FSP Virtual High Street

Virtual High Street A unique tool to measure the impact of current and future trends on retailer profitability

What is Virtual High Street and how can I benefit?

The Virtual High Street (VHS) is a unique modelling tool which combines detailed financial analysis with FSP’s understanding of the space requirements, investment requirements and trading performance of stores.

VHS has been created to quantify how the pressures faced by many retailers across the country are likely to affect their ability to occupy physical stores. It also provides an understanding of which retailers in which merchandise groups are best positioned to meet the challenges of the fast changing retail environment.

In addition to standard profit outputs, FSP also calculates the Return On Trading Assets (ROTA) for each store. ROTA allows us to assess the profitability of retailers across the board, by comparing input (assets) with output (profit).

As a result of using VHS, you will be able to find out :    

The impact of future cost pressures Which retailers in your Centre/Portfolio are most resilient to change Which retailers are under increasing pressure unless preventive action is taken Recommendations on the best tenant line-up and strategies to ensure you have a profitable scheme

2 25 May 2018

What Virtual High Street can do for you

FSP’s Virtual High Street answers key questions for investors: ‒

What do rising costs such as business rates, wages and import costs actually mean for the future profitability of the High Street?

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What is the impact of falling footfall or further digital shift?

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How much sales growth is required to return high streets to sustainability?

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What change in occupational costs would return high streets to profit?

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For how many years will rents stagnate before high streets return to profit?

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Which merchandise groups are most vulnerable?

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Which businesses are best placed to flourish in the future?

3 25 May 2018

How Virtual High Street works

In the first review of performance, we take the Virtual High Street and investigate the impact of changes on occupiers in terms of: ‒

Footfall

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Rising business rates

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Increasing staff costs

Although the impact of these factors will affect the profits of all occupiers in our Virtual High Street, some merchandise groups (and the occupiers within them) are impacted differently.

VHS takes all these factors into consideration to provide a predictive model of future profitability of the asset.

Introduction

4 25 May 2018

Virtual High Street – Case Study

Key findings from The Virtual High Street report are: ‒

A 0.05% increase in sales would offset the impact of an 8% increase in business rates

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A 3% increase in sales would be required to offset a rise in minimum wage from £7.83 to £8.75 an hour

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The F&B market in particular, due to its high employment to sales ratio, is most susceptible to further increases in its cost base

Returning the High St to profitability will require a circa 22% increase in sales So which brands in which merchandise groups are best positioned to meet and exceed customer needs? FSP and The Virtual High Street can help you identify them

Average ROTA

14%

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CONTACT FSP TO FIND OUT MORE: ANDREW MCVICKER SALES DIRECTOR, FSP +44 (0) 1494 474740 ANDREW@FSPRETAIL.COM

6 25 May 2018

FSP Credentials

FSP is the most experienced independent retail property consultancy in Europe. Having completed 3500 projects over 40 years across numerous markets, FSP has helped many of Europe’s leading investors and occupiers get the best possible returns from their retail assets.

FSP works with some of the world’s most successful investors, including Ares, Aviva, Blackstone, Commerz Real, Landsec, Legal & General, M&G and Resolution Property, working on projects with assets worth a total of £135bn. We provide strategic recommendations and tactical support which allows clients to grow their rental income, attract target tenants, acquire new assets, prioritise investment, turn failing assets around, spot tenant risk, position assets for disposal and avoid costly mistakes.

Also widely known and respected in the retail market, FSP helps leading businesses including Acuitis, Menkind, Clas Ohlson, Joules, New Balance and Sushi Shop maximise their sales and profits by enhancing their store strategies and insight.

FSP’s approach uses experience backed by evidence. It helps its clients first understand their consumers better (with insight on shopping catchments and consumer preferences), and second fully get to grips with the impact of emerging trends such as demographic shifts, decentralisation, globalisation and digital shopping. It all adds up to smarter decisions and more profitable places.

To find out how FSP can help increase the long-term profitability on your asset, be it high street, shopping centre, OOT, outlet, mixed use or leisure, contact the FSP team.

7 25 May 2018

FSP Services

To provide its clients with the insight and evidence required to make informed, value driving decisions, FSP provides a range of services. At its heart, FSP is a true retail consultancy, not a data provider, and will always look to use the most appropriate methodologies and sources of data, including:   

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IMPACT – FSPs gravity model, providing accurate and in-depth definitions of shopper catchments for every location in the UK and Ireland FSP’s Retailer Database – tracking the store locations, account information, sales performance, store performance, contacts and news articles for over 2000 UK retailers Rent Sustainability Analysis – FSP’s Retailer Database allows us to produce the most accurate view of retailer performance of any UK retail consultancy. Our bespoke models allow us to provide accurate and in-depth P&L analysis for stores across the UK, to determine their underlying operating profit and their comparative performance by ROTA (Return On Trading Assets), key to understanding medium-term sustainability STAR – FSPs online sales recording system, used to collect, analyse and report sales insights at centres across the UK Trading Gap – Using detailed audits of retail performance for target locations, FSP is able to compare and contrast market shares by merchandise category to understand where the greatest potential to increase turnover lies. Analysis by customer type and catchment segment allows marketing to increase return on spend FISH – FSPs bespoke segmentation of the Clothing & Footwear market; segmented supply and demand for any location across Europe MENU – FSPs bespoke segmentation of the Food & Beverage market, helping operators and landlords understand in greater detail opportunities derived by the source of demand (resident, worker or tourist) and type of demand to spot the best appropriate locations/operators for their brand/centre

The above products and methodologies allows FSP to support the activity of a wide range of players in the retail market:  Fund Managers – providing a robust, long term view of retail opportunities  Asset Managers – providing bespoke solutions to drive value growth  Marketing – determine strategies to provide best ROI on marketing spend  Leasing – provide robust and trusted independent assessments of trading opportunities for target occupiers  Centre Managers – support the collection of sales data and provide robust insight into what the numbers actually mean  Retailers – understand the most appropriate locations for their brand, the scale and nature of opportunity

8 25 May 2018