u.s. vs. europe retail market overview

MAPIC 2015

Retailing USA. Opportunity awaits.

Trust our retailntelligence.


MAPIC 2015

Retailing USA. Opportunity awaits.

David Zoba

Global SVP Retail Real Estate, Gap Inc.

(Recently Retired)

Panelist

Dana Telsey

CEO and Chief Research Officer

Telsey Advisory Group

Panelist

Michael Hirschfeld

Executive VP

National Retail Tenant Services, JLL

Panelist

Naveen Jaggi

President, Retail Brokerage

JLL Americas

Moderator

Nigel Jobson

Head of Group Property

Superdry

Panelist


The U.S. is a huge and

fragmented consumer

market

It is made up of a handful of international

cities, and hundreds more markets

large and small


CountryShopping Center GLA SF

Per 100 Inhabitants

USA 2,357 SF

Canada 1,536 SF

UK 384

France 382

Denmark 380

Finland 355

Portugal 352

Spain 312

Poland 293

Italy 273

Germany 235

Greece 89

Source: ICSC Country Fact Sheets, 2014 (US, France, Germany, Poland, Portugal, Spain),

2013 (Canada, Italy, UK), 2012 (Denmark, Greece), 2011 (Finland).

Understanding the U.S. Market

Vastly more shopping options

The U.S. has over six times more square feet of retail space per person than the UK



Retail is low density

Malls and high streets play a role, but most retail is spread out across

suburban shopping centers and freestanding buildings

49%General Retail

34%Shopping Center

7%Power Center

9%Malls

1%Specialty Center

Retail SF by type

in major U.S. markets

Source: Q3 2015 Retail Market Inventory, JLL, Costar.


Source: Q3 2015 Retail Market Inventory, JLL, Costar.

Greater New York7%

Greater Los Angeles6%

Chicago4%

Philadelphia4%

Dallas/Ft Worth3%

Houston3%

Atlanta3%

Boston3%


Retail geography is fragmented

The top 8 U.S. markets only make up 33% of the nation’s retail space

Major retailers open hundreds of stores across many markets before

their presence is truly felt nationally

12.8B SF of retail

space spread across

137 U.S. markets



Primary markets the world over

Major retailers generally begin U.S. entry in

one of the top 13 U.S. markets

USA Asia Pacific Europe

New York Hong Kong London

Los Angeles Shanghai Paris

Las Vegas Singapore Moscow

Miami Beijing Milan

Chicago Tokyo Madrid

San Francisco Taipei Istanbul

Washington DC Seoul Rome

Boston Bangkok Munich

Dallas Osaka Barcelona

Atlanta Chengdu Berlin

Honolulu Kuala Lumpur Brussels

San Diego Tianjin Amsterdam

Houston Shenyang Hamburg

Top Retail Markets: U.S., APAC, Europe



Multiple markets combine for big impact

The state of California, by itself,

is the world’s eighth largest economy.

It’s about the same size as Brazil. The economy of Texas is roughly the same as all of Scandinavia,

including Sweden, Norway and Denmark combined. If it were

a nation, it would have the 11th largest GDP.

Source: 2014 GDP Estimates, U.S. Bureau of Economic Analysis

and International Monetary Fund

New York’s GDP is roughly

the same size as Spain.

If it were a nation it would

be ranked #15.


It’s not just about malls

and high streets

Foreign entrants have found success

(and failure) in a variety of retail

property types.


Fifth Avenue, New York City

Understanding U.S. Retail Types

High streets are a small percent of retail

Downtown shopping with a mix of specialty, department

store and luxury – often a first choice for foreign retailers

new to the market



High streets like 5th Avenue in NY are home to many foreign retailers


Malls have remained much the same for decades:

department stores anchors, specialty retailers –

often with an emphasis on fashion

King of Prussia Mall

King of Prussia, PA

Simon Property Group


For most Americans, malls are still tops for clothing and general merchandise


Sephora entered U.S. in New York

Launched JCPenney in-store shops

360 North American stores; 485 JCPenney in-store shops;

Sephora owns 12% of U.S. Beauty & Cosmetics market share,

according to IBISWorld


France’s Sephora encounters most Americans in a mall setting

2015

2006

1998



Sephora has been less aggressivewith new stores than domestic rivalUlta since 2014

