Shopping Centre Retail
The second chapter considers the relevant literature surrounding shopping centres. A number of definitional issues are resolved to begin with. Firstly, the definition of what constitutes a “shopping centre” is examined. Secondly, the definition of what constitutes “impact” is considered. Following this, the assessment criteria is established in order to establish the impact of Arkadia on the Warsaw retail sector, incorporating literature from relevant case studies.
2.2 “Shopping Centre” definition
Schiller (1985) noted that the term “shopping centre” can be the source of much confusion. It can mean either a comprehensive shopping development or a clustering of traditional shops in a town / city centre. Other authors differentiate the term “shopping centre” in a similar way, as Dawson and Lord (1985) use the term to describe a coherent and controlled group of establishments, whereas Guy (1994) makes note of international differences, with the UK referring to unplanned retail areas as “shopping centres”, and USA restricting the term to describe planned centres.
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In terms of the impact of shopping centre schemes on traditional retail environments, and for the purpose of this paper, the following definition of what constitutes a shopping centre has been implemented:
“[It] is a purpose-built facility either in a precinct or mall form which contains several retail units and has been developed as a distinct complex from surrounding shopping streets. It does not include large store expansions along traditional high streets or those sections of streets which may have been redeveloped” (Bennison and Davies, 1980, p.10).
2.3 “Retail impact” definition
A number of authors have various definitions for the term “impact” in terms of analysing the retail sector. According to BDP Planning and OXIRM (1992), although the term “retail impact” has a wide range of interpretations, much of the literature is usually made use of in a limited meaning.
“Habitually, the bulk of retail impact assessment has concerned itself with the calculation of the diversion of trade from an existing centre / centres to a new development. Most of this work has been in the area of forecasting” (BDP Planning and OXIRM, 1992, p.34).
However, Howard (1988) notes that trade diversion alone is not enough to assess “impact”, and effects on both consumers and retailers must also be accounted for.
“Impact expressed in turnover loss is a shorthand expression for structural change in the retail industry and in the physical structure of shopping centres. It implies many different things. Change in space and employee productivity and profit levels are most immediate. These changes are filtered through company operating and financial structures to profitability before they have an “impact” on those features which are ultimately of concern when impact studies are discussed (space contractions, unit closures and the substitution of one kind of business for another, the occurrence of vacancies etc.)….Whether turnover diversion ‘impact’ is 4% or 20% is the first question, not the last, in the debate about new developments”. (Howard, E.B., 1988, Change in the Retail Environment, Longman & OXIRM, p48)
In other words, a wider range of information is also required in order to determine the retail impact upon the market.
2.4 Criteria for measuring impact
According to BDP Planning and OXIRM (1992), the effects of major new retail development can be classified into three groups; namely economic, social and environmental tests. This review will concentrate on economic testing as the wider aim of the research is to assess the impact on the Warsaw retail market.
Economic testing considers shifts in pattern of trade, market share activity and consumer spending within a defined catchment area as a result of new development (BDP Planning and OXIRM, 1992).
In order to assess the economic testing it has been necessary to review the literature of relevant studies undertaken by various authors. There are two types of studies which can be used in terms of retail performance; namely post-hoc and a priori.
Post-hoc studies describe the statistical behaviour of trading patterns which emerge as a result of a new shopping centre development, whereas a priori studies are used to asses the predictive impact, producing results from forecasts, usually used after the refusal of planning permission (Noel, 1990).
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Much of the work undertaken by various authors has been in the area of forecasting [a priori studies] and is of restricted value. It does not greatly assist in understanding the process of change in consumer behaviour and in shopping centre development (Howard, 1993).Therefore, this literature review focuses on using actual effects of retail development, as opposed to predicted. The following section examines the three studies listed below, all of which are comparable to Arkadia: Justify reasons for the study??
- Bennison and Davies (1980) – Eldon Square
- Tynn & Partners (1993) – Merry Hill shopping centre
- Howard (1993) – Meadowhall Shopping Centre
Surveys, where appropriate, are the most common means of conducting research, the results from which can be utilised to make appropriate analysis. (Thomas and Bromley, 1995). The quality of surveys conducted varies between each study. It should be noted that even where survey work has been undertaken at a high level, the resulting figures are not precise measures (Howard, 1993).
In terms of “before” and “after” surveys, Tynn & Partners (1993) note that “before” surveys provide a picture of shopping patterns, market shares and turnovers prior to the opening of a shopping centre. Where such data exists, the findings of integrated “after” surveys can be measured against them in order to assess impact.
To establish the impact of Meadowhall on surrounding areas, OXIRM conducted two regional household surveys by telephone in 1989 and 1991, allowing for generated results to be both “before” and “after”. Furthermore, customer surveys were undertaken at Meadowhall itself.
Additionally, Bennison and Davies (1980) sought to compare conditions both “before” and “after” the opening of Eldon Square by conducting a number of consumer retailer and land use surveys carried out over a four year period for Eldon Square, from 1976 – 1980. Due to circumstances, the Merry Hill shopping centre study did not benefit from “before” surveys, and therefore Tynn & Partners (1993) attempted to assess the situation prior to the opening with data which already existed, although the authors noted that opportunities arose to ask retrospective questions of people using the new centre.
BDP Planning and OXIRM (1992) highlight that it is necessary to determine between results from the “early” effects of trading and in emerging from the more “mature” results. The author of the
impact research on Meadowhall states that “[It] is not a complete estimate of overall impact: changes associated with the new development and their effects are likely to continue for a considerable period in the future” (Howard, 1993, p. 98). Therefore it must be established whether such shopping centres have been trading long enough and are sufficiently mature for the full economic effects to be measured. Howard (1993) argues that the maturity of a shopping centre can only be measured on an individual basis. Therefore assessments conducted need to consider the specific nature of a shopping centre of alongside the market conditions, both during and after the development stage.
