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credit: Retail Customer Experience
credit: Retail Customer Experience

On the way to the smart store: GRR Report shows opportunities for digitalization in retail real estate

Digitalization in the retail sector is in full swing. This is leading both to a changed shopping experience for customers of local suppliers and discounters and to simplified processes in the management and purchase and sale of retail real estate. However, retailers should be mindful of customers’ interests when using artificial intelligence (AI) in sales. While functioning digital systems are important, completely digital smart stores without personal support miss the mark when it comes to consumer needs. This is shown in the third GRR Basic Retail Report, which GRR Group is presenting with its cooperation partner Savills.

Big Data can boost sales

“Digitalization has been facilitating the shopping experience in retail for a long time. Local retailers cleverly use data collected from consumers to attract or retain customers. The completely staff-free smart store, on the other hand, does not meet consumers’ expectations. Grocery retailers should skillfully combine the benefits of digitalization with personal, non-digital service. In this way, AI can help boost sales and increase customer loyalty. If this succeeds, the value of local retail real estate will also increase. After all, the valuation of the properties is inextricably linked to the attractiveness of the stores for their customers,” explains Martin Führlein, CEO of the GRR Group.

The transparent consumer exists – despite data protection

It is of central importance that local suppliers adapt to the needs of their customers. Customer data is crucial here – collected, for example, via bonus cards, app tracking, social media platforms, or online purchases. In this way, personalized advertising can be placed or discount promotions can be used to encourage customers to visit the retail store in a targeted manner. But the transparent customer finds its limits in data protection regulations, especially the General Data Protection Regulation (DSGVO). If food retailers respect the protection of personal data, they can use digitalization to specifically improve the shopping experience.

Survey: Consumers value digital convenience – but not anonymity

For the report, the GRR Group surveyed retail customers for the first time to obtain a differentiated picture of the mood regarding the use of new technologies. Self-scanning checkouts, for example, were rated as important by 65 percent of respondents, and mobile payments by 58 percent. By contrast, cell phone charging stations, digital customer service and cashierless shopping were rated as predominantly unimportant. The use of technical solutions also varies greatly. For example, just under two-thirds of respondents use loyalty cards or loyalty programs, self-scanner checkouts are used by 69 percent, and mobile payment by 41 percent. Other services, such as online delivery service, pick-up service with click and collect, or mobile self-scanning, are only used by around 15 percent. The level of affinity for technology declines as the age of the customer increases.

By contrast, fully automated shopping stores that are open around the clock and have no staff are of little interest to consumers. Overall, 56 percent of those surveyed do not appreciate such a service. For more than three-quarters of the over-35s, it is important to receive personal assistance when shopping. What all respondents have in common is that they appreciate the convenience of new technologies, but attach great importance to the sensitive handling of their data. At the same time, consumers hardly seem to be aware of the consequences of using loyalty cards or enabling app tracking on their smartphones.

Digitalization is becoming a key factor for retail real estate

It is not only retail customers who are becoming more transparent as digitalization progresses; retail properties are also benefiting from transparent data usage. Instead of being recorded manually in Excel spreadsheets, all information about the property will be recorded in a digital property passport in the future. This will also make it much easier to buy and sell the properties. In addition, the so-called Building Information Model (BIM model) will make it much easier to manage properties. According to this method, also known as digital twin, a model of the building is created with the help of software. All building data relating to planning, construction and management are then recorded in this digital market. The data can be combined and structural measures simulated. For example, the modernization of a retail store or ESG-compliant changes can be played out virtually – this will also speed up purchases and sales of the properties.

“Both in retailers’ business with customers and for administration and asset management, the degree of digitalization is already an indispensable success factor. The sustainability of the properties also plays a significant role here because the data on ESG compliance flows directly into the digital property passport or the BIM models. In this way, the upgrading of properties – for example, in terms of energy consumption or the use of renewable energies – can be planned and implemented virtually,” explains Dr. Astrid Keller, ESG and Research Manager at GRR Group.

Food retail remains the anchor of stability in the investment market

Independent of the process of digitalization, the GRR Report also looks at the current situation of investments in retail real estate. Experts at Savills, the cooperation partner of the GRR Report, assume that the overall transaction volume in the real estate investment market in 2023 will probably be lower than it has been for more than a decade. And there is currently no upswing in sight. Nevertheless, the experts for local shopping center real estate are cautiously optimistic. After all, the twelve-month transaction volume up to and including April 2023 was just under one billion euros, hardly lower than during the years before the pandemic surge. The trade in local supply real estate – according to the experts – stabilized at the beginning of 2023 and increased again in the further course of the year.

“The decline in prices in the real estate investment market has at least slowed in recent months. In the case of local supply properties, we are even observing increasing transaction activity again – and thus earlier than in the case of many other uses. The crisis resistance of the food retail sector, which was demonstrated at the latest with the pandemic, is likely to play a supporting role here, as is the structural growth that continues to be observed in the sector. The fact that most owners are still able to sell their properties at a profit despite price declines also helps. All in all, we can state that the investment market for local supply properties has remained comparatively liquid and is likely to remain so,” emphasizes Karsten Nemecek, Managing Director at Savills.


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