10398

75

122

98

16

42

63

42

125121

94

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2010 2011 2012 2013 2014 2015

New U.S. Sephora Stores (Includes JCP in-store) New U.S. Ulta Stores


Sephora’s 485 JCPenney in-store shops are ~1,500 SF,

compared with the ~5,000 SF stand-alone stores

Britain's Topshop is found in 94 of Nordstrom’s 121

full-line stores

Nordstrom launched 14 Topshop (~2,500 SF) and

14 Topman (~1,500 SF) in-stores in 2012

Topshop/Topman has 3 American flagships at

20,000 SF each


Store-within-store strategy


Upscale national tenants in an urban setting

Department stores anchors, specialty retailers –

often emphasizing aspirational and luxury brands

Similar tenant mix to traditional mall


For many, lifestyle centersare the new high street

The Americana at Brand

Glendale, CA

Caruso Affiliated


Sweden’s H&M came to the U.S. in 2000 with a Fifth Avenue 57,000 SF flagship

Most of H&M’s 381 U.S. stores are in malls; 17 are in lifestyle centers

H&M opened 51 stores in the U.S. last year


H&M demonstrates patient steady growth

85%Malls

3%Neighborhood/Community

2%Power6%

Lifestyle

4%Outlet



H&M averaged 32 new stores per year since 2011

200 218240

269310

361

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

2010 2011 2012 2013 2014 2015

# of stores


Centers focused on convenience in areas of high car traffic

Tenanted with goods and services retailers, often grocery-anchored


Neighborhood and strip centers are daily destinations for grocery and services

Berry Town Center

Davenport, FL

Phillips Edison


Aldi entered the country in 1976 in Iowa

Currently 1,400 stores (~16,000 SF) in 32 states in the Eastern half of the U.S.

29 West Coast locations opening soon in California

130 locations per year (through 2018)


Germany’s Aldi has blanketed much of the U.S. in neighborhood centers


Expected to open 500 U.S. locations

Broke ground on a distribution center in Virginia (October 2015),

and will soon open its national HQ in the state

No stores currently open


Germany’s Lidl is hot on Aldi’s heels


Big boxes of home improvement, discount department and off-price “category killers”

Few foreign retailers have made it to power centers


Power centers offer big boxes, category killers


41 outlet centers will have opened from 2012 – 2015

60 new projects and expansions are planned


Outlet centers offer fashion brands at a discount

U.S. Outlet Centers 202

Average Outlet Size 395,381 SF

Average Occupancy Over 95%

Average Sales PSF $546.33

Source: VRN.


Pay attention to the

differences in the U.S.

consumer

Millennials have a unique set of shopping

habits and their purchasing power

is growing. E-commerce is less

mature in U.S. than Europe.


Understanding the U.S. Consumer

Top 4 consumer spending growth trends

Americans love their pets

U.S. pet industry expenditures will grow to $67.6 billion by 2018

Athleisure explosion

U.S. apparel, footwear and accessories spend grew by $2 billion in 2014 –

driven by active wear, athletic performance footwear and bags

Yoga pant sales have skyrocketed

Foodie nation

Consumers are choosing higher end “fast casual options,” many retailers are adding

food components, shopping centers are devoting more feet to food uses

Healthy nation

With the increasing availability of data from health trackers, health awareness

seems to be rising along with health-retail: fitness centers, juice bars, healthy food,

exercise wear



Stocking up for the week

Many Americans value time over money – one-stop-shopping is important

Americans often do all their grocery shopping in one weekly trip

- 60% of Americans say they grocery shop to “stock up”

- Only 37% of Europeans said the same thing



Auto driven nation

Europeans think 100 km is a far distance to drive for a purchase –

many Americans call 100 km their daily commute

Retailers must pay close attention to parking ratios

Trade areas (catchment areas) are often defined by drive time



Millennials are making a major impact

At ~80 million strong, millennials1 represent 25% of the U.S. population

Responsible for $600 billion in spending, which is expected to grow to $1.4 trillion by 2020

