Coffee retail: wake up and smell the innovation
There is arguably no retail sector in the world currently more exciting, dynamic or downright necessary than coffee – and I’m sure countless big-city professionals will agree for their own personal reasons. At an industry level, it’s a market rife with activity across acquisitions and innovation that is currently worth around £10.1bn in the UK, having achieved 20 years of sustained growth.
2018 was hot for major acquisitions of coffee chains by international conglomerates. We saw JAB Holdings acquire a majority stake in Pret a Manger for £1.5bn and Coca Cola acquire Costa Coffee – a deal which completed in January this year. You may have noticed in the news this week that Coca Cola is gearing up to launch its brand-new Costa ready-to-drink product; a move that, according to Coca Cola CEO, James Quincey, aims to “target mid-day slump” and signals innovation in the company’s product portfolio. Though blurring lines between product categories is only a small segment of the major transformation underway in the coffee sector, with the changing face of coffee on the high-street taking the cake (pun intended) for the most significant and worthy of our attention in the run-up to #MAPICFood in Milan next month.
In recent years coffee shops have become the epitome of cultural hubs in retail. Smaller chains and artisan cafés are on the rise, and each is a destination to work, relax, socialise and learn; it is open, green, bright and welcoming; it sells paraphernalia, quirky homeware, unique gifts, jazz music, 90s board games – the list goes on. By becoming all-around cultural destinations, coffee shops are harnessing the power of community and inclusion to tackle the troubles faced by today’s high-streets head-on.
Even the biggest chains are realising the central importance of becoming, not only coffee specialists, but cultural forums in order to drive footfall. Complete sensory in-store experiences, such as in-house roasting and tasting sessions, are prolific. Starbucks is a prime example of this having unveiled its third Reserve Roastery in Manhattan in January; a sprawling outpost of sheer barista theatre, housed within an incredible three-storey copper, concrete and wooden store design “inspired by the history of manufacturing” in Manhattan’s meatpacking district. You can read more about Starbucks’ new store in Dezeen’s picture article.
Digital of course also plays a huge role here, with ‘Instagrammable experiences’ becoming one of the biggest drivers of footfall in the modern age. Some coffee chains are embracing technology even further, capitalising on the new fronts for customer engagement opened up by digital; smooth transactions, interactive menus, loyalty apps and smart payment systems, to name but a few. Chinese start-up Luckin Coffee also featured in the news this week, announcing its plan to open a store every 3.5 hours to dislodge its biggest market rival, Starbucks, after securing $150m in Series B funding earlier this month. Luckin has enjoyed unbelievable caffeine-induced growth in the last year and a half, exploding its presence from nine stores at the end of 2017 to 2,073 at the end of last year.
An outstanding feature of Luckin’s business model is its seamless integration of digital. Luckin enables its customers to order their coffee via an app and then watch live-streaming video as their coffee is made and delivered within 20 minutes. This core focus on technology, discounts and delivery has played a significant role in its rapid growth and sets a number of exciting new precedents for the whole of the foodservice sector.
We’ve merely scratched the surface here when it comes to the future of coffee, which is looking increasingly bright. Speaking on behalf of the whole Innesco team, we cannot wait to dig even deeper into the topic at MAPIC Food, which will kick off its conference programme with “Coffee: the new black gold rush”, exploring everything from authenticity, merchandising, and emotions in customer experience, to the reasons why coffee is the best bet for multinational food groups. It’s gearing up to be a tantalising week of #foodservice insights, and if you are yet to register, it’s time to wake up… and smell the innovation!
Andrew Smith, Senior Account Executive, Innesco
What lies behind JD Sports’ success?
Despite the gloom on Britain’s high streets, the athleisure brand just unveiled a double-digit leap in profits that makes it standout and question what the brand is doing right that the others are not. More to the point maybe, why is JD Sports obviously thriving while Sports Direct continues to struggle?
Listening to experts have us assume that part of the answer lies in the different customer bases the two retailers serve with the former focusing on younger consumers, offering them everyday athletic gear that they rarely wear to the gym. Furthermore and while Sports Direct has been focusing on expanding its UK portfolio of retail businesses, JD Sports has developed a robust online presence and is actively growing overseas. Overall, success seems to have emerged as a combination of both strong market positioning and essential strategic choices. But what if JD Sports hadn’t adapted its format to make it more attractive to Millennials by seizing the so-called athleisure trend?
