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City centres and the retail trade – developments and perspectives

Our city centres have changed. Vacant commercial premises coupled with a shortage of parking spaces, high noise levels and traffic pollution have resulted in a deterioriation in the quality of the urban environment. These factors, together with the continuing shift towards online retail, are causing a decline in footfall in our shops.

Frankfurt City Zeil
There is a lot of discussion about the development of city centres - always with the aim of identifying new opportunities for action.

Our city centres have changed. Vacant commercial premises coupled with a shortage of parking spaces, high noise levels and traffic pollution have resulted in a deterioriation in the quality of the urban environment. These factors, together with the continuing shift towards online retail, are causing a decline in footfall in our shops.

This was already the situation when Germany went into its first lockdown in March 2020. COVID-19 may represent a turning point in many respects, but the developments that city centres are undergoing are the consequences of structural change that began decades ago.

What does the future of our city centres look like? What can the retail sector do in response to these new challenges? Can it perhaps even grow as a result? Or has its role in fact become obsolete and a fundamental rethink is required?

We are living through a time of many unresolved questions, which makes the role of experts who are looking for answers even more important. They discuss the future of city centre retail, gather statistics, analyse trends and sectors and, of course, communicate with the retailers themselves. The aim of their work is to indicate to the retail trade ways and means of dealing with the changed conditions and to look competitively towards the future.

Retail in difficulties

With the rise in retail rents in conurbations and a simultaneous decline in footfall, the last few years saw many retailers entering the pandemic in a weakened state. The double whammy of a flourishing online retail sector and lockdown ultimately brought many stores to their knees. The best-performing companies were those that had already invested in digitalisation measures, streamlined their processes and ideally used social media advertising to build up an online community that would remain loyal during this difficult period.

However, developments – such as the shrinking of city centres – that started long before COVID-19 will not magically disappear as the pandemic situation eases. In a panel discussion on the prospects for retail in city centres, municipal consultant Michael Kremming states that large cities such as Munich may still have specific “A-list” areas that are good for retail outlets, but these areas are becoming increasingly few and far between, especially in smaller and medium-sized towns.

“A-list” inner city areas with consistent retail sales, such as Munich’s Stachus square, are decreasing.
“A-list” inner city areas with consistent retail sales, such as Munich’s Stachus square, are decreasing.

Space, however, is no longer so important to many retailers, says Kremming. A clean, safe city centre with points of interest such as monuments is more likely to increase the appeal of a location, attract visitors and increase retail footfall.

This also means that the often cited dominance of Amazon and other internet traders is only part of the problem of desolate city centres. Cooperation between neighbouring retailers and the expansion of the retailer’s own online offer are important, but ultimately only represent part of the solution.

The problem of declining footfall is a question of the attractiveness of a location. And the attractiveness of a city centre is no longer measured solely by the number of shops but also by the quality of the experience and the variety of activities – from gastronomy to cultural and leisure opportunities.

Fresh perspectives, new opportunities

Challenges are always a driver of change. High rents may well be causing retail space to shrink, but popular payment models such as click and collect and the general expansion of online offerings are also reducing the need for retail floor space. With online and high-street retail increasingly operating in tandem, this gives high-street stores the opportunity to develop their showroom character. In this way, they can offer customers precisely what online retail is not able to reproduce despite its convenience – the product experience, the feel of the object, the materials, the intrinsic value, the quality of workmanship and, of course, customer service.

Service and ambience bring the experience of shopping more sharply into focus. Stores today must work more with storytelling and omnichannel concepts to emotionalise the merchandise as well as the shop itself and to offer added value compared to the more utilitarian online retail alternative

The fact that customer needs are nowadays at the centre of everything requires no further explanation. But that the experience itself is one of the most important needs of all is worth repeating and underlining. Generation researcher Dr Steffi Burkhart speaks of the phenomenon of the “experience economy” (Interview is in german). She and many other experts agree that the experience is increasingly becoming the decisive factor that attracts people to city centres.

The character of a cityscape is not just a question of retail.
The character of a cityscape is not just a question of retail.

Of course, retail continues to represent a core element of the city centre. But just as city centres consist of more than just shopping streets, it is not the sole task of retail to revitalise our city centres. Sebastian Deppe of business management consultancy BBE Handelsberatung puts it this way: “The city centre and city centre retailing are not separate entities – what is important is the attractiveness of the overall environment.”