CONSUMER EXPENDITURE SURVEY COMPARISON – MILLENNIALS IN 2013 VS. 2003

2003 2013 '13 vs. '03 (bps)

Under 25

years old

25-34

years old Millennials

Under 25

years old

25-34


Under 25

years old

25-34


Food 15% 13% 15% 16% 13% 15% 30 (20) 16

Alcoholic beverages 2% 1% 2% 1% 1% 1% (110) (10) (82)

Housing 32% 36% 33% 34% 36% 35% 250 30 188

Apparel and services 5% 5% 5% 5% 4% 5% 0 (80) (22)

Transportation 21% 20% 21% 19% 19% 19% (220) (90) (184)

Health care 2% 4% 3% 3% 5% 4% 70 100 78

Entertainment 4% 5% 4% 4% 5% 4% (10) (20) (13)

Personal care products and services 2% 1% 1% 1% 1% 1% (40) (10) (32)

Reading 0% 0% 0% 0% 0% 0% 0 (10) (3)

Education 7% 2% 5% 7% 2% 5% 10 40 18

Tobacco products and smoking supplies 1% 1% 1% 1% 1% 1% (30) (10) (24)

Miscellaneous 1% 1% 1% 1% 1% 1% (40) (10) (32)

Cash contributions 2% 2% 2% 2% 2% 2% (10) 10 (4)

Personal insurance and pensions 6% 10% 7% 7% 11% 8% 110 80 102

TOTAL 100% 100% 100% 100% 100% 100%

Prepared by Telsey Advisory Group

Source: Bureau of Labor Statistics, Accenture, Berglass+Associates/WWD study titled “What happens when millennials get the wa llet”. (1) Definitions of age range varies but typically include 18 – 34 year olds. Note: Reflects

latest available data. Note: Cash contributions represent donations to charities and other entities in cash form. Note: Millennial category represents weighted average between Under 25 and 25 – 34 year old segments.



E-commerce less mature than in Europe

Source: retailresearch.org. Q2 2015 U.S. Department of Commerce.

2.1%

2.8%

3.0%

6.6%

7.1%

7.6%

6.9%

7.2%

10.0%

13.5%

2.5%

3.3%

3.5%

7.2%

7.4%

7.8%

8.0%

8.4%

11.6%

15.2%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Italy

Poland

Spain

US

Netherlands

Sweden

France

Europe av

Germany

UK

2015

2014



Mobile commerce is gaining traction

Mobile devices are causing consumers to spend more time online

Mobile commerce is a significant opportunity for brick-and-mortar retailers who can successfully

broaden their distribution channels

Source: eMarketer. Note: Retail m-Commerce sales includes products or services ordered using the internet via mobile devices, regardless of the method of payment or fulfillment; excludes travel and event ticket sales.


$24.8

$42.1

$57.8

$76.4

$98.1

$114.5

$132.7

11.0%

16.0%

19.0%

22.0%

25.0%26.0%

27.0%

2012 2013 2014E 2015E 2016E 2017E 2018E

Retail m-Commerce Sales ($bn) % of Retail e-Commerce Sales

US RETAIL M-COMMERCE SALES AND SHARE OF RETAIL E-COMMERCE SALES



E-commerce concentrated in few categories

Categories conducive to e-commerce are commodity-like, have low shipping costs relative to

the value of product, and are generally not needed for immediate use

51% of online sales are concentrated in just three major categories

- Consumer electronics1 (22%); Apparel and accessories (16%); Pre-recorded media2 (13%)

Source: eMarketer. Note: Retail m-Commerce sales includes products or services ordered using the internet via mobile devices, regardless of the method of payment or fulfillment; excludes travel and event ticket sales.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pe

ne

tra

tio

n R

ate

2013E 2017E

e-Commerce Penetration

> 20%

e-Commerce

Penetration <10%Categories

expected to

increase to

more than 20%

penetration by

2017.


ONLINE PRODUCT PENETRATION RATES



E-commerce’s long-term impact
