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The Future of Shopping Centres: DIVERSIFICATION

Mutual competition of shopping centres (SC) may be reduced by a change in the structure of tenants.

• No shopping centre can focus on all types of customers - SCs must specialize and diversify
• Larger space for diversification in big cities
• Diversification will eliminate competition among SCs in terms of footfall
• Advanced markets have experienced the trend towards diversification of SCs
• Diversification on the market will take several years
• The future of SCs: a clear focus on target groups

CBRE, the world leader in commercial real estate,  monitors the current trends on the market for shopping centres and retail and confirms a new trend coming to this segment from Western countries. If shopping centres are to succeed in the future, they must diversify the composition of their tenants and the range of products offered, while communicating this information to their customers.

The boom of shopping centres in the Czech Republic is over. The current saturated market does not need new but rather more clearly-focused shopping centres. Shopping centres must understand which target group of customers they want to focus on and adapt the offer of the shops and services accordingly. Shopping centres usually have an identical or at least similar structure of tenants. The solution is distinguishing oneself from the competition and having a greater specialization or focus on the needs of a specific catchment area. 

Shopping centres will have to diversify and find their own way to differentiate themselves from the competition through the composition of their occupiers and the range of products and services they offer to their customers. Specialization will evolve in accordance with the needs of customers in the respective catchment area and target segment. Shopping centres cannot focus on all customers, not today nor in the future. Therefore, CBRE expects a greater diversification of the structure of tenants in shopping centres in the future, a trend which is expected to last several years. By the end of the period, shopping centres should have a clearly defined position on the market (positioning) and appeal to customers in the target segment in which individual shopping centres decided to specialize. 

Veronika Tebichová, Head of Retail Agency, says: “In some cities we can already see that shopping centres have started to diversify. For example, they focus on the so-called ‘fashion customer’ looking for a wide selection in the area of fashion and design products, even at higher prices. Centrum Chodov is a good example of such a shopping centre. Another good example is Palladium, which clearly targets foreign clientele with high purchasing power, among others. Advanced markets, to which the Czech market also belongs, call for diversification, a clear differentiation and meeting the wishes of customers.” 

A greater number of target groups and a clear specialization 

Shopping centres must clearly define groups of target customers. It is no longer possible to focus on just one group these days, e.g. young families. The target group must be wider and partly overlap the segments of customers whose characteristics are similar within the framework of defined target groups. Diversification should be considered seriously in cities where there is tough competition among shopping centres, especially older shopping centres operating on the market which are under more severe pressures of competition.