Business Technology

Saturday 23 August 2014

Retailers will seek rent reductions to battle online shopping

Published 19/10/2013 | 05:00

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ONLINE retail sales in Europe are set to double by 2018 to €323bn as French, German and British consumers increasingly go shopping online.

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Market research firm Mintel found that Germany, Britain and France will remain by far the biggest markets for online retail by 2018, although the Netherlands, Spain and Poland should grow at a faster rate and Norway and Sweden will have the highest online per-capita spend.

Ireland currently sits slightly below average in terms of online shopping - 57pc of Irish internet users made a web purchase last year, in comparison to the EU average of 59pc.

"There is a big North-South divide in e-commerce in Europe," said Mintel European retail analyst John Mercer, noting French participation levels lag behind Britain and Germany by five years and Spain, Greece, Portugal and Italy are even further behind.

Amazon sales are growing at a faster rate than the general market, extending its lead on the continent.

Its market share grew to 9.8pc in 2012 from 9.2pc a year before, while Germany's Otto, its next closest rival, saw its share slip to 3.3pc from 3.9pc.

Mintel predicts Amazon could double its Europe-wide market share in the next three to four years, despite negative publicity in Britain over its low tax bills and in Germany prompted by strikes at its distribution centres.

But though the future is bright for Amazon and its competitors, prospects are less positive for European shop landlords.

They will have to accept lower rents in the coming years to help besieged retailers cope with the rise of online shopping and weak consumer spending, according to research by French insurer AXA.

Property owners in Spain are under most pressure, said AXA Real Estate in a report called 'Retail will never be the same again'.

It said online shopping in countries such as France and Britain has become a "substantive threat" to store profitability, which could leave some retailers unable to afford rents that landlords would then have to reduce.

Property investors had underestimated the impact of internet shopping and the economic downturn left them "unable to differentiate between the weakening of physical sales due to the shift online from those resulting from the current recessionary environment."

The report continued: "90pc of future growth in retail sales in the UK, France and Germany from 2012-2016, or €91.5bn of the €101.2bn total, will be captured by online spend".

Spain is likely to see sales per unit area fall by 5.7pc by 2016, ahead of France, Italy and Germany at 5.5, 4.4 and 3.2pc respectively, said AXA.

Such declines would spur retailers to slash property costs, forcing rents to fall.

Occupancy costs in Spain, for example could decline by as much as 18pc over the period, while costs in France could drop by 17pc.

Irish Independent

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