY
`The
Challenge
BEFORE CLICK HERE TO VIEW THE PORTFOLIO AFTER OPTIMIZATION ►
A retailer with a large store portfolio across Asia had
expanded at pace and scale over the past five years
resulting in an inconsistent customer experience and
subsequently, poorly performing stores. The retailer
was looking for ways to achieve higher returns from
their store portfolio.
The Approach
The first step to solving the problem was to understand
why some stores were achieving higher returns than
others in the portfolio, and to consider which lessons
they could apply to the poorer performing stores to
reduce unnecessary operating costs and help improve
sales.
The next step involved collating a large amount of
detailed information, such as performance figures,
location demographics, space efficiency, condition of
the store property etc. in order to get a clear picture
of the current situation.
In order to fully understand this information, the data
was entered into a model which generated simulated
results that could test the impact of various strategic
decisions on the retailer’s portfolio and help make
the right investments or divestments to improve
portfolio returns.
A Positive Outcome
The results were significant, providing the retailer
with a reduction in operating expenditure and square
footage and improving the customer experience in
selected stores through added innovative design. This
led to a portfolio that generated greater returns, as
can be evidenced in the graphic on the right.
TOTAL STORE NO.
FLAGSHIP
STANDARD
MINI
SQFT
SALES HEADCOUNT
REVENUE
EXPENSE
ROI
BEFORE
12
4
3
5
38,000
200
45M
20M
2.3
26
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ARCADIS • RETAIL OPERATIONS INDEX
I
CONTENTS →
CASE STUDY
`The
Challenge
AFTER
CLICK HERE TO VIEW THE PORTFOLIO BEFORE OPTIMIZATION ►
A retailer with a large store portfolio across Asia had
expanded at pace and scale over the past five years
resulting in an inconsistent customer experience and
subsequently, poorly performing stores. The retailer
was looking for ways to achieve higher returns from
their store portfolio.
The Approach
The first step to solving the problem was to understand
why some stores were achieving higher returns than
others in the portfolio, and to consider which lessons
they could apply to the poorer performing stores to
reduce unnecessary operating costs and help improve
sales.
The next step involved collating a large amount of
detailed information, such as performance figures,
location demographics, space efficiency, condition of
the store property etc. in order to get a clear picture
of the current situation.
In order to fully understand this information, the data
was entered into a model which generated simulated
results that could test the impact of various strategic
decisions on the retailer’s portfolio and help make
the right investments or divestments to improve
portfolio returns.
A Positive Outcome
The results were significant, providing the retailer
with a reduction in operating expenditure and square
footage and improving the customer experience in
selected stores through added innovative design. This
led to a portfolio that generated greater returns, as
can be evidenced in the graphic on the right.
TOTAL STORE NO.
FLAGSHIP
STANDARD
MINI
SQFT
SALES HEADCOUNT
REVENUE
EXPENSE
ROI
AFTER
20
1
4
15
28,000
150
52M
15M
3.5
27
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ARCADIS • RETAIL OPERATIONS INDEX
I
CONTENTS →
28
To speak with any of our experts to find out more about how we
can enable optimum results from your store portfolios across the
globe, please do not hesitate to contact us:
CONTACT
Julia Harvey
Partner
E julia.harvey@arcadis.com
Matt Fletcher
Sector Leader - Retail & Conglomerates
E matt.fletcher@arcadis.com
Catherine Tobiasinsky
Regional Leader
E catherine.tobiasinsky@arcadis-us.com
Ciara Walker
Senior Strategic Regional Leader
E ciara.walker@arcadis.com
Chris Seymour
Client Development Director
E chris.seymour@arcadis.com
John Atkins
National Account Director
E john.atkins@arcadis.com
9168FEB15EC
Kevin Chrisp
Partner
E kevin.chrisp@arcadis.com