How do the multiple channels of modern commerce affect a small town? Is e-commerce killing city centre retail and where do peripheral shopping malls fit in? How should retailers, landlords and city planners act? I would like to share my thoughts on this from a small town perspective. In this first part I will have a look at the state of commerce today.
My home town Lund is a quaint little town with roughly 85,000 citizens and 1000+ years of history in southern Sweden. When I moved here in 1991 all commerce was in the city centre, but in 2002 the Nova shopping centre opened in the town periphery, attracting a lot of the consumer spending. Moving ahead to modern day, online commerce has grown tremendously and matured, and now seven per cent of all consumer retail spending in Sweden is made online.
How have these 20 years of development changed this small town?Being a university town, Lund’s city centre is still a vivid place, packed with students - and office workers, since it’s still very attractive to work there. But the commercial activity has changed a lot: where once there were a lot of both chain stores and independent stores, the centre is now filled with hair-dressers, coffee shops, restaurants and real estate agents. No one goes to town to shop, they go there to work on weekdays and for recreation on weekends.
Dozens of landlords all struggle to maintain their margins
The shopping that actually remains is dominated by one-item shopping, accessories, gifts, and other price insensitive merchandise. Bulky shopping is almost completely absent since car access and parking is very restricted. Dozens of landlords all struggle to maintain their margins, so the rents move down slowly and in tandem, it’s not that hard to spot empty retail space. Lowered rents have a double impact for the property owners, their cash flows shrink and the properties depreciate on their balance sheets, leaving them with financing challenges.
The peripheral shopping mall, Nova, has also transformed under the growing pressure from e-commerce. Being the one place in town with decent car access, it attracts families both on week nights and weekends. It has, however, increased its recreational and customer-experience efforts, with more restaurants, coffee shops, hair-dressers and events. It hosts retailers of bulkier merchandise and attracts chain stores with strong brands using differentiated rent levels. This last fact is a major factor in competing with the city centre and one of the long-term competitive advantages of having a single landlord.
Shopping online in Lund is not different from anywhere else in northern Europe, the distribution points are generally very close to home, often combined with grocery stores, making extra sales on the e-commerce consumer traffic. Peeking into the storage rooms you will notice packages from the pure players (e-commerce only companies) such as Zalando and Scandinavian CDON, but also from multi channel operators such as H&M, Intersport and their likes.
To sum this first part up, Lund's commerce has undergone major changes the last 25 years, much like most small towns in Europe. This has affected both the city centre and the shopping malls, and the changes will continue. In the next part I will apply the omni-channel perspective and get to some actual recommendations for city planners, landlords and retailers.
Robin Gustafsson is the CEO at Avensia, specialists in online commerce, but also a long time Lund resident, former student of city planning, house owner, family father and multi channel consumer.