by Stewart Drummond and Adrian Hill
Retail warehousing has come of age. The position of DIY, furniture and white goods traders is now firmly established on the edge of most main towns and cities. Customers have shown that they are prepared to make special journeys to shop for these type of goods and seem to appreciate the one-stop car shopping that the retail warehouse locations afford. Now the battle is not between the retail warehouse and the High Street shop but between the retail warehouses themselves.
The DIY giants in particular are becoming acutely aware that the original one-stop shopping idea could mean a visit to one of their competitors. How are they going to persuade the car-borne shopper to drive past one retail warehouse to get to another selling very similar goods? The answer, they hope, lies with the services they offer.
Just like their food superstore counterparts, which have also found a niche on the edge of town, the DIY retailers are having to provide goods with a “value-added” appeal. The trade discount atmosphere within high-ceiling sheds showing exposed steel rafters has been fully exploited. Traders are now improving the quality of their buildings and the quality of their product as they search to improve their image. Price is no longer the big determinant and value for money is reflected in the services they can provide. This can range from free delivery and free roofrack hire to no-fuss refunds and a vast catalogue of own-brand goods.
Home furniture specialists are presenting the shopping public with a new “lifestyle” idea reminiscent of Habitat’s original aims. Following their management buy-out, MFI are back in the market for 2.4m sq ft of new-style furniture warehouses in the next three years. But they have competition from IKEA, who recently opened a 200,000-sq ft luxury store in Warrington and are shortly opening another of 250,000 sq ft in Neasden. Both rely heavily on selling the idea of an individual lifestyle with the accent on “value-added” living rather than bargain prices.
While the specialist retail warehouse market consolidates and improves in the face of growing competition, a new breed of retailer is moving in to their domain. Traditional High Street names are increasingly making an appearance and some are becoming well established.
One of the earliest entries was motor accessories specialists Halfords, who now complement their 326 town-centre shops with 57 edge-of-town superstores. They envisage that by the end of 1988 there will be more than 90 retail warehouses, 50 of which will include car service centres. They say they have doubled the range of goods available in their High Street shops.
Boots have concentrated their bid on the out-of-town market with Children’s World. The John Lewis Partnership caused a stir when in 1986 they announced their intentions to open a solitary store on the outskirts of High Wycombe. The department store will principally carry furniture and home furnishings. The JLP philosophy is that fashion “lies in the thick of the most intensive comparison shopping”, which “looks set to remain rooted in town centres”.
That vision of fashion is already being questioned. Marks & Spencer joined forces with Tesco in a pioneering retail warehouse development at Cheshunt in Hertfordshire and construction begins later this year on The Meadows in Camberley, Surrey. A 130,000-sq ft Marks & Spencer will be joined by a 110,000-sq ft Tesco superstore, supported by a restaurant and parking for 2,000 cars. The 76-acre site is just off junction 4 of the M3, and the proposed Sandhurst/Crowthorne bypass will further benefit the scheme once trading begins in the summer of 1990.
Such pioneering moves by the major stores have caused some to question whether this is the vision of the future.
Will shoppers take to buying their clothes in one visit to a single retailer?
Next believe they will. They are shortly to open their 30,000-sq ft “Next Village” store outside Leeds. Unlike Marks & Spencer or John Lewis, in the High Street Next primarily trade from single shops selling specific merchandise, so their decision marks a further departure from the traditional retail warehouse idea. Furthermore, British Shoe Corporation, who operate many of the High Street names like Dolcis, Lilley & Skinner and Freeman, Hardy & Willis, are soon to open more “Shoe City” stores.
Such bold moves have raised suspicions as to whether the retail warehouse idea can indeed stretch this far, and whether they and other specialist retailers with origins in the High Street are not being misled by the phenomenal success of the bulky goods and DIY traders.
It is easy to see why fashion multiples are keen to establish a niche in the market. Total expenditure in retail warehouses is forecast to grow by 12% pa until 1990. This still only represents 15% of total furniture sales, 24% of DIY and 13% of electrical sales, illustrating that there is much more of the retail warehouse market to be exploited.
Rental growth figures underline that success. Over the past five years, rental growth in retail warehousing has averaged 15.6% pa — more than 4% higher than the growth of the average prime shop and nearly 11% higher than the Retail Price Index over the same period. Prime yields have also fallen from over 8% to 7%.
New demand from the traditional High Street retailers is broadening the trade base of out-of-town retailing and so putting more strain on an already-under-supplied market. Some of the highest rents being achieved are those where the fast food and restaurant trade is co-sited with retail warehousing. In certain retail warehouse parks restaurants are now commanding rents of up to £15 per sq ft.
Twenty-five retail parks opened in 1987 alone and now provide about 5.25m sq ft of park floorspace. More emphasis is being put on the inclusion of leisure and communal facilities so that shoppers can regard a trip to a retail park as a family activity. Owing to the amount of total floorspace contained in retail warehouse parks, they are able to offer ancillary facilities such as children’s play areas and catering facilities, which not only benefit the shoppers but help to increase the time spent shopping for goods.
The leisure element is being regarded as an increasingly important part of retail warehousing. The development of a 165,000-sq ft retail park at Skimped Hill in Bracknell also included 40,000 sq ft of leisure: this has now been raised by a further 70,000 sq ft. Leisure not only emphasises the new awareness of the need for a wide range of activities to complement retail warehouse shopping but is testimony to its commercial viability.
Increased competition is a healthy sign that the retail warehousing market is here to stay. But while the specialist retailers take stock of their success and try to capitalise on it, they are becoming more aware of the new breed of retailer in their midst.
The recent arrival of Next and Marks & Spencer conjures up a vision of the future. Will other High Street multiples such as Burtons and Sears decide to amalgamate their retail divisions so that a wide range of shops are available under one girdered roof? The traditional retail warehouse may have now come of age but the characteristics of its personality are still just emerging.
