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Research Study on the Effectiveness of NPPG 8 Town Centres and Retailing

2. General Retail Changes

2.1 The first of the six key issues is to look at overall changes in retail patterns, which can affect retail planning and development in Scotland. This was researched for the study by IRS, through an extensive bibliography, and is summarised in a comprehensive literature review provided for the client group. The literature review also included some further research by CBRE into background retail planning commentary amongst the planning and property profession. In addition, various further material emerged from the retail profiles, questionnaires, discussion groups and other sources, throughout the research.

2.2 We summarise below the findings from desk and survey research and summarise our implications at the end of this section.

Findings from Desk and Survey Research

Literature Review

2.3 The IRS report makes it clear that it is fundamentally important for any review of NPPG8 to have a full understanding of the retail sector. Specific reference was made to comprehensive reviews such as research by John Dawson on "The future of patterns of retailing in Scotland (2000)" and further research by IRS for the UK Department of Trade and Industry in 2002. In drawing from these and many other sources, IRS concentrated on the scale and scope of retailing as a crucial sector and a major contributor to the Scottish and UK economy. Households in Scotland are engaged in various forms of shopping activity and there is a significant retail sector providing employment, particularly for the female segment of the labour force. Beyond the large omnipresent chain of retailers, there exists a large body of independent businesses throughout Scotland. Although IRS recommends significant central government improvements to data collection in order to analyse the importance of the retail sector, from available sources the scale parameters for Scotland include sales of approximately 19 billion in 2000, a network of approximately 22,500 shops and an employment base of 230,000 people in Scotland.

2.4 Within this overall scale of retailing in Scotland are various dichotomies; from some of the largest retail businesses in the UK such as Tesco with sales of over 22 billion pounds and components of the world's largest business (ASDA/Wal-Mart) down to the local corner shop or even the car boot sale stall holder. A single shop can employ many thousands of staff or can be a one-person enterprise.

2.5 Providing a clear form of mapping of the retail sector is a difficult challenge for planning purposes. Official data are available and these essentially follow a "line of trade" typology and this approach is used in most of the reviews of the sector. IRS recommend that any analysis of the sector should recognise that there is a fundamental blurring of the overall retail sector in both the product line horizontal dimension and the channel activity vertical dimension.

2.6 With respect to the horizontal characteristics of the retail sector, as businesses have sought to grow and the physical size of outlet has expanded, traditional product boundaries have dissolved. For example, food retailers now no longer merely sell fresh and dry groceries but also retail electrical products, financial services, clothing and entertainment products (CDs, videos, newspapers, toys). The boundaries of traditional "hardware" retailing now encompass garden products, furniture, and home furnishings. The widening of consumer demand and changing consumer expectations, increased sophistication of stock control and management information systems, plus the appearance of new product markets (e.g. mobile telecommunications) all involve pressures which have encouraged retailers to think and operate "outside" the traditional retail product boxes.

2.7 Change in the vertical dimension of the retail sector is best illustrated by changes in who performs and manages channel tasks and activities. The traditional view of retailing has seen it as one function or activity within a distribution channel which links supply or production to demand or consumption. Tasks, activities and roles within this channel process were clearly delineated. Retailers were essentially passive, responding to the lead of brand manufacturers, and relationships between the various actors were dual focused and transactional in nature. As retailers have used their increased organisational scale, and growing control over customer access and information to take the lead within the distribution channel, the management and organisation of tasks and activities has changed. Retailers have assumed a pro-active role in a demand (as opposed to supply) chain to manage the whole channel process. The need to meet a range of customer needs, desires and priorities has required retailers to manage costs and activities within the channel through a more co-ordinated, integrated approach to activities. This is well seen in issues such as the persistence or not of wholesaling, transportation or packaging businesses. The outcome is again a "blurring" of the traditional boundaries used to delineate retailing and assess its role and importance within the economy.

2.8 This fundamental change in process for the leading retailers, and generally for the retail sector as a whole poses problems in understanding the contribution that retailing makes to a country and in any international comparisons. For the UK and for Scotland, the poor quality and quantity of official statistics further complicates any data or statistical processing. It is more sensible therefore to discuss broad trends and tendencies when considering retail change. This is also beneficial where the time horizon is long in retail terms. We can summarise the main trends in Scottish retailing (Table 2.1).