It is one of those markets which has expanded rapidly over a short period of time to the extent that some believe it has reached its saturation point. A study conducted last year by Morgan Stanley however reports that the athleisure sector, which has increased 42% between 2011 and 2018, is expected to grow by another 30% by 2020. More than just benefitting from it, it is fair to say that JD Sports has efficiently seized it, especially when you consider that their stores were still mostly male-oriented only just 5 years ago.
JD Sports intelligence partly lies in the fact that they have been able to adapt their format and make it attractive for females too. It’s also key to note that 40% of the products they sell are exclusive to the chain, creating more occasions for the consumers to shop there instead of anywhere else or to look online for lower prices.
Staying way ahead of the curve has proven to be an efficient way to drive business, particularly in the retail industry. This nevertheless requires constant attention and confidence that the next trend can be turned into a consistent source of profit. It might be relevant today for JD Sports but not all retailers have been so lucky in the last few years as some trends are now beyond extinction mode. Food for thoughts they say.
On a lighter note, it is almost Easter and with the weather finally turning to fantastic, we hope the Millennials in each of you will enjoy the egg raffle wearing a brand new pair of super trendy white trainers.More
Barcelona greats a refreshed ICSC European Conference
This week, we attended the refreshed ICSC European conference in Barcelona as official press partners – the first time it has combined the acclaimed European Conference with innovative exhibitions and a speaking programme.
The flagship event offered a great opportunity to network and exchange ideas with key decision makers from the retail property industry; Customer Experience Strategist Ken Hugues, Group CEO of Unibail-Rodamco-Westfield Christophe Culliver, NASA’s Visual Strategist David Delgado, founding partner of Skype Jonas Kjellberg and many more.
Exciting panel discussions and seminars explored highly relevant topics impacting the sector such as changing consumer patterns, e-commerce, shopping places and of course the current retail environment. Our MD Dan Innes had the pleasure of leading the “Marketing for Operational Success” workshop, together with VIA Outlets and Anita. Get in touch if you would like a copy of his very useful deck.
It was particularly interesting to experts dive head-first into the much anticipated about whether or not the industry is in the midst of an Armageddon or Renaissance. ICSC Europe Managing Director Bill Kistler presented strong arguments to support a Renaissance-view of retail real estate on Wednesday, during a fierce debate with Peter Wilhelm, ICSC European Chairman.
We also enjoyed immersing ourselves in the he exhibition area, which brought a unique and rich space to explore “must-have” ingredients for retail brands, such as the multi-sensual shopping experience offered by @BompasandParr and @gensler_design
Overall this year’s ICSC European conference will be considered a successful one for Innesco – although one sad fact remains. Now back at our London HQ, we are regrettably mourning the tragic loss of our dearest travel companion: our yellow bunny Miffy.
AIN’T NOTHING GOING ON BUT THE RENT
Sometimes it can feel like there’s too much news. This week alone has seen new developments in the ongoing Debenhams saga, a boardroom coup at Superdry, falling sales at Boots, and Philip Day launching a takeover bid for Bonmarché. It is, to quote a journalist of Paperclip’s acquaintance, “a competitive news environment”.
So we’ll forgive you if you missed AO.com’s announcement that it is trialling a £2-a-week washing machine rental scheme. It is a subscription service – so no usurious APR or extra charges – and that in itself brings significant benefits; for too long, operators such as BrightHouse have used the rent-to-own model to charge lower-income consumers over-the-odds for basic household goods. The disruption of this scheme causes will be a good thing.
AO.com is banking on being able to leverage its delivery network and buying muscle to reduce costs – and if that means a better deal for consumers then so much the better – but the initiative has wider implications too. Is the much-vaunted ‘sharing economy’ about to go up a gear?
There remains a suspicion that the rise of the sharing economy is more theoretical than actual. Uber trips are in truth replacing bus journeys, not car ownership. There’s very little real-world difference between songs bought outright and those being streamed via Spotify. And isn’t Airbnb just a modern interface on an age-old marketplace?
If renting-not-buying is ever to be widely adopted, washing machines are precisely the sort of product – used daily, but a significant purchase – that will be at the vanguard of the shift. The theory that millennial lifestyles make renting more attractive is about to be tested; if AO’s scheme is a success, we can expect the range of available products to expand, and other operators to enter the market too.
