The Retail Institute has published footfall and turnover results from 1 January – 14 October 2018 with special focus on changes as of 5 March 2018, i.e. after the implementation of new regulations on the nationwide Sunday trading ban.
The footfall at more than 120 shopping centers participating in the Retail Institute project between 1 January and 14 October 2018 dropped by -3.07 percent compared to the same period in 2017. During that time, the shopping centers had 9.16 million customers less compared to the same period in 2017, with each subsequent month increasing the loss by 1.2 million customers. For the time being, shopping centers located on the outskirts and those driven by the offer of food operators have been the most affected (-4.3 percent and -3.8 percent respectively). Since the entry into force of the ban, the shopping centers have lost more than -15.7 million customers who used to do their shopping on Sunday, whereas only 7.3 million customers have changed their shopping habits and decided to visit a shopping center between Monday and Saturday.
In order to assess the impact of the Sunday trading ban on the results, the Retail Institute team reviewed the data for 2017 and 2018 using the “like for like” method, namely compared data from weekly periods to the same number of business/trading day, e.g. Monday to Monday, Tuesday to Tuesday etc. The team came to a conclusion that in 2018 the shopping center footfall between Monday and Saturday has increased by 3.7 percent. During trading Sundays, the shopping centers have 3.8 percent visitors more compared with the same Sundays in 2017. It is therefore visible that the drop in the footfall of 3.07 percent is directly linked to the trading ban, which entered into force on 5 March 2018. Christmas and Black Friday will be an opportunity to improve the results. Last year on Black Friday, the footfall in the shopping centers increased by 48 percent.
The Retail Institute analysed not only the footfall, but also the turnover and the affordability index, also referred to as OCR, which is a lease and service costs/turnover ratio. Both parameters are vital to fully assess the current changes in the retail sector. Since the beginning of the year, the turnover of retailers operating in 120 shopping centers has increased by 2.2 percent year to year, however, the inflation rate for the same period as estimated by the Polish National Bank was at +1.8 percent.
The biggest drop affects service categories, i.e.:
Health and beauty, services (-11.4 percent)
Entertainment (-11.0 percent)
Coffee shops and restaurants (-3.7 percent)
Services (-4.9 percent)
for which trade is a strong motor helping them improve the results.
Food operators and specialty food stores continue to have the highest turnover with an increase of 8.4 percent year to year. Save for fashion – women, fashion – mixed and electronics, developing categories operating in shopping centers decreased by 3-12 percent compared to the same period last year. Unfortunately, all predictions and forecasts concerning consequences of the trading ban seem to be correct.
Even though the Polish inflation rate is the third highest in Europe, RI experts believe that in the nearest future its fast increase will not translate into significant price changes in the fashion and footwear category. The latest EUROSTAT data show that these last 18 months the prices in this category have dropped by as much as -51.6 percent. It seems that destructive price competition and the policy of never-ending sales and discounts start to have their toll. A the moment, the retail sector is beginning to raise questions whether it makes sense to specify in the shopping center rules and regulations fixed dates of sales or to compete with one another using non-pecuniary parameters.
Retailers are actively looking for a new business model and new solutions. Online sale, even though develops fast, represents only 5-10 percent of retailers’ revenues and does not cover increasing operational costs. In view of a further decrease of the unemployment rate, new legal regulations on minimum remuneration which increase the cost of finding and keeping employees and an anticipated 40 percent increase of electricity cost in 2019, retailers are more and more keen to look for solutions involving close collaboration with shopping center managers. Paradoxically, the collaboration is not (only) based on expected reduction of lease costs, but most of all on the idea of creating, under the aegis of Retail Institute, an information exchange system and engaging in common (including marketing and technological) activities so as to maintain positive sales results, margins and EBITDA.
The Retail Institute is a center of dialogue, research, analysis and innovation for retail real estate experts. The Institute supports development of shopping centers, retailers and e-commerce businesses through know-how, experience and innovative solutions.