New Analysis: Bluewater's ripple effect on retail

The UK's biggest shopping centre opens tomorrow. Does the ailing sector need it?

WHEN THE Bluewater shopping centre opens its doors to shoppers near Dartford tomorrow it will become Britain's ninth regional mega-mall.

It will also be Britain's biggest, nudging ahead of rivals such as the Metro Centre on Tyneside, Merryhill in Dudley and two centres that opened last year, the Trafford Centre near Manchester and Cribbs Causeway near Bristol. In total it will add another 1.5 million sq ft of retail selling space, the equivalent of almost two new branches of Harrods.

Shoppers will no doubt flock to this latest mammoth on the motorway. They will be mesmerised by the 320 shops spread across three themed areas - the Guildhall for "the discerning shopper", the Rose Gallery devoted to "family focus", and the Thames Walk with high street fashion shops, cafes and bars.

As well as visiting the three anchor stores, John Lewis, House of Fraser and Marks & Spencer, weary shoppers will be able to re-charge their batteries in the leisure areas which include a 12-screen cinema and the Water Circus. This area includes a man-made lake where customers can try their hand at boating, ice-skating and cycling. In addition, there are 13,000 car- parking spaces and a 200-space creche in which to park the kids.

But does Britain's beleaguered retail sector need another gigantic, US- style mall? With the sector already suffering from chronic over-supply and retailers still licking their wounds after one of the worst trading years in recent memory, will Bluewater not exacerbate those problems?

The developers of Bluewater, the Australian Lend Lease Corporation, say not. They point to the fact that the pounds 350m mall has been fully let since September, a rarity for such developments. Demand has been strong, analysts say, despite retail rents among the highest in the country.

But the issue of over-supply, as opposed to weak consumer demand, has tended to be over-looked in the consumer spending debate. UK retailers spent the latter part of last year complaining endlessly about vanishing consumer confidence and weak sales. But a look at the official sales data for the year shows that 1998 retail volumes rose by 2.9 per cent on 1997. Sales by value were ahead by a very respectable 4 per cent. Every part of the retail sector, department stores, clothing and footwear and household goods, showed increases.

It is true that one of the problems last year was that many retailers based their autumn ordering on retail demand in the spring when consumer confidence was high. When that demand evaporated in October, shops were left grossly over-stocked.

But the amount of new shopping space coming on stream received less attention. Two massive new regional malls opened last year, the Trafford Centre and Cribbs Causeway, as well as a host of smaller openings. There will be more of the same this year with Bluewater being joined by two large centres in Glasgow - in Braehead and at Buchanan Galleries. In shopping centres and on the high street most major retailers have still been expanding their store portfolios while complaining about the supply-side problems.

"Space has grown faster than spending though not as much as in the US," says George Wallace, chief executive of Management Horizons, the retail consultancy.

Clive Vaughan at Retail Intelligence agrees that Britain is "over-shopped". But he points out that retail space per head of population is still four or five-times greater in the US than it is here. "That supply-demand issue is one of the reasons prices tend to be lower there," he says.

But if the UK retail sector is over-supplied and demand is rising only gradually, why do retailers flock to sign up to these high-cost centres where their profit margins are wafer thin. The answer, experts say, is that consumers love them.

They like the ease of access, parking and the range of shops. They like the added leisure facilities and the "entertainment". They are also re- assured by the security. Malls such as Bluewater are patrolled by security guards, filmed by closed circuit television and designed to minimise dark spots in car parks and stairways.

As Nathan Cockrell, a retail analyst at BT Alex Brown, says: "There are barriers to entry to these places. You need a car to get to them and they are safe. Subconsciously retailers and consumers respond to that."

The history of these centres also suggests that they have found a successful formula and the UK's nine regional malls have traded well even though two of them, Meadowhall in Sheffield and Thurrock in Lakeside, opened in the teeth of the last recession. As Richard Hyman at Verdict, the retail consultants, says: "These regional centres tend to do well because they are environments people are comfortable in."

They do not benefit everyone, of course. For retailers the costs associated with entry can be so high as to make profits difficult to achieve. Prime rents at Bluewater are the same as prime high street space in Manchester or Birmingham, though half the cost on London's Oxford Street.

But as Mr Cockrell says, retailers are "falling over themselves" to get into these new centres because there are fewer of them in the development pipeline. Centres like Bluewater were first conceived in 1990, before the government started to crack down on out-of-town shopping centres and their impact on local high streets. After the few due to open this year, there will be hardly any new mega-malls left on the stocks. Retailers will then be left to grow profits from existing stores or "in-fill" store openings in smaller retail locations. Mr Cockrell predicts a retail advertising blitz as shops attempt to woo customers with special promotions as the new space pipeline closes off.

The other potential losers are the local towns and shopping centres around Bluewater. Analysts say that surrounding towns like Dartford and Bromley and smaller high streets in South-east London will be affected. Another potential loser is Lakeside, the mega-mall just across the Thames in Essex. Some experts have said that Lakeside has been losing some trade even before Bluewater has opened and that the new mall will lure away shoppers from Kent towns such as Sevenoaks.

As Nick Bubb at SG Securities says: "Bluewater should succeed; all these regional centres do. But where it will take its share from is harder to say."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee