Nightriders why extending your opening hours could unlock new profit potential

NIGHTRIDERS Why extending your opening hours could unlock new profit potential The UK is turning into a nation of night owls at least when it comes to retail activity. Over the past 6 years, we ve seen a distinct shift in shopping centre footfall patterns, with destinations that have extended their opening hours experiencing an uplift in visitors. This phenomenon, known as the night time economy (NTE), is closely linked to the changing role of the shopping centre. No longer purely a retail venue, competition from bricks-and-mortar and online competitors has triggered the transformation of shopping precincts into a leisure destination with visitors just as likely to watch a movie or go out for dinner as they are to visit a store. As a result, consumers have become less likely to visit a retail park for their post-work purchases, and instead are deciding to make an evening of it at their local shopping centre. So how can shopping centres optimise the new opportunities presented by the night time economy? This report will explore what changing behaviour patterns mean for profitability and how centres can increase revenue by extending their opening hours. 2

Retail Parks Shopping Centres -0.9% decline in NTE +0.9% growth in NTE For retail parks between 2009 and 2015 For shopping centres between 2009 and 2015 So how can shopping centres optimise the new opportunities presented by the night time economy? 3

The growth of the night time economy The rising popularity of ecommerce has forced shopping centres to work harder, in order to increase footfall levels. Traditional models no longer resonate with today s convenience-driven, high expectation consumers particularly the younger generation. Transforming the shopping centre into a leisure and entertainment destination is proving an effective way to create a more attractive, engaging visitor environment. Far from being just a retail destination, the shopping centre of the future is a community in itself, and consumers are embracing this new role and changing their habits accordingly. Steve Richardson, UK Regional Director, FootFall 4

WHAT TRIGGERED THE RISE OF THE NIGHT TIME ECONOMY? To understand the new popularity of leisure retail, we need to look back to 2009, when shopping centres started to heavily invest in food and beverage facilities. During the two years that followed, the budget being devoted to eating and drinking destinations increased from 7.6million to 35.5million generating a 367% rise in floor space dedicated to such facilities by 2011.* This resulted in a significant rise in evening dwell times, with shopping centres NTE footfall growing +0.5 percentage points to +5., taking market share from retail parks, where NTE fell -0.1 percentage points to +14.1%. Looking even further forward, the focus on experience and a more relaxed environment has meant that between 2010 and 2013, both the average number of visits to cafes and restaurants in shopping centres, and the dwell time of those visitors, has more than doubled. During this period, NTE footfall rose by +0.8 percentage points.* Budget devoted to eating and drinking destinations 35.5 2011 7.6 2009 +0.5% growth in shopping centre NTE Floor space dedicated to F & B facilities nearly quadrupled between 2009 and 2011 700k sqft dedicated to F&B use in 2009. 3m sqft In 2011,3 million sqft of floorspace converted to F&B use. *Source: BCSC Food and Beverage Report 5

NORTHERN IRELAND bucking the trend While there has been a general upward trend in NTE traffic over the past six years, Northern Ireland has not followed the same path as many other regions. Scotland Initially, Northern Ireland s night time economy exploded, but the figures have since tailed off meaning that, when compared to 2009 figures, the area s NTE footfall is actually down -2.5%. Social concerns may be partly responsible for this; a study by the Northern Ireland Civil Service (NICS) found that high levels of people drinking can be a deterrent for some shoppers, while alcoholrelated anti-social behaviour is also a serious concern. Northern Ireland There is an opportunity here for Northern Ireland shopping centres to grow their night time economy, however work is needed to ensure they provide customers with a safe, welcoming environment. North West -2.5% Wales fall in NTE Northern Ireland has actually seen the NTE fall -2.5% in popularity. (2009-2015) South West 6

North East Although NTE has increased among shopping centres as a whole, there are significant variations between regions with southern areas seeing a greater uplift than many northern areas. The South West and London has experienced the greatest increase in the popularity of the night time economy between 2009 and 2015, +1.7% and +1. respectively. +1.7% +1. Yorkshire Humber South West growth in NTE London growth in NTE Eastern London South East 7