There are reasons to be sceptical, and we have been here before – many readers will remember a time when every high street was home to a branch of Radio Rentals – but there does seem to have been a shift in consumer attitudes. Think about how many people you know lease rather than own their car, and you get a little insight into how mindsets are changing.
This leaves the question of how retailers will need to adapt to a world of renters rather than buyers – how deep a change will depend on how widely renting is embraced. Big-ticket items seem sure to have a rental market. But will richer people embrace rental as a way of regular upgrading? Will AO eventually stop selling appliances altogether and just focus on leases? Will handbag rental become more widespread as people seek to freshen their look? And clothes? Will “retailers” even be the best names for the companies that thrive, or will they be more akin to finance houses with logistics operations tacked on?
The implications for retailers are at the same time huge and unknowable, but any shift towards renting will have a profound impact on the shape of the sector. The successful retailers will be the ones that shift to give consumers what they want, whether that’s in exchange for a one-off payment, or for a reasonable monthly fee . . .More
What went wrong with Debenhams?
In a time when department stores seem to have lost their spark, this week has been a particularly busy one for Debenhams. On Monday, it was reported that Mike Ashley (Sports Direct) was considering a cash offer to take over the chain for 5p per share, valuing it at a mere £61.4m. The offer, which was Sports Direct’s latest attempt at gaining control of the chain, followed a revelation on Friday that Debenhams was looking to raise £200m from existing investors, causing the share price to plummet 61 per cent. While Mike Ashley’s bid led to the share price soaring 42 per cent, it was eventually snubbed by Debenhams, who instead announced it had secured a £200m refinancing deal.
In a bid to cut costs, Debenhams has already announced it will be closing up to 50 stores – and this week it was disclosed that the lease for the company’s headquarters, located at Regent’s Place in the West End of London, had been surrendered in favour of moving staff back to the upper floors of its Oxford Street flagship store. British Land, which owns the Regent’s Place premises, announced it had relet the 175,000 sq. ft. space to Facebook, which now occupies a total of 290,000 sq. ft. at Regent’s Place. Sergio Bucher, Chief Executive of Debenhams, commented saying that the move would mean material savings, while customers would still be able to enjoy a store trading over five floors.
When it comes to struggling high street department stores, Debenhams is in good company with, amongst others, House of Fraser, which last year announced it would close 31 of its 59 stores – including its Oxford Street flagship. One could argue that the pair are just two amongst many retailers hit by declining high street footfall and the advent of online retailing – but are these external factors really the entire story, or are internal issues equally to blame?
It has been argued that the reason Britons have fallen out of love with the department stores they once adored is due to a lack of innovation – or not jumping on the experiential bandwagon that is said to be the saviour of physical retail. As a case in point, one can look at what thriving department stores are doing differently. Harrods, for example, recently launched its first-ever podcast to explore the luxury fashion sector through a series of one-on-one conversations – a move that is sure to put the department store firmly at the forefront of the luxury retail market. Meanwhile, Selfridge’s has been reinventing its shop floor to offer customers an experience that cannot be duplicated online, for example by introducing the UK’s only free wooden indoor skate bowl. Looking outside the UK, French department stores – the so-called les grands magasins– are dusting off their marble floors and gilded adornments to revamp their offering for a younger consumer. Time will tell if some of Debenham’s £200m will be used to ramp up on customer experience – and what the future of Debenhams will be. One thing is for sure: the British high-street stalwart needs to up its innovation game if it is to stay afloat in the ever-challenging retail market.
Why is it now a better time for retailers to transform their businesses?
This week’s headlines, with announcements on falling profits by #Next, #TedBaker and #Kingfisher, reminded us once again that these are challenging times in #retailing. However, they are equally exciting, and there is an enormous value up for grabs for retailers who will see that there’s never been a better time to transform their business.
The good news is that, as the way consumers shop evolves, the model of retail is adapting with some retailers making bold moves to meet the new consumer needs and behaviour.
#Marks&Spencer and #Harrods have taken the opportunity to evaluate the role online shopping plays in delivering the overall customer experience, and both partner with retailers with sophisticated technology capabilities – #Ocado and #Farfetch respectively.
Consumers want to shop seamlessly between bricks and mortar and online; this is the primary shared objective of the partnership between Harrods and Farfetch – to ensure “digital customers receive the same exemplary service as those who visit the store.”