2.6 Catchment Area
Calculating the attraction distance from a shopping centre development allows for the supply of consumers to be assessed (Tynn and Partners, 1993). The propensity to make use of a shopping centre depends on various retail and historic factors, and on the critical mass and quality of the offer on the centre compared with the competing retail provision.
Howard (1999) argues that the likely proportion of people who live within the defined catchment area and who will make use of the shopping centre scheme will depend on certain characteristics, consisting of site accessibility, existing shopping provision, general shopping patterns, competing projects and the market positioning of the centre.
The catchment area for a shopping centre scheme can be defined by calculating walk times and drive times to the property by conducting research based on information provided by government agencies (Knight Frank LLP, 2007). The findings should be qualified and supported by a comprehensive consumer/retail analysis.
The initial household survey undertaken by Howard (1993) for Meadowhall Shopping Centre calculated the preliminary catchment area, covering an area within a 30 minute drive to the shopping centre. Following this, the customer exit surveys captured the overall shape of the catchment area, something which the telephone surveys could not achieve alone. Similarly, household surveys conducted by Tynn & Partners (1993) established the catchment area of Merryhill, defined within a radius of 0 – 45 minutes drive time from the shopping centre.
Patterns of trade
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As mentioned above, from the findings of surveys conducted it is possible to mark changes in consumer behaviour and hence patterns of trade which are the common effects of a new shopping scheme opening, particularly if successful, with repercussions for not only small businesses, but a wide-cross section of retailers located along traditional high street shopping areas (Bennison and Davies, 1977).
Patterns of trade can be measured by comparing a shopping centre scheme with different competing retail areas, usually in terms of “non-food” visits (Howard, 1993). To establish which surrounding centres diminish in non-food visits as a shopping centre gains, or visa versa, results from “before” and “after” surveys can be compared which indicate consumers’ choice of shopping destination. Howard (1993) notes that these figures can determine how great the impact or diversion of trade from various retail centres is in comparison with the subject shopping centre, allowing for the strength of attraction to be assessed.
It was calculated that Meadowhall gained 12% in non-food shopping trips in 1991 when compared with surrounding schemes. This was established by comparing the last centre visited report in 1989 with the last centre visited report in 1991. Furthermore, after similar surveys were conducted by Bennison and Davies, (1980), it was noted that:
“[We] might summarise the general process as being one where new shopping schemes, whether in traditional or peripheral locations, extend the area of concentrated activities within the town centre, thereby benefiting most principal shopping streets, but where they also lead to a diminution of trade in the surrounding area, thereby adversely affecting a large number of secondary shopping streets. Even where the secondary streets may not experience an actual decline in trade, they often do not share in the general enhancement of trade within the town centre created by the additional attractions of a new scheme” (Bennison & Davies, 1977, The Impact of Town Centre Shopping Schemes in Britain, pp.41-42).
The authors continue to expand on this by associating retail displacements and re-locations with patterns of trade, indicating that small businesses may be indirectly affected by the opening of a new shopping development as larger stores from traditional high streets move into the entre or open additional branches. Nelson (1958) refers to such shops as incipient traders to the extent that their trade is dependent on the crowds generated by other attractor stores, and thus are vulnerable to any changes in patronage of these.
In terms of patterns of trade of from neighbourhood shopping centres, Thomas Bromley (1995) notes that contemporary processes associated with retail change can often initiate a “spiral of decline”. As a result of such impacts, some centres lose a significant proportion of their comparison goods trade and can decline to “convenience orientated centre” status.
Material other than trade diversion used to assess the impact of shopping centres on the retail market, in terms of the effects of consumers and retailers, are discussed below.
The market share of a shopping centre is the percentage value which is calculated by dividing the amount of consumers which visit the scheme with the total amount of consumers within a defined catchment area (Hillier Parker, 1994, p.19). Market share can be indicated by observing shopping behaviour of customers using in-centre surveys alongside household surveys.
It was discovered by Tynn & Partners (1993) that Merryhill was found to be achieving a market share for “pure comparison” shopping of some 15.6% in 1993. It was thought that this success was at the expense of other surrounding centres. Additionally, OXIRM found that Meadowhall was attracting approximately 12% of most recent main non-food shopping trips from the whole household population in this area made by survey respondents in 1991.
Hiller Parker (1995) notes the importance of a shopping scheme’s market share and how the shopping behaviour of consumers can be affected as a result, whilst intense levels of market share changing can directly and indirectly lead to the closure of retailers.
Following this, BDP Planning and OXIRM (1992) note that increased vacancy levels in traditional centres will be multiplied due to the effects of unlet and boarded up units. By examining such levels both “before” and “after” the opening of a shopping centre it is possible to compare and contrast the data.
Howard (1993) found that between 1990 and 1993, the number of A1 vacant units in Sheffield city centre had increased from 45 to 95. As well as this, the number of A1 units trading dropped from 421 to 370. From this it was evident that vacancy levels rose in the period which followed the opening of Meadowhall.
It should be noted that the impact of major shopping centres tends to be assessed in limited terms: “Most retail impact assessments have concerned themselves with the calculation of the diversion of trade from an existing centre or centres to a new development” (Howard, 1993, p. 97). This is not highly beneficial in terms of understanding the changes in consumers and retailers behaviour. Post-hoc studies were also found to be limited in numbers, with much of the “after” research undertaken being within a short time period of the shopping centre opening date, as in not more than four years (Oughton, Crosby, Lizieri & Palmer, 2003). In other words, the impact of shopping centre schemes over a time period of over four years is not well documented.