Table 2.1: Trends in Scottish Retailing in the 1990s/early 2000s (after Dawson 2000)

Understanding Change

2.9 The discussion of recent trends in Scottish retailing now needs to be placed into a wider context. The framework used here is based upon three components. First is the identification and assessment of key drivers for change influencing the retail sector. These factors are external to individual businesses within the sector but shape the broad competitive environment within which retailers operate. Secondly, there is a consideration of the structural characteristics of the retail sector. This allows analysis of the business organisation of retailing within individual sectors in respect of ownership, competitive structure and scope - in effect charting the shape and resource base of the sector. Finally, the focus is upon internal characteristics and competencies within retailing. This requires identification of core operating competencies, which contribute to success within retailing. As with all frameworks however artificial barriers between levels of analysis are inevitable and we would emphasise that linkages amongst the three components exist.

(a) Drivers for Change

2.10 Competitive analysis starts with an assessment of the environment within which a business operates. For the purposes of this report a framework considering key drivers for change will be utilized. Change within each of these interrelated drivers contributes to the broad environment within which retailing operates. These drivers are identified as :

• Political Structure and Trends
• Economic Structure and Trends
• Socio-cultural and Lifestyle Aspirations
• Demographic Structure and Trends
• Production and Process Innovation
• Environmental Changes and Trends

Table 2.2: Drivers for Change

(b) The Sector Structure

2.11 The influence of the external environmental drivers and the capacity for retail organisations to respond to the opportunities and threats posed by these changes is moderated by the structural characteristics of the retail sector. These contribute to competitive analysis through an understanding of the implications for organisations arising from issues surrounding scale, scope, the organisation of businesses and resources. The key considerations here include:

• Size and Scope of Retail Sectors
• Competitive Structure
• Organisational Structure and Competition
• International Opportunities and Threats

Table 2.3: Sector Structure

(c) Internal Characteristics and Competencies

2.12 An analysis of internal characteristics and competencies within retailing provides an assessment of core competencies and capabilities. Although operational areas are intrinsically inter-linked, for purposes of analysis core competencies are identified in:

• Retail Operations
• Employment Characteristics
• Marketing Activities
• Supply Chain Management

Table 2. 4: Internal Characteristics and Competencies

The Implications For Retail Planning In Scotland

2.13 There are many ways in which the interplay of the issues identified above could be translated into impacts on retailing in Scotland. Not all of these impacts are clear at this stage. Not all of the impacts are requiring of a planning policy response either. However, there are some issues that should be highlighted for their potential effect on the shape and scale of the retail sector, and the resulting potential impact of this on consumer behaviour in Scotland. These effects may require reconsideration or reaffirmation of planning policy towards the sector. These issues are:

• Accommodating retail sales growth
• Format developments
• Locational developments
• Accessibility issues
• Competitive effects

Accommodating Retail Sales Growth

2.14 Despite issues about the future shape and level of the population in Scotland, it is believed that there will be sales growth in the retail sector. Ordinarily, increasing sales growth leads to an increase in requirements for more locations for retailing, but some caution could be expressed here. The development of the Internet as a retail channel that is growing will have some sales effect. Increases in productivity may also be possible for some retailers from existing locations. Whilst the sector may therefore have to develop some new locations, the evidence would seem to be that there will be fewer shops in the future in Scotland and that the problem of accommodating growth is not one that needs a macro planning policy change.

Format Developments

2.15 Retailers will continue to develop their formats to meet the changing consumer demands. Whilst we could speculate about the shape and direction of these formats, from a land-use planning perspective there would not seem to be the need for major new departures in terms of formats. Instead, the issues are likely to be: the mixed use at some locations and in some formats and the potential for new formats in newer locations that currently do not have retailing. One of the concerns might be the ability of existing retail units to accommodate modern retail demands in terms of scale and size as well as operational attributes.

Locational Developments

2.16 The locations through which retailing is carried out may well change. Certainly existing trends point to a concentration of development. Whilst the number of centres may indeed grow, the overall effect may be to polarise the locational map for retailing. New developments will have to be thought through very carefully in terms of their effects on the existing retail fabric. In some cases new development may mean an opportunity to focus retailing and other activities at one site. Retailers' ability to change product mix in existing off-centre stores provides a competitive advantage over retailers who are still trying to secure off-centre sites.

