Spanish retail is heading out of town, says report

Design opportunities in the Spanish retail market will shift from DIY, homewares and white goods to pharmaceutical, out-of-town and multi-channel platforms in the long term, according to a Verdict Research report out this week.

Previously booming sectors such as furniture, DIY, electricals and homewares will have to adjust to tougher conditions going forward, suggests the report. The recent decline in Spain’s housing market has impacted on consumer confidence, borrowing and spending, and as a result expenditure on big-ticket and home-related items is being reined in. What was once one of the European Union’s most buoyant retail markets, says the report, is now set for tougher times.

However, there are two sides to the coin, and despite an air of caution among consumers, an array of opportunities for retail designers could present themselves across pharmaceutical, out-of-town and digital channels, as legislation is relaxed and consumer confidence with retail technology grows.

The report’s author, Verdict Research senior analyst Daniel Lucht, offers the likely liberalisation of pharmacies as a possible major boost to Spanish retailing.

‘As it stands now, there is a rule in Spain that pharmacies can only be owned by pharmacists rather than corporations, but this is being reviewed by the European Commission,’ says Lucht.

If a relaxation of this law is approved, supermarkets and ‘perfumeria-drogueria’ players could easily capitalise on a pharmaceutical offer using their established footfall to boost sales. As such, demand for new pharmacy sub-formats could be required, with retail designers being called upon for their expertise.

The report suggests that Spanish grocers Mercadona and Eroski, alongside drug store retailer Schlecker – with 1184 outlets in Spain – would all be in a prime position to ‘work existing footfall harder and increase sales’.

Relaxation of planning and out-of-hours legislation also looks set to stimulate development of the out-of-town sector, says the report. Strong demand for retail warehouse space from domestic and international retailers is being met by planning and shopping hours liberalisation, as Spain’s regional governments attempt to boost consumer spending.

The report predicts developments such as ING Real Estate’s Inspira Deco ‘furniture boulevard’ in Madrid will spring up around the region, presenting a host of opportunities for branding, new retail formats and in-store marketing.

A fledgling Spanish multi-channel offer and Internet retailing could also provide significant growth avenues, says Lucht.

‘At the moment, Internet retailing is an area that is still underdeveloped. Broadband penetration stands at 18.3 per cent, while on-line sales are generating about €2.8bn [£2.2bn], that’s double-digit growth,’ reports Lucht. ‘A good website can attract consumers into stores, but it can also mean that stores can be used more efficiently by only showing the best ranges and taking up less space,’ he adds.

According to Lucht, the Spanish grocery sector has very little digital capability, with players such as Eroski, Mercadona, Carrefour, Lidl and Aldi yet to make sites transactional and offer delivery services. Cue digital designers.

In terms of department stores, El Corte Inglés continues to dominate the Spanish retail scene. Because of its financial muscle, further expansion with new formats and diversification into new categories looks possible. Most recently, El Corte Inglés has moved into DIY with Bricor, and furniture and homewares with its Hogar standalone and shop-in-shop outlets.

Verdict Research sees potential for large retailers with the necessary capital expenditure levels to grow, despite tougher times ahead.

The Spanish scene

• The Spanish retail market is worth €218bn (£173bn)

• Grocery is dominated by Mercadona, Eroski, Carrefour, Auchan, Lidl and Aldi

• Clothing is dominated by Inditex, Zara, Mango, Cortefiel, Dunnes Stores, Primark, H&M and C&A

• Furniture players include Ikea, Conforama and Leroy Merlin

• El Corte Inglés remains the most dominant department store