Dr. Hugh Phillips, DeMontfort University, Lecester UK
Communications and Its Effect on Location, Location, Location --
It Starts and Ends With the Customer

Introduction

This paper will consider some of the major changes in shopper behaviour and the retail environment. It will draw conclusions as to the likely effect on land management, in the retail sector.

The most pressing of retailers concerns, at least in Europe, is the level of retail sales. When the lights were turned on after the end of the recession, the expectations were that naturally the world would return to 'normal'. As disposable incomes increased, so it was assumed, would retail sales -- fuelled by a revival in retail credit based on the recovery in consumer confidence. This simply did not occur. Retail sales were at the best static and in some cases actually in decline. Whatever the retailers, suppliers and even the government tried to do to re-stimulate consumer sales, the consumers doggedly resisted.

Faced with static or even declining markets, retailers were faced with only one option to sustain volume growth -- stealing customers from each other. Unfortunately one effect of the eighties retail boom, was that retailers had come to increasingly resemble each other (1,2). The consumer had no particular reasons to favour one outlet over another. To steal share, a store group had to create a reason for shopping with them rather than the competition. Retailers tried a wide variety of quick fix solutions, all with limited success.

Marketing Your Way Out

It became apparent that the only solution to market conditions was for individual retailers to differentiate themselves from the competition, in the eyes of the consumer (3). In other words, provide a reason to shop with them rather than their competitors. Thus the current buzzword in retailing strategy is "Sustainable Competitive Differentiation". However, words and strategies are cheap. Achieving this Nirvana, requires a considerable re-orientation of retail formats and operations. To achieve this differentiation, retailers have had to belatedly enter into the marketing world. The world of consumer segmentation, marketing positioning etc. Unfortunately retailers had come too serious marketing very late in the day (4). In the past, 'marketing' had been merely equated with the advertising and promotional arm of the business. It had never been a key tenet of pervading the totality of the business and its operations. Consequently there was no recognised, readily available, tradition of retail marketing on which to draw (5).

The implications for land management are obvious. A sound marketing strategy, one which will achieve that elusive competitive differentiation, requires all the elements of the business, to be co- ordinated in satisfying the requirements of that differentiation -- in the eyes of the consumer. Space has now to be made to work in terms of not just the retailers' costs and logistics but the customers' needs. Space has become another element in the marketing mix. Simply buying or selling prime sights and square meters at an economical cost are no longer sufficient. The space sold or rented has to work in consumer terms. Another element has been added to the already complex mix of factors in land management, what role does this site have in the retailers' marketing mix. Vendors of space, will now have to address the role of a site in a segmentation strategy, sell the potential market positioning, address the role of the site in terms of the marketing mix of the retailer etc. etc. All this is now a necessary part of the package that the is buying into, when acquiring a site

Some retailers already have to address the problem that their sites are unsuitable for their current market positioning. They are wrongly located, in the wrong environment, do not have the facilities that are required. In other words, they do not match the current marketing strategy. However, landlords are suppliers to the retail industry, as such they are on the same basis as the manufactures who supply the goods that the retailers sell. Recently these manufacturers have had to move away from merely seeing the retailers as passive partners. The development of 'Category Management' -- currently fundamental to any supplier's strategy -- has demanded that they become partners in developing marketing strategies of the retailers. It is simply a question of mutual dependency and survival (6,7). The suppliers of space can not escape this inevitable mutual dependency. Their survival is as equally bound up with that of the retailers -- their source of revenue. The property industry now needs to be able to sell marketing solutions, along with all the other complex elements involved in the transaction.

Developing a Marketing Strategy

The inevitable question is how to effectively develop a mutual strategy for a particular site(s). The key question is therefore what are the needs that space now have to satisfy? The answer is far from obvious. Surprisingly little is known about shopper behaviour (8). A key finding from research is that consumer behaviour is completely different to shopper behaviour. Whatever rules govern how consumers act and think prior to entering the store do not work when the customer enters the store (9,10). Classical marketing theories about how consumers think and act are valid in terms of creating the propensity to buy certain products, but that propensity needs to actualised when the customer is in store (11). This is obvious to anyone who shops. We frequently come out of the store having bought something different to the product we intended to buy when we entered. Thus to develop our retail marketing strategies, we can not conveniently latch on to the prevalent marketing theories of how consumers act. Retail behaviour is different and needs to be treated separately.

Within this a key problem needs to be addressed, very firmly. One of the most pervasive theories of consumer behaviour in retailing is the economist's model; customers are primarily motivated by 4value for money'. Even the economists are now admitting that this view is restrictive (12,13). A key factor forgotten in the retail context is that to the customer, the 'cost' of a product is not just the price tag but also the time and effort involved in acquiring that product (14). 'Value for time' has become a key factor in post recessional retailing. Not only do we work longer hours and so have less leisure time but we are also more parsimonious in terms of how we spend what leisure time we have. Shopping has always been a leisure activity. For many, it can be a very fulfilling way of spending free time. However, as free time reduces and becomes more precious, increasingly the leisure side of shopping becomes more aspirations than reality.