In the meantime, social is the new shop window: the place that consumers browse to find influencers to follow, ideas and inspiration. Some retailers have taken social media more seriously than others when it comes to integrating them into their #e-commerce strategy. For example, this week we read on the Guardian that 23 brands including Nike, Zara, H&M and Burberry have signed up a partnership with #Instagram allowing US users only for now to purchase products without leaving the app.
In cases where proximity and convenience matter, consumers still want to shop in stores, which explains why in the grocery sector innovation has focused on small urban store formats. #Aldi has followed this route with the launch of its first smaller high street brand ‘Local’ that opened in London’s Balham, and the question is how the new brand would impact the big four supermarkets if it’s rolled out to other sites.
According to #PCW’s 2019 Retail Outlook report, this year “shoppers will adopt a mix of coping mechanisms to shop smarter”. If this is true, the retailers who will be quick enough to adapt to the changing retail landscape and respond well to customer expectations will be the industry’s long-term winners. We have to wait and see who these winners will be.More
What was the social atmosphere at MIPIM?
Well, #MIPIM2019 has come to an end, proving once again to be a crucial platform for global real estate players to showcase their projects and share their insights and outlooks on the future of the industry.
Amidst the rush of event roundups that are already in circulation, we’d like to offer some unique #Inn_sights from the world’s largest real estate event, with a particular focus on social media; a fundamental driver of conversation during any industry event, setting the tone for the week and connecting delegates from around the world.
Over the course of #MIPIM, we created an insights panel through our social media listening platform, tapping into the biggest inputs of the event’s international online network. Social media listening may sound like just another bit of communications jargon, but we see it as an absolutely crucial function for real estate brands, with the potential to drive positive change, create new opportunities and, fundamentally, help companies, individuals and even whole countries do better business.
It is perhaps no surprise then that we’ve seen an explosion of favourable discussions about investment opportunities over the course of #MIPIM. With a fair share of 15%, “opportunities” was among the key buzzwords of the week, also including “city” and “investment” – owing largely to the presence en masse of local authorities looking to partner with developers, housing associations and developers to reinforce their development pipeline.
We were delighted to experience this first hand having been appointed to coordinate the international communications and social media for the country of Egypt, which this year launched the first every Egypt Pavilion at MIPIM. Egypt made a monumental splash in its inaugural year – with online engagement with the #OpportunityEgypt brand surging as we rolled out a fully integrated campaign including international press opportunities, dynamic digital content and an industry-leading programme of sessions on the stand.
Our social listening also revealed great excitement around regional projects unveiled at #MIPIM’s conferences – the UK in particular. On the ground, it was also great to experience a constant buzz at the Oslo stand, where our client Oslo Metropolitan Area welcomed crowds of delegates to engage in insightful sessions on the Scandinavian investment climate, as well as have the opportunity to be publicly humiliated (in good taste) by Magnus Carlsen, World Champion and Grand Master of Chess.
All in all, we found #MIPIM30 to be an incredibly insightful, productive and enjoyable trip to the French Riviera and we’re already looking forward to next year. For now, we’ll be mapping out our involvement with Reed Midem events from now until March 2020 – in Europe and back in the UK – on-site and online!More
MIPIM: Yachts, champagne and sunshine?
Yachts, champagne and sunshine. That’s the outsiders’ view of MIPIM and one which is always sure to attract some salacious headlines every year. But to take this blinkered view is to hugely underestimate the event’s role in driving global change in the real estate sector. Of course, it remains the place where big mergers are announced and huge investment deals are sealed. However, its real impact comes from how it shapes the towns, cities and countries in which we live, work and play.
Put simply, there is no better place for local authorities, companies and national governments to showcase their ambition and attract the best-in-class funding and development partners to help realise them. Period.
The UK government will be out in force promoting investment opportunities with delegations from The Department for International Trade (DIT), Ministry of Housing, Communities and Local Government (MHCLG), Homes England and the Cabinet Office. UK Cities including London, Manchester, Liverpool, Belfast and Cardiff will also be out in force making a play to attract the world’s best developers, while local authorities from Slough to Glasgow will be presenting their visions for the future.
