RETAIL RESEARCH PUERTA DEL SOL THE IDEAL LOCATION FOR SECOND GENERATION FLAGSHIPS IN SPAIN AUTUMN 2017 FLAGSHIPS | WHY SPAIN AND WHY MADRID? | PUERTA DEL SOL | TRENDS 2 22,000 SQM OF RETAIL SPACE 37 RETAIL UNITS A VIBRANT MELTING POT THAT WELCOMES OVER 100 MILLION VISITORS PER YEAR INTERSECTION OF THE CITY'S BUSIEST HIGH STREETS, MADRID’S EQUIVALENT TO PICADILLY CIRCUS OR TIMES SQUARE STRIKING PERIOD FAÇADES IN A LANDMARK SQUARE SURROUNDED BY ICONIC HISTORICAL BUILDINGS 3 2ND GENERATION FLAGSHIPS: A MULTI-SENSORY EXPERIENCE • Across the globe, top retail brands are now street world, has embarked on its expansion turning landmark properties into second strategy by opening a flagship store on generation flagship stores. These new Paseo de Gracia, where its customers can flagships are not just a shell in which to sell fully immerse themselves in the brand's a product, they provide an exclusive setting philosophy and enjoy their “Happy Culture” in which retailers can innovate, present their right in the heart of the city centre. Sephora most creative design concepts and has developed and introduced its new continually reinvent themselves to provide concept in its stores in Madrid and their customers with truly unique Barcelona, integrating visual and digital experiences. content into the sale of its products. The sunglass designer Hawkers has also just • A prized location in a prime retail area of a joined the click-to-brick crowd, opening a major city is no longer the be-all and end- store on Calle Carretas in Madrid that all for success in terms of a brand’s visibility features both a videogame area and allows and prestige, retailers must now also focus customers to pay with bitcoins. on the customers’ sensory experiences A SECOND when they visit their stores. • Creating in-store multi-sensory experiences has become a must for retailers, who are GENERATION • Burberry on Regent Street is a prime now designing new formats that allow example; creating an interactive shopping valuable synergies to be created between FLAGSHIP IS THE experience that has reinvented the brand the on and offline businesses. and boosted its online sales. Pepe Jeans is PERFECT SETTING another example of a brand that has • E-commerce has significant room to grow introduced technology into its London in Spain, with only 30% of online stores FOR CREATING flagship, now offering its customers both delivering to the whole of the country. interactive fitting rooms and an area where However, despite the rising number of MULTI-SENSORY they can design tailor-made clothing. online sales, with 27% of Spanish people Topshop has created a beauty area in its now buying online, brick-and-mortar stores AND OMNI- 8,400 sqm store on Oxford Street, now remain the country's preferred choice. offering customers the opportunity to treat CHANNEL themselves to a make-over or even a hair • Having a flagship store that produces appointment. that all important and lasting wow-effect EXPERIENCES has become a must, repositioning and • In Spain, H&M has opened a flexitarian strengthening a brand's image, thereby restaurant in its Paseo de Gracia flagship allowing the store to have a much store in Barcelona, whilst KIABI, which up higher effort rate than any other high until now had not ventured into the high street format. SPANISH QUARTERLY E-COMMERCE TURNOVER 2013-2016 7.0007,000 6.0006,000 5.0005,000 4.0004,000 Millions 3.0003,000 2.0002,000 1.0001,000 0 IV I II III IV I II III IV I II III IV 2013 2014 2015 2016 Source: CNMC 4 FLAGSHIP INNOVATION GASTRO SPACES. H&M TAILOR-MADE CLOTHING. PEPE JEANS Flagship store Barcelona Flagship store London TAILOR-MADE CLOTHING. PEPE JEANS PERSONAL SHOPPING EXPERIENCES. TOPSHOP-TOPMAN Flagship store London Flagship store London 5 WHY SPAIN? • Spain’s economic recovery has been remarkable, and recognised • Thanks to the improving economic backdrop, consumer by the IMF as the example to follow. It is currently the fourth confidence reached all-time highs in July, generating positive fastest-growing economy in the Eurozone, outpacing the UK, expectations for consumption, which have then been further Germany and France. boosted by contained price growth and low interest rates. • The country’s infrastructure, combined with the physical and legal • Spain received a record 75.3 million tourists in 2016. The industry assurance that it offers, has become a major draw for international has continued to thrive in H1 2017, with the number of tourists investors. visiting Spain exceeding H1 2016’s figure by 11.5%. HOUSEHOLD FINAL CONSUMPTION EXPENDITURE MILLIONS (€) CONSUMER