Accessibility Issues

2.17 If the predictions for falling store numbers and some concentration of locations are correct, then there will be accessibility issues for consumers that will only partially be alleviated by electronic developments. Access to food and non-food shopping is a concern at the minute and this may well rise. Planning policy may have to express a view about the desirability of maintaining access as a social goal. Other attributes of accessibility are also important however. Issues about transport mode choice for shopping are likely to continue and planning policy has to be aligned with other policies. However this is a very complex area and data are not really available to support solutions. Congestion in some locations may also affect accessibility, whilst congestion charging in some locations may affect consumer demand for certain locations and types of shopping. There may also be considerable differences in approach needed in rural as opposed to urban areas.

Competitive Effects

2.18 Retailing is likely to remain competitive at many levels e.g. stores, companies, centres and towns. The effect of this and the trends identified above will be to make more locations marginal and to continue to cause problems and issues in terms of dereliction and re-use of retail sites. Some of these will be large developments as well as the more traditional smaller shops. Managing the process of decline may well become a major planning problem in future.

2.19 In addition to the IRS review, CBRE carried out further research on general commentary in the planning and professional press in relation to key planning issues. However, the most useful information gleaned from this exercise was on specific issues which are addressed in subsequent sections of this report. There were more useful sources on general retail trends from retail profiles and the reports of surveys, summarised in the headings below.

Retail Profiles

2.20 The CBRE research included some selected profiles of demographic, expenditure and floorspace data which helped to inform the study on various background trends in Scotland.

2.21 The first, and most up to date source of retail information was from Scottish household expenditure patterns in The Retail Pocket Book 2003. Table 2.5 demonstrates average weekly household expenditure in Scotland:

Table 2.5 Average Weekly Household Expenditure

2.22 These expenditure data clearly show just what a significant element of a household's individual weekly spending capacity is directed towards food and non-food shopping, with some 47% of expenditure being spent on this category. Other categories which feature significantly include:

• Transport: including petrol, public transport fares, ticket costs and air travel. It should also be noted that this category also includes the purchasing of new vehicles and accessories, categories which further re-affirm the importance of retailing.
• Restaurants & Hotels: This includes holidays and meals eaten in restaurants, as well as take -away food and drink eaten at home.
• Miscellaneous goods and services: Includes, amongst other things, insurance policies, childcare, bank and credit card charges, legal fees etc.

2.23 Table 2.6 below then divides the retail spend shown in the bottom line of the above graph, into various categories, as follows:

Table 2.6 Average Household Spend - Food/non Food

2.24 Average spend on recreation and culture products feature the most. Such goods include audio and visual equipment, computers, photography, games, toys and hobbies, sport equipment, pets and pet food and horticultural goods. Spend on food and non alcoholic drinks is the next category to feature with over 11% of a household's weekly spend being dedicated to such goods. This is followed by fashion goods at just over 6%.

2.25 Another general source used in the study is CBRE's National Survey of Local Shopping Patterns (NSLSP). This forms a UK wide national telephone shopping survey, based upon the responses of more than 1 million UK households. This survey has been undertaken in 1998 , 2000 & 2002.

2.26 From the survey results, CBRE's in-house research department have identified the catchment areas and catchment penetration rates of all significant retail locations within the UK. While this data is very useful in analysing specific retail locations, some analysis of Scotland's national retail trends can also be drawn from the data.

2.27 For Scotland, the NSLSP identifies 230 trading locations, based upon consumers' responses to where they undertake their main comparison shopping. The survey then ranks each location from 1 to 230, based upon the number of customers which stated that they use that centre / location.

2.28 While the individual shopping population figures established for each specific retail location cannot be divulged, due to confidentiality, Table 2.7 below categorises the 230 locations into 23 groups of 10, i.e. the trading locations ranked as 1 to 10 comprise group 1. From these data it is then possible to calculate the percentage change of consumers using the 23 groups over the five-year period from 1998 to 2002.

Table 2.7 NSLSP Data

2.29 Table 2.7 demonstrates that the top 30 ranked comparison goods trading locations (i.e. groups 1 to 3) have, on average and to a limited extent, improved their strength within the overall retail hierarchy, with a greater number of the survey respondents stating that they undertook their main comparison shop within these locations in 2002 than in 1998. The top three groups have increased their shopping population by 2%, to 2.74% and 3.3% respectively.

2.30 These data also suggest that those trading destinations ranked between numbers 41 to 100 (groups 5 to 10) have, in overall terms, improved their market shares more significantly with, on average, locations increasing their population draw by over 10%.

