Retail: An era of renaissance, not apocalypse

Paolo Magnaschi is the Chairman and Managing Director of MF Real Estate Advisory, a ‘boutique’ company which provides sourcing, management, and disposal of real estate portfolios for their clients in Italy. An active advisor member of the GRI Club and holding decades of experience in the real estate industry, he gave his take on the current retail climate in Italy.


Who is investing in Italian retail these days?

Retail continues to be targeted by investors, even if there has been a significant drop in volumes both in the high-street and out-of-town sectors in the first half of the year. These reasons are different - core investors are heavily seeking high street assets in prime and secondary locations but availability remains limited, while value-added and opportunistic investors are the most active players for shopping centres, but with a consistent gap between vendors’ expectations and buyers’ availability. 


To what extent does ecommerce affect retail?

While the majority of individuals feel that e-commerce has negatively affected the retail industry, it may not be entirely accurate. Small retailers who have been relying only on the traditional business method have been damaged, but many major brands have been thriving and increasing their retail business. E-commerce has forever changed the perception of retail market, when we think about buying something we think about major discounts, quick delivery, a vast variety of products, easy return policies, and, most of all, easy accessibility.

The arrival of the internet and e-commerce has brought a new way of marketing and selling many products and, concerning traditional retail jobs, the disruptive effect of trade digitalisation appears to be clear. However, there are some major concerns about the energy and packaging materials used by the logistics networks for product fulfilment and delivery. It’s too early to tell but this will need to be part of the discussion very soon.


Do you ever see a resurgence of traditional retail over e-commerce happening? If not, what would have to happen for it to come about?

Retail is not dead; it is just in a period of change. A retail industry which can quickly adapt to the mentality of the new buyers and reinvent itself in the coming years, can grow and thrive. The world has changed, the payment methods have changed, shops will get smarter thanks to the technology, not only to optimize inventory and making use of the power of data but also to take part in customisation of the shopping experience. 
But rather than a retail apocalypse, I like thinking of a retail renaissance where we have evolved into a new era of modern shopping. Through the proliferation of digital technology consumers expect retail brands to meet them wherever they are. At the same time, retail brands are tapping into more data sources and channels to give customers the relevant, engaging, flexible experiences that they expect throughout the shopping journey.


What cities do you believe to be the most profitable for logistics? 

Moving goods is a crucial component in the supply chain, with transportation accounting for almost 50% of the total cost. A warehouse, therefore, needs to be strategically located to ensure the moving of goods is as economical as possible, so therefore in close proximity to good infrastructure. That said, there has been a proliferation of several subcategories of logistic warehouses (fulfilment centres, cross-docking, last mile, etc.) and therefore the best location differs compared to the prospective use. In my view, the profitability of an investment is a concept closely linked to its liquidity, therefore the more profitable cities in Italy will remain the same: Milan, Turin, Verona, Bologna, Florence and Rome.

Paolo will be joining Europe's leading developers, investors and lenders to discuss further market information at Europe GRI, taking place on the 11-12 September in Paris. For further discussion into the Italian market with leading regional experts, Italia GRI 2020 takes place on 28-29 April in Milan. 

Article by Matt Harris