CONFIDENCE INDEX 2007-2018 2011-2017 120 175.000175,000 170,000 170.000 100 165.000165,000 80 160.000160,000 155,000 155.000 60 150.000150,000 40 145.000145,000 140,000 140.000 20 135.000135,000 I III I III I III I III I III I III I III I III I III I III I III I III 0 2011 2012 2013 2014 2015 2016 2017 (Jul)(Aug) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: INE. Ieconomics Source: CIS GDP (SPAIN AND REGION OF MADRID) and CPI 2001-2018 GDP CPI 6,0%6.0% 5.0%5,0% 5,0%5.0% 4.0%4,0% 4,0%4.0% 3,0%3.0% 3.0%3,0% 2,0%2.0% 2.0% 1,0% 2,0% 0.0% 0,0% -1.0% 1.0%1,0% -1,0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -2,0%-2.0% 0.0%0,0% -3,0%-3.0% --1,0%1.0% -4,0%-4.0% -5,0%-5.0% --2,0%2.0% Madrid EspañaSpain IPCCPI IPC.forecastCPI. Forecast Source: INE, BBVA Research and IMF 6 WHY MADRID? • Madrid currently boasts all the key attributes to establish itself as • Madrid also holds the number two spot in Europe, only behind a global hub. London in the Globe Shopper index’s Best Shopping Destination ranking. The results of this study are based on a five-category • The city’s economic growth is outstripping the national average, analysis: store quality, affordability, culture & climate, hotels & with GDP forecast to climb 3.6% in 2017 and 3% in 2018. transport and convenience (opening hours, use of languages, security and savings). • International tourism is playing an increasingly important role in Madrid. With the city receiving close to 5.3 million international • Madrid is highly competitive in terms of retail unit rental levels visitors, Madrid was ranked fourth out of all European cities in compared with other European cities, with the average annual the Global Destination Cities Index, which tracks average rent standing at €3,600 per sqm versus €6,400 per sqm in Paris international tourist spend. and even up to €14,500 per sqm in London. TOP TEN EUROPEAN CITIES BY INTERNATIONAL TOURIST SPEND Global Destination Cities Index 7th 1st BERLIN LONDON 2nd 6th 9th PARIS MUNICH VIENNA 8th MILAN 4th 10th 5th MADRID ROME ISTANBUL 3rd BARCELONA Source: MasterCard 7 WHY OPEN A FLAGSHIP IN PUERTA DEL SOL? • Puerta del Sol is situated right in the very together the current pedestrianised TIMELINE heart of Madrid, forming the city’s main areas of Fuencarral, Preciados and social hub and is the retail area par Puerta del Sol. excellence along with Calle Preciados. th • Converting Preciados, Fuencarral and 15 Century Given its location outside the city’s walls, the square was a • The ever-increasing number of Arenal into pedestrianised areas paved busy meeting place for international companies and retailers, the way for some of the city’s most merchants looking to avoid including the arrival of top brands such prestigious lettings, such as the opening paying taxes. as Apple, coupled with the of Pull & Bear’s largest store at Preciados refurbishment of some the city’s 9, the debut of Decathlon in the iconic 1766 Casa de Correos constructed. landmark properties and the Calle Fuencarral Market and Calvin 1857 The square takes on its current regeneration of surrounding areas, is Klein’s decision to strengthen its semi-circular form after further establishing Puerta del Sol as a positioning in Spain with its new store at undergoing a major go-to national and international retail Arenal 3. In London, semi- regeneration project. destination. pedestrianising Oxford Street also bolstered sales and the road is expected 1919 The first Metro line is opened, running between Puerta del • The fact that Puerta del Sol is a to be fully pedestrianised by 2020. Sol and Cuatro Caminos. pedestrianised area drives business; increasing sales and pushing up rents. • Madrid’s City Council and Regional 1950s The area is refurbished to Other streets such as Preciados, Government are working on plans to improve vehicle access given Fuencarral and Arenal boast virtually no redesign the Sol area to make it more the rising traffic levels. vacancy. accessible by modifying the layout, 1960s Landscaped areas and repositioning the street furniture and fountains are added. Works to • In Spain, works to semi-pedestrianise clearing the centre of the square to allow pedestrianise Calle Preciados Gran Vía are expected to get underway for higher footfall. This project further and Calle El Carmen begin. towards the end of 2018, and will form demonstrates the city’s push to establish 1986 A large pedestrianised area is one single retail hub that will join this area as a major retail hub. created, the Metro station is refurbished and the Regional Government relocates to the Real Casa de Correos.