2.31 Finally, the data suggest that those locations positioned towards the bottom of the ranking are tending to perform badly, in that the number of people shopping there has reduced over the past four years. This suggests that, although retail locations currently performing strongly continue to improve and increase their customer draw, those retail locations which are ranked at the lower end of the hierarchy are finding it increasingly difficult to retain their levels of market share.

2.32 Another source of data is CBRE's detailed research regarding retail development, currently in the development pipeline and historic retail completions. The full extent of the research is included in the Desk Research Report to the client. A summary of the main findings is detailed below.

2.33 From the CBRE research on non-food comparison shopping floorspace development pipeline data for the UK, it has been possible to disseminate certain data on the level of floorspace that is in the process of being developed. This has been undertaken in terms of location, i.e. town centre and out of centre locations, and in terms of retail format, i.e. shopping centres, retail warehouse parks and factory outlet centres. It has also been possible to compare this data with UK wide trends and to review the situation in terms of Scotland's three most dominant retail locations, Glasgow, Edinburgh and Aberdeen.

2.34 These data examine the amount of retail floorspace (all figures stated within here are in sq ft) which is in the pipeline at February 2003. This relates to the following stages of the development process:

• Retail Proposals: Developments detailed in the press etc. but as yet not subject to a formal planning application. Caution should be attached to the evaluation of such figures due to the fact that some major proposals may never come to fruition.
• Applications: Submission of both outline and detailed planning applications that have yet to be determined.
• Consents: Schemes which have secured outline or detailed planning consent.
• Under Construction: Retail proposals which are in the final stage of completion.

2.35 In the first instance, Scottish pipeline data has been examined in terms of location, i.e. town centre and out of centre.

Table 2.8 Scottish Floorspace Pipeline

2.36 Table 2.8 demonstrates that, in general, the amount of retail floorspace currently in the development pipeline, located in out of centre locations exceeds the level of floorspace proposed within town centre locations. This is particularly the case in terms of both detailed and outline planning applications for retail development. However, it appears that this difference is significantly reduced in terms of the level of floorspace which actually successfully achieves planning consent. Despite this, the level of floorspace being constructed in out of centre locations is greater than that located within town centres.

2.37 In summary, the data suggests that taking a current snapshot (5 years into the life of NPPG8) there is certainly no evidence that today's development industry is being discouraged away from the out of centre locations. But the planning system is delivering a level of consents in town centre locations which is not significantly behind the level granted for out of centre.

Table 2.9 Scottish and UK Data

2.38 Table 2.9 details the outline figures stated within the previous table for Scotland and compares them to the UK development pipeline data.

2.39 When a comparison of the two sets of data is made, it is evident that, for the UK as a whole, the level of floorspace located within town centres, which either has planning consent or is under construction, exceeds that level of floorspace located in out of centre locations. This is the opposite of the trend for Scotland, where out of centre consented floorspace and schemes under construction is dominant.

2.40 This difference could suggest that the application of retail planning policy guidance in England and Wales is resulting in higher proportions of consents for centrally located schemes.

Table 2.10 Shopping Centres

2.41 In table 2.10, we have singled out shopping centre developments for Scotland. Shopping centres are defined as planned/managed single schemes - normally a covered centre or mall type of scheme. It is evident that the level of consented floorspace for shopping centres located within town centre locations far exceeds that located in out of centre locations. This trend exists, despite the fact that the amount of floorspace being applied for within out of centre locations far exceeds those applications submitted in town centre locations.

2.42 This would suggest that the shopping centre format is being successfully directed predominantly towards town centre sites, perhaps reflecting the fact that the shopping centre format is also best suited to town centre locations, as opposed to retail warehouse parks (see below).

Table 2.11 Retail Parks

2.43 Table 2.11 singles out the retail warehouse parks. Unsurprisingly, the vast majority of such developments are located in out of centre locations. The current level of retail park space applied for represents 60% of the overall out of centre floorspace proposed by planning application (shown earlier).

2.44 In general, the level of floorspace currently being applied for in retail park formats exceeds the level of floorspace submitted for shopping centre formats, with over 2 million sq ft submitted.

Table 2.12 Factory Outlet Centres

2.45 In terms of factory outlet centres (Table 2.12), these are again located within out of centre locations. Very few factory outlet centres are currently being progressed as proposals and there are no schemes under construction.

2.46 The data used in the above tables are related to the current position. We now look at trends over time. Historic data regarding retail floorspace completions has been examined in order to ascertain retail trends which have occurred since 1990 up to June 2003.