From an international perspective, we can expect to see a strong presence from cities such as Paris, Oslo, Dubai, and Lisbon. The city of Olso will be promoting its status as 2019’s European Green Capital with a packed programme of events and announcements, as well as the unique opportunity for a game of chess with World Champion, Magnus Carlsen, and their Tuesday Dinner with resident DJ Dr. Alban.
Of the 100 countries attending MPIM, we can expect the likes of Turkey, Egypt, Poland, Belgium and the USA to be especially visible. The country of Egypt – represented by Innesco – will be attending MIPIM for the first time this year as it launches one of the world’s most ambitious masterplanning programmes of 15 new cities, including the New Administrative City recently visited by Property Week. As a mark of their commitment to the event, the delegation will include the Prime Minister, the minister of investment, the minister of tourism and the minister of housing, as well as a consortium of the country’s largest developers. You’ll also see them as sponsors of the Opening Night Drinks reception.
Over and above making things happen at a project level, MIPIM is also taking the lead in pushing forward new trends and ideas. This year’s theme is ‘Engaging the Future’ and with a conference programme including speeches from Ban Ki-moon, the eighth Secretary-General of the United Nations and business philosopher, Anders Indset, the agenda is sure to provide some compelling content to all delegates. Innesco will be at the heart of all these key themes, issues, trends and locations – look out for the team around the event, or be sure to follow our progress @INN_Tweets !
Is the grocery industry succumbing to merger fever?
It has already turned into a saga. Nearly ten months after announcing that they would be joining forces, Sainsbury’s and Asda merger’s plan has been torpedoed by the CMA. The reason being that it would weaken competition and have a negative impact on prices for customers. No doubt that this decision was hard to swallow for the two companies, especially given the context. They are both facing serious headwinds from discount chains and pure online players, and have to deal with the prospect of a potential hike of up to 50% on food prices in the likelihood of a hard-Brexit.
It is no news that the face of grocery shopping has changed significantly in recent years. And still, 9 out of 10 people visit a physical grocery shop every week while nearly half of Aldi’s customers come for the main weekly shop these days, compared with less than a quarter a decade ago. Also and in recent years, Ocado and Amazon have emerged as online competitors while Just Eat, Deliveroo and Uber Eat are taking market share into the takeaway meals category. People’s grocery shopping habits are unquestionably different today than they were a couple of years ago but the problem remains. A merger between Asda and Sainsbury’s would have only lessened the low-cost options available for a customer aiming or needing to save on its grocery. It was neither the time nor the place to let that merger happen.
And still, the grocery industry remains buoyant thanks to the newly announced M&S and Ocado’s £750m deal. While M&S started testing food delivery in 2017, it has not yet launched a service and a tie-up with Ocado would help fill that gap. But will it work? For starters, delivering groceries to customers’ homes is an expensive business. Last year, Ocado lost £44 million on a pre-tax basis. Besides, most Marks & Spencer food customers are small-basket shoppers (below £20), while Waitrose’s average customer basket size which is well over £100 and makes the delivery costs easier to swallow. All change is definitely challenging but partnering with Ocado will give M&S access to a larger range of products and a larger average basket size. It also spares the company the time, cost and risk associated with building its own online distribution infrastructure. However, these benefits come at a price and according to analysts M&S may be paying a high price for simply being late to the party.
Innesco welcomes you to the MAPIC FOOD Kick-off Reception!
After a tantalising inaugural event in 2018, MAPIC Food returns to MiCo Milan in May. We are proud to announce that Innesco has the pleasure of partnering with Reed MIDEM on the event for the second year running.
#MAPICFOOD will delve deep into the biggest influences on the international food services industry and invite the most innovative new food concepts, operators, landlords, developers and investors to explore the key ingredients for building the food destinations of tomorrow.
The conference line-up is shaping up nicely; food in retail destinations, dark kitchens and food technology, F&B in travel retail, F&B as a key driver for private equity investment and more. Have your doggy bags at the ready as there will be takeaways for everyone at MAPIC Food.
To kick-off things off, we have been working with the MAPIC team to organise a pre-event meet-up in London, taking place tomorrow on Thursday 28 February at the Soho Hotel. Attendees will have the opportunity to preview some of the main event’s features, meet key speakers and rub shoulders with international F&B’s best and brightest.
We are delighted to welcome our readers to the London meet-up to celebrate the launch of the second edition of MAPIC Food. Places are limited so if you have the appetite, reach out to us now!More