In order to translate this attractiveness into a liveable future for city centres, the Friedrich Naumann Foundation for Freedom has initiated a german Future for City Centres study to look into different approaches. These include concepts such as the dynamic, shared use of commercial space in a sharing economy, as well as urban farming and logistics solutions including digitally supported delivery zone management.

The study also looks at new mobility concepts such as electric cargo bikes that can be booked via an app and whose use should reduce noise and pollution in city centres and so improve the quality of the urban environment.

Infrastructure is also a topic that interests renowned management consultant Sanjay Sauldie. He calls for new shopping concepts that involve municipal authorities and urban marketing in the development of customer-oriented solutions. For example, he describes central pick-up stations to which items are delivered that were previously scanned in the showroom using an app, as well as delivery services that bring purchases made in the city centre to the customer's own doorstep. He also thinks that shuttle services to relieve the traffic situation in city centres are a viable option.

Another way to make city centres more attractive again is currently being developed in the German town of Giessen (about 60 km north of Frankfurt) where the principle of the pedestrian zone is being revived. Here, a former “temple of consumption” is being converted into a hybrid mixed-use real estate concept – with medical practices located next to grocery stores, day-care centres and apartments.

And 25km east of Frankfurt, the town of Hanau is also adopting interesting approaches in its fight against city centre desolation: Under the slogan “HANAU auf LADEN” (“RECHARGING HANAU”), the town is giving retail space in the revamped city centre at reduced rates to young entrepreneurs with a wide range of business concepts and ideas. At the end of three months, the two sides come together and decide whether to continue.

From city centres to district centres?

As with city centres, urban district centres are also not immune to the challenges of structural change. District centres, though, have gained in importance precisely because of the pandemic. The lockdown has dramatically reduced the radius of movement of urban dwellers. In addition to this, contact restrictions and the closing of shops and restaurants have devalued the city centre as a central meeting point and location for consumption and shopping. People are rediscovering their neighbourhoods and shopping local is very much on trend.

Local shops often enjoy greater customer loyalty.
Local shops often enjoy greater customer loyalty.

According to a german position paper published by the Association of German Towns and Cities: “The effects of digitalisation as well as the Corona pandemic have made the weak points in urban structures visible and highlighted the importance of district centres. These take on an important small-scale supply function in their catchment area and act as meeting points and places of cultural exchange and health care.”

Much attention has also been attracted by various fundraising and voucher initiatives that have made it their goal to ensure smaller shops survive the lockdown. Regardless of whether they were sufficient to save our favourite shop, they reminded us that we are more attached to the shops in our neighbourhoods than to those on major shopping streets. This is undoubtedly an important learning point for the shops that survived the worst months of the pandemic.

Conclusion

A city centre is more than simply a collection of retail spaces – and people visit them not just to buy goods. Leisure, gastronomy and cultural activities, together with retail, municipal authorities and urban marketing, must enable a diverse offering in order to increase the quality of the city centre environment. This is the only way to counteract the decline in footfall and other negative effects of structural change.

It is a big task involving many stakeholders – but there are numerous opportunities for the retail sector to help itself, strengthen its position and increase its competitiveness. First and foremost, it must focus on service, the quality of experience, digitalisation measures and modern social media marketing.

In addition, a trend-conscious shop window and product presentation and a well thought-out shop design not only enhance the streetscape, but also grab the attention of passers-by and attract potential customers into the shop. In the store itself, customer centricity is an absolute must these days. And it is even better when management and staff on the salesfloor see themselves as “customer happiness creators” – combining soft skills such as empathy with measures that include maintaining the customer database.

Furthermore, new technologies at point of sale can help by making the shopping experience more exciting, more transparent and more convenient, by making more profitable use of smaller retail spaces or by creating additional purchasing incentives with the use of cross-selling and up-selling strategies.

Further assistance, industry insights, expert opinions and specialist studies to support retailers can be found here at Conzoom Solutions.

Author

svaerm is an online marketing agency with core competences in web applications, SEO, social media and multimedia content creation for B2B and B2C. As a strategic, editorial and creative partner based in Frankfurt am Main, svaerm helps businesses grow.