Watch: Next generation US department stores eye UK market

Next generation department stores are eyeing the UK retail market with a view to getting a foothold on the British high street.

Speaking at the recent Completely Retail Marketplace event, P-THREE co-founder Hannah McNamara told Completely Retail News executive editor Lisa Pilkington, that international brands have formed the “bedrock of the UK retail industry.”

International brands including Zara, Nike, and Sephora will continue to dominate the sector, however she added: “… At this point in the market, there’s probably fewer international retailers than at other points who have been looking [for space].

McNamara said: “There’s interesting American concepts that are the next version of a department store – so [brands such as] Neighborhood Goods, Showfields – that curate interesting types of retail. That would be really interesting [for them] to come over to the UK, in terms of the next generation of what a department store might be.”

Asked how these next-gen department stores would look, McNamara said: “It would be a similar concession-type model in terms of a mix of different retail brands within a location, but that combined with a sense of community like other brands have created – like GymShark on Regent Street for example, where they have a running club – and you create a sense of community within that location where that brings people back continuously.

“…There might also be some co-working space in that location, or maybe medical, or culture. So creating different types of uses with really interesting brands, in a beautiful location, I think would be the future.”

She was joined by Mark Disney, executive director of CBRE, to discuss the importance of a well-balanced tenant mix to enhance a property’s appeal, drive footfall, and ensure long-term success.

Speaking on the ongoing process of change between online retail and bricks and mortar retail, Disney said that during the Covid-19 pandemic, online retail made a “giant leap forward”, which at the time increased its penetration of the market.

He said that over 10 years, the penetration of online retail increased from 10% to 20%, but this rose to 25% in just 18 months during the covid period:

“It hasn’t really changed since then, it might have dropped a little bit back”, he said. “I think it will just continue to grow gradually, perhaps at 1% per annum. We just jumped forwards five years but the rate of change has now gone back to the previous normal.”

Discussing how online brands can develop brand loyalty compared to physical stores, he said they are “getting better”, through tools such as advertising campaigns and influencers.

However, there is still a desire from some online retailers – such as Sosandar which is targeting its first stores – to have a physical presence:

“They’ve recognised that there’s actually quite a cheap way of customer acquisition through [physical stores], people think that online is cheaper but actually the customer acquisition price is expensive.”

He said Sosandar is “an example of somebody that has seen the value of leveraging an online brand.”

Watch the full ‘Retail Tenant Mix Strategies’ session above.