2.47 As with the pipeline data, this has been undertaken in terms of location, i.e. town centre versus out of centre locations. A comparison with the UK completion rates has also been undertaken.

Table 2.13 Total Completions

2.48 Table 2.13 details the amount of comparison goods floorspace which has been completed since 1990. A significant boom in retail development, which peaked in 1999, is clearly evident, and this is thought to reflect the very buoyant property development and investment sector, responding to a surge in retail demand in the nineties. It is interesting to note that the publication of NPPG8 in late 1998 almost coincided with the peak of the cycle, the 5 years of subsequent NPPG8 policy has prevailed over a falling trend in retail completions.

Table 2.14 Scottish and UK Completions

2.49 Table 2.14 compares the Scottish completion dates with UK data. Again, the boom in retail development is evident on a UK wide basis, which, as with Scotland, peaked in 1999.

Table 2.15 Scottish Completions by Location

2.50 Table 2.15 details the Scottish completion rate and divides these into town centre and out of centre locations.

2.51 Town centre completion rates have remained reasonably consistent throughout the period but with some erratic jumps in activity such as 1996 and 1999. However the boom in out of centre retail development in the late 1990's is clearly evident. It can also be seen that this trend has reduced significantly and consistently post 1999. This perhaps suggests that the introduction of NPPG8, in its current form, and the subsequent use of the sequential approach to influence the location of retail developments has been reasonably effective, in terms of retail schemes being actually built-out over the time period. The notable fall in annual out of centre completions is tracked by levels of town centre building, broadly holding their own.

Table 2.16 UK Completions by Location

2.52 Table 2.16 (above) details the UK completion rates by location. The late 1990's peak in retail development is again clearly evident, with the level of floorspace being completed generally decreasing thereafter. For the UK as a whole, the level of floorspace located within town centre locations has been increasing since mid 1990s.

Table 2.17 Scottish Completions by Format

2.53 This final table (Table 2.17) details the Scottish completion rates and divides them into format, in terms of town centre developments, out of centre shopping developments, retail parks and factory outlet centres.

2.54 In very broad terms, the retail park format has tended to feature more strongly throughout the period, particularly during the mid and late 1990s. Similarly, town centre shopping centre developments are also fairly consistently evident throughout the period, although a lower level of floorspace has been developed when compared to retail parks.

2.55 The Scottish pipeline and completions data for comparison goods detailed above helps to show the current mood in the development industry and recent trends. Whilst many other factors such as investment cycles, retailer demand and developer activity may influence these trends, it is expected that national retail planning policy is also a contributing factor.

2.56 For the NPPG8 review, the important points to summarise from the charts above are:-

• No evidence, that post 1998 NPPG8, there has been any hold placed on retail development. High levels of activity have continued.
• No evidence that the industry has been discouraged from making proposals for out of centre floorspace, but some evidence that the "planning policy filter" results in less space allowed than proposed, in out of centre locations.
• Evidence that a healthy level of town centre consents is still being produced on an annual basis and no reduction over time in the build out rate for town centre space.
• Evidence that the retail warehouse park format has been highly popular in Scotland (and arguably stronger than town centres compared to UK trend). Although the charted statistics for retail warehouse parks are remarkably high, it should be noted that some retail warehouses, particularly for bulky goods, are more extensive in floorspace layout than town centre malls/centres and less intensive on turnover density. For instance, 10,000 m. sq. could sustain only one large DIY unit with a low turnover density and spacious internal layout; whilst this can be contrasted in the same floorspace in a city centre mall sustaining more than 30 retailers, all trading at much higher turnover densities per square metre. On the other hand however, there are some retail parks which have flourished without restriction and produced "high street from sheds" retailing in decentralised locations, whilst relatively little development has emerged in the nearby town centre.
• Evidence from the charts also show some surges in out of town centre shopping centres (the 1999 Braehead opening is apparent) and a period from 1996 to 2000 where factory outlet centres were prolific (this has now abated) and a late showing in 2002/03, of more focus on town centre completions taking up most of the activity.
• Overall, one clear point from these charts is that, although there has been a high level of floorspace proposed, consented and completed in the out of centre locations, this has not been accompanied by a dearth of proposals in central locations. Town centres have continued to show consistent levels of activity throughout the periods covered and indeed the most recent data suggests that they remain as one of the strongest areas of investment.

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