Value for Time

Value for time and effort has become critical elements in modern shopping behaviour. This is particularly reflected in the lives of modern women -- who still comprise the overwhelming majority of shoppers. The stereotypical family of father, non-working mother and children, on which much of our retail thinking is based, is now in a definite minority. In over six out of ten households with dependant children, there are now two wage earners (15). The working wife and/or mother are critical factor moulding the shape of modern retailing. 'Money rich, time poor' typifies this group This group will readily trade money for time. Shopping has to be a highly planned and directed exercise based on the knowledge that a certain shop would instantly satisfy those customers needs

The implication for land management is to emphasis the need for ergonomic efficiency in catering for the modem customer. They need to rapidly locate and access the stores that will satisfy their needs. This is not only in terms of physical convenience but psychological convenience; the modem consumer needs to know where to shop for what. This is mainly the retailer's province, but land management must also play its role. For example, creating clear sectorisation in shopping centres or malls, where certain types of shops will be almost certainly be found, using design to signpost the type or style of business being conducted on those premises and so on. All aspects of land management must be used to simply economise on the consumers precious time. If the consumer can efficiently find the products they are seeking, they will shop with that store or in that mall time and time again. If they can not they will go elsewhere, the retailer will lose revenue and you site owner the rent.

Demographic Changes

These major changes in demographics have other far-reaching implication. Much of our retail philosophy is based on the stereotypical family and the non-working wife. These concepts. It was these that built the out of town stores and the shopping malls. However, in the UK households with no dependant children have increased to two thirds of all households (15). In other words, the vast majority of households have no children to tie them to traditional household shopping patterns. Even where there are children in the household, in six out of ten cases, there is a working mother. Who again lacks time, but has an additional income.

In terms of the future of land management, there is every reason to believe that the out of town or edge of town site has now reaching its zenith. In terms of location, the retail market is segmenting between those with the time and inclination to shop out of town and those who do not have that need or even the opportunity. Already some retailers are dual siting their retail locations to straddle both segments. The out of town centres have probably reached their peak, the move back into the centre appears to be the next twist in retail development. If town planners can sort out congestion in towns and provide easy access, the town centre becomes just a shopping mall without a roof on and a highly convenient one for many customers.

Individualism

However, it is not just demographics that are driving segmentation. The post-recessional consumer is typified by individualism. When combined with them being considerably more educated, sophisticated and cynical has resulted in consumers being considerably less prone to be responsive to social pressures and marketing stimuli (16). They simply do not conform any more to neat, easily identifiable, groups; they refuse to be compartmentalised. Thus even a demographically homogeneous group, such as young singles, is now fragmenting into a set of loosely connected sub groups, each with its own needs and trends. Thus retailers have to adapt again to an ever-diversifying consumer. The challenge to land management is how cope with a continuously evolving variety of retail formats and within retail formats. Already retailers development strategies to accommodate to this shifting environment but are being thwarted by traditional, intractable, leases. These tie them into historical trading formats, dating from the time when they were negotiated. Retailers will need and demand, terms that will conform to their need to evolve their locations, size, retail format etc. in response to this ever diversifying and demanding consumer.

The obvious solution to the needs of the time-constrained consumer would appear to be electronic shopping. For a decade, this has been said to on the horizon. However, apart from certain sectors, it has not seriously evolved as a major force. The sectors, which have developed, books, recorded music, airline tickets and computer accessories, share certain definite characteristics. They are all items where the product has precise characteristics. The customer knows exactly what they will be receiving when purchasing. Consequently there is no need to inspect the item before placing the order. In addition, the purchase is very rational and directed. Which fits the logic of a computer based system. However, the number of markets conforming to this profile are limited, thus the development of E-Commerce, is decidedly restricted at present -- despite what the purveyors of hardware and software would like us to believe.

Electronic Commerce

In fact there are certain consumer trends that militate against the development of E-Commerce. There has been a major increase in in-store decision making. The set of data from the Point of Purchase Advertising Institute (17,18) reveals show that across Europe and North America, amongst supermarket shoppers, seventy percent or more of product decisions are now made in-store. Our research at the University has shown that in store shopping behaviour, deciding on what products to buy is a highly complex and primarily sub-conscious activity. By using sub conscious scanning customers are able to process vast quantities of information to guide them in their product choice. This can not be reproduced by a computer. In addition, shopping still has major social and psychological benefits, over and above these associated with the economic interchange -- socialising, recreation, sensory stimulation, bargaining and many others. These, it is impossible even to approach, in an electronic media.

There seems little doubt that E-commerce will develop but currently it is technology rather than consumer lead. When it does develop, there seems little doubt that development will be by a series of steps and these steps will be confined to specific, well-defined market sectors. The threat of E-commerce sweeping away traditional retail formats has been promised for a decade, the promises are now wearing very thin indeed.

Summary

In summary, there are major changes already in progress in the retail industry, that are having major implications in terms of the relationship between retailers and the land management and property industry. It is no longer sufficient to rent or sell space, however attractive or sophisticated the terms. It is equally no longer sufficient to have the most attractive portfolio of properties, in terms of their facilities or sheer physical excellence. It is now necessary to add a further dimension to the relationship that of the role that the space purchased by the retailer plays in their marketing mix.

This is no-longer just added value or a nice luxury, or a cute selling tool, it is now a necessity. It is just one part of a global picture of increasing mutual dependency of companies in the face of an increasingly complex and demanding world.

Dr. Hugh Phillips
DeMontfort University
Lecester UK

References

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