Storm clouds may be gathering over the Welsh economy, but the retail sector could provide some protection. Kristian Dando and Douglas Friedli take a look at what’s in store for the high street and shopping parks.
"If there’s something characteristic of Welsh shoppers, it is that they love a bargain” – so says Leekes marketing director Martyn Lewis, who has just overseen an image change for the homewares retailer. “People in Wales respond well to added value. We ran a promotion for a free 15 inch TV for orders over £1,000. That’s something typically Welsh.”
Downturn or not, Leekes has yet to feel the pinch. “Ideally you want a rebranding exercise to coincide with the population feeling affluent,” says Lewis. “But our large-ticket items haven’t been hit that badly by what’s looking like a recession. It still appeals to people who’ve got money to spend.”
There has been no meltdown on the high street, or on the retail park, as yet. Sales across the UK were down 1.5 per cent in September, according to the British Retail Consortium – but that is still up 1.5 per cent on September 2006.
That matters beyond the checkout queues, because retailing is closely linked to regeneration, tasked with improved town and city centres.
One of the most important is the £100m Eagles Meadow centre in Wrexham, which opened at the end of October with 90 per cent of space occupied. David Wilford, manager at developer Wilson Bowden, predicts it will lift the North Wales town into the top 80 UK retail hotspots.
Cardiff will get St Davids 2 next year and Swansea’s future looks better too, thanks to retail developer Hammerson which hopes the market will have bounced back by the time its city centre schemeis complete in 2018.
Some retailers are doing well as shoppers make a trade-off between luxury brands and cheaper alternatives. Peacocks, based in Wales, has benefited from this factor, while low-cost European retailers Lidl and Aldi are expanding. Aldi in particular has earmarked Wales for further growth, buying up space for a regional headquarters at Wentloog in Cardiff. Aldi regional manager Peter Casey says the Welsh eye for value has helped: “About 50 per cent of our customers are in a position where they don’t need to shop at Aldi, they just choose to.”
But the market is delicately balanced. “Consumer confidence is low – that means people are holding back on big ticket items, furniture for instance,” says Retail Knowledge Bank analyst Robert Clarke. “That ties in with fewer people moving houses because of the housing market collapse. The electrical goods market was the next to be hit, and now it is spreading.
“Things are getting quite price competitive,” says Clarke. “The mid-market retailers are being squeezed by supermarkets and budget retailers. Primark, H&M and TK Maxx are doing well, whereas Marks & Spencer is having a tough time.”
But he says Aldi’s growth has more to do with new shops opened over the last 18 months than the credit crunch. “They reached a plateau for the time being in terms of growth, but the stores they opened are maturing – I think that the growth that they’re experiencing at present is as much to do that, as people wanting to save money. I don’t believe they are taking market share at any greater rate than before – though Aldi has been of importance in less economically strong parts of Wales.”
South Wales shoppers will get more choice at the other end of the scale next year when John Lewis opens its second largest UK store at Land Securities’ St Davids 2 development.
“We’ve realised for some years that we wanted to get a stronghold in Wales, but we needed the right opportunity,” says John Lewis project director Kirsteen Roberts. “I think the Welsh market has done a lot of maturing. All of the existing developments plus the work going on in the valleys has come together and I think that certainly compared to other cities we’ve gone in to – Leicester, for example – Cardiff is of a different order. It has progressed further in it regeneration.”
She does not expect the retail market to have picked up again by the time the Cardiff store opens, but adds: “We are long term player and don’t have to be too reactive.”
Swansea could also be in line for a John Lewis store, according to Hammerson, although Roberts will only say: “If there’s enough potential to draw a large enough catchment that wouldn’t draw too much away from Cardiff, then I’m sure it’s something we’ll consider.”
St Davids 2 will bring in more shoppers, and many will drive – so a car park will be built on the site of a historic city centre pub, leading to protests from community groups. But Roberts believes a balance needs to be struck: “We’ve looked at creating easy links to bus and train stations. But we have to provide customers with choices they have to make.”
And she is enthusiastic about the way development is moving from out of town back to city centres – although extra competition could provide a headache for smaller retailers such as those in Cardiff’s Victorian Arcades. Roberts believes there is room for both: “The smaller indigenous shops in the arcades near SD2 are a vital part, they make Cardiff a special place that want people want to come to.”
Ten miles away in Llantrisant, Leekes’ Martyn Lewis says he is ready to embrace the competition. “Our proposition and John Lewis’ are similar. On one level, that’s a bad thing – but if it makes people reconsider just going to a budget shop, that’s got to be a good thing. It raises the bar having a retailer who deals in good variety and depth of product, rather than another discounter who just drags the market down.”
Nick Carter, director at property adviser Calan Retail, says SD2 will help the Cardiff retail scene: “It looks fantastic, and it is important for the city and Wales as a whole that Cardiff remains the regional retail powerhouse in the face of increased competition from Bristol’s Cabot Circus,” he says. “It should ensure that Cardiff retains its position in the retail hierarchy, while the presence of John Lewis should reduce shopping trips across the Severn Bridge.”
Carter believes the scale of development in central Cardiff and the economic climate will lead to incentive packages for occupiers in the short term. That may lead to a slowdown in rental growth but rents in Cardiff are already fairly low in comparison with other areas, so are unlikely to fall dramatically.
Meanwhile, SD2 is not the only retail game in Cardiff – the new Capital Retail Park at Leckwith with its Asda, Next, Costco and Marks & Spencer is well placed to attract shoppers from the west. Carter says the effects will be felt widely: “The increased strength of the city is likely to be at the expense of other regional towns and retail centres that will be unable to compete with the variety and quality of retail product on offer.”
Whether retail has been a tool of regeneration, or a result of it, is debateable. Torfaen council’s head of economic development, David Ludlow, says: “Both stances have elements of truth. As an area is regenerated so new retail opportunities will develop. This makes certain assumptions, that the regenerated area will have a potential to service the retail unit, and that the retail units reflect the needs of the area. The counter is that, in many cases, there is a need for a retail development to balance the needs of the area or to fund a large element of the regeneration costs.”