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OCTOBER 2015 a JLL retail research point of view Trust our retailntelligence. JLL | Retail Research 1 Omni-channel, Schmomni-channel Primark’s U.S. success disproves the notion that an omni-channel platform is the right approach for every retailer Want to buy Primark? You Better Live in Boston. I recently visited the website of Primark for the first time. Primark is the latest international retailer to enter the U.S. market, with one location in Boston open now and another seven announced for the northeast corridor. Known for fast fashion at prices lower than its competitor, I was excited to get in on the goodness. An analysis by Sanford Bernstein found that U.S. Primark prices are 40 percent lower than H&M and 20 percent lower than Forever 21. I clicked into the “Products” page and found a Grey Split Festival Jacket. A steal at $15. I clicked to add the item to my favorites list. I found a nice Gray Lined Zip Hood Jacket ($35) and a 2-Pack Blue Stripy Cozy Socks ($3.50.) I was pumped! But when it came time to purchase my list of goodies, I found that I couldn’t. There is no way to purchase Primark goods online. If I want Primark, I’ll have to print out my list and take it to the store. For me, that’s about a thousand miles away.

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OCTOBER 2015 a J L L r e t a i l r e s e a r c h p o i n t o f v i e w

Trust our retailntelligence. JLL | Retail Research 1

Omni-channel, Schmomni-channel Primark’s U.S. success disproves the notion that an omni-channel platform is the right approach for every retailer

Want to buy Primark? You Better Live in Boston. I recently visited the website of Primark for the first time. Primark is the latest international retailer to enter the U.S. market, with one location in Boston open now and another seven announced for the northeast corridor. Known for fast fashion at prices lower than its competitor, I was excited to get in on the goodness.

An analysis by Sanford Bernstein found that U.S. Primark prices are 40 percent lower than H&M and 20 percent lower than Forever 21. I clicked into the “Products” page and found a Grey Split Festival Jacket. A steal at $15. I clicked to add the item to my favorites list. I found a nice Gray Lined Zip Hood Jacket ($35) and a 2-Pack Blue Stripy Cozy Socks ($3.50.) I was pumped! But when it came time to purchase my list of goodies, I found that I couldn’t. There is no way to purchase Primark goods online. If I want Primark, I’ll have to print out my list and take it to the store. For me, that’s about a thousand miles away.

Starbucks Comparable Store Sales Growth*

Consolidated 7%

Americas 7%

EMEA 3%

CAP 10%

*Starbucks company-operated stores open 13+ months. 3 quarters ending in June 28, 2015.  

Trust our retailntelligence. JLL | Retail Research 2

Omni-channel, Schmomni-channel Primark’s U.S. success disproves the notion that an omni-channel platform is the right approach for every retailer

A European Success Story Primark has proven to be an especially successful model in Europe. A subsidiary of Associated British Foods, the retailer operates nearly 300 stores across 10 European countries. Its stores offer apparel, accessories and home goods at rock bottom everyday low prices. Its big and bright stores are located on European high streets and draw huge crowds. Two flagships on London’s Oxford Street, which are a mile apart, are doing huge sales volume, according to people familiar with the business. While the company has seen recent slowing in same-store-sales growth, it’s still a huge success. Primark sales grew from £ one billion to £ five billion in the past decade, and added nearly one million square feet to its portfolio in the past year.

Primark Needs Foot Traffic Primark has virtually no name recognition in this country and does not spend much on advertising, so the retailer will need to open stores in high-traffic areas where shoppers will already be shopping. The former Filene’s location in downtown Boston, Primark’s first U.S. store, is an iconic spot with high volumes of daytime worker and tourist foot traffic. The next logical step for Primark would be a Midtown Manhattan spot, but as of yet no lease has been secured. For now, Primark plans to make a splash by opening big in multiple northeast super-regional malls. In order to do that, Primark turned to an unlikely entity: Sears Holdings.

Primark will be moving into more than half a million square feet of former Sears real estate during the next year. Primark will open its second location at the King of Prussia mall in November, just in time for holiday shopping. Another six stores will be coming to super regional malls in New York, New Jersey, Pennsylvania and Connecticut.

Sears Tries New Tricks, Primark May Prevail with Old Ones While discount and luxury retailers have continued to thrive, once-strong middle-cost classics like Sears are struggling. Sears saw comparable store sales drop another 14 percent in the second quarter of 2015.

Sears’ stated turnaround strategy is to reduce the number and size of stores and focus on its stronger categories such as appliances. It plans to attract the modern multi-channel consumer by offering online purchasing and in-store pickups and returns. Old dog Sears is trying to recapture its youth through new technology tricks, while young upstart Primark, having taken on half a million of Sears’ square feet, may be on track to conquer U.S. fast fashion while avoiding e-commerce altogether.

Primark’s success in Europe and potentially in America would prove that an omni-channel strategy is not the right approach for every retailer. If all things were equal, the multichannel retailer would reach more consumers and prevail. But if a retailer can offer exceptional style and huge value in sacrifice of e-commerce, convenience might not matter so much. The truth is that all things are rarely equal.

ONE Strong Appetites for

Sale-Leasebacks

TWO Optimize for

Opportunities

THREE Synergistic Shrinking

FOUR Consolidate Creatively

Trust our retailntelligence. JLL | Retail Research 3

Omni-channel, Schmomni-channel Primark’s U.S. success disproves the notion that an omni-channel platform is the right approach for every retailer

Primark opened its first U.S. location in Boston’s Downtown Crossing in the former site of Filene’s Basement, with 77,390 square feet over four floors. Primark chose Boston for the downtown location and large population of international students, many of whom may already be familiar with the brand. The balance of Primark’s announced openings will come in the form of takeovers of 520,000 square feet of Sears space in top northeast super-regional malls.

Northeast U.S. Expansion

520,000 SF of Prime Sears Mall Space

Sears Trades in Space While Sears attempts to pull off a huge retail turnaround, it will pay for that strategy by trading in some pretty good real estate. Sears recently spun off much of its real estate assets into a REIT called Seritage, earning $2.7 billion in the process. New retailers that have taken over former Sears space include Dick’s Sporting Goods, Nordstrom Rack, Corner Bakery, Aldi, West Elm, Whole Foods and Forever 21. Sears still owns 425 of its properties.

1.  Burnham Building Boston, MA – 77,390 SF (Millennium Partners)

2.  King of Prussia King of Prussia, PA –100,000 SF (Simon)

3.  Burlington Mall Burlington, MA – 73,000 SF (Simon)

4.  Danbury Fair Danbury, CT – 70,000 SF (Macerich)

5.  Freehold Raceway Mall Freehold, NJ – 66,500 SF (Macerich)

6.  South Shore Plaza Braintree, MA – 71,000 SF (Simon)

7.  Staten Island Mall Staten Island, NY – 70,000 SF (GGP)

8.  Willow Grove Park Willow Grove, PA – 77,500 SF (PREIT)

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Trust our retailntelligence.

About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com. About JLL Research Jones Lang LaSalle’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial Real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. © 2015 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

For more information, please contact:

James D. Cook Director of Retail Research, JLL [email protected]

jllretail.com