THE NIGHT TIME ECONOMY BY SHOPPING CENTRE BANDS Another decisive NTE factor is the band of shopping centre; the largest Band A and smallest Band D shopping centres have seen the greatest growth since 2009, with night time footfall increasing by +2.1% and 1.1% respectively. However, the reasons behind this are very different. Major shopping centres have the space and budget to invest in entertainment facilities such as cinemas and bowling alleys. Equally, they can attract a wide mix of food and beverage facilities to give visitors greater choice, even hosting pop up drinking and dining experiences. Minor district centres, on the other hand, may only have one or two foodservice units. Therefore their offering should be tailored to the demographic profile of the catchment area, and should be flexible enough to cover as many different day segments as possible. They do, however, have the advantage of being local encouraging spur of the moment visitors who crave a quick and easy evening out on their doorstep. But while these bands have experienced strong growth, the greatest volume of consumers,, visit Band B shopping centres, which typically contain 118-140 units. As a result, destinations within this category present the greatest opportunity to capture night time shoppers, with relatively low marketing efforts required to educate consumers into visiting later in the day in comparison to other bands. Growth in NTE - 2009 Vs 2015 Band A 2.1% Band B 0. Band C 0. Band D 1.1% Minor district centres NTE growth is due to them being more accessible for visitors to just get a drink or grab a bite to eat. 8

Shopping centres with 118-140 units have a higher percentage of visitors in the evening. Average percentage NTE visitors over the past 5 years Band A 9% Band B Band C Band D 5% Band A: 140+ units Band B: 118 to 140 units Band C: 89 to 118 units Band D: 1 to 89 units 9

NIGHT TIME ECONOMY THE WINNERS AND LOSERS So we ve analysed regional and shopping centre size trends, but what are the other NTE patterns worth noting? One interesting factor is the level of disposable income; as the graph below demonstrates, retail park and shopping centre footfall tends to broadly mirror gross disposable income with the exception of 2010. 2010: a 5.3% disposable income rise saw shopping centre footfall increase +0., while retail park footfall fell -1.3%. Shopping centres Retail parks Gross Disposable Income 5% 3% 1% -1% - -3% - 2006 2007 2008 2009 2010 2011 2012 2013 10

Most shopping centre visitors spent money on treats such as a cinema ticket or a restaurant meal. Since then, both sectors have returned to the same general footfall pattern, but the gap between the two has widened significantly. This is because consumers spend more cautiously during times of austerity so are more likely to visit a retail park for home essentials, such as white goods and furniture. With most shopping centre visitors spending money on treats such as a cinema ticket or a restaurant meal, naturally activity is higher during times of greater disposable income, when consumers feel more confident making non-essential purchases. 11

As consumer confidence rises along with disposable income, it is interesting to see how the gap widens between retail parks and shopping centres. When money is tight, people spend on the necessities, which has helped sustain the NTE at retail parks. However, with shopping centre NTE figures tracking the same trend as disposable income rising during improvements, and falling during declines it comes as no surprise that shopping centres with cinemas, restaurants and even gyms are benefiting from this increase. Especially with reports that up to 15% of monthly income is now being spent on leisure. Wider trends indicate that the more traditional shopping centre is under pressure from a resurgent high street, as well as online shopping, so successful centres are those that can tempt customers with a much broader offer that gives them a more rewarding experience. Jane Hawksworth, Head of UK Business Consultancy, FootFall 12

Disposable income and the night time economy 13

HOW CAN YOUR BUSINESS BENEFIT FROM THE GROWING NIGHT TIME ECONOMY? While these general trends indicate where there are opportunities to benefit from the UK s nation of night owls, the exact shape of these opportunities will depend on factors affecting your shopping centre such as location, layout and retailer mix. FootFall believes in acting on insight to ensure the value we create delivers a rapid and measurable return on your investment. This is why we have a team of dedicated consultants on hand to help you unlock and realise the potential revealed in your data. We don t just give you the tools to make informed business decisions; we support you with recommendations and action plans for tangible performance improvement, so you can deliver on the promised return on investment and drive business performance at regional and global level, whether on a pilot project or through full deployment. Based on the principles of our Visitor to Customer strategy, FootFall provides a range of services which complements the needs of our clients, including bespoke consultation. You can contact our consultancy team by scanning the QR code below, or calling 0121 711 4652. 14

WHAT ELSE IS INFLUENCING YOUR SHOPPERS BEHAVIOUR PATTERNS? As you well know, changing shopping hours is just one result of constantly evolving consumer behaviour. To help your business understand the latest economic, political, social and cultural influences and their impact on retail footfall, we ve provided a number of free online resources. UK RETAIL FOOTFALL INDEX Snap the QR code to receive the latest consumer traffic figures across the UK. TRENDS REPORTS Benchmark your performance with other global regions, by visiting our international foofall trends centre. Follow the QR code to find out more FOOTFALL MONITOR REPORT Download the latest BCSC footfall monitor report via the QR code below, to see further shopping centre traffic trends. 15