The retail trade is undergoing radical change - Zurich´s famous Bahnhofstrasse in the year 2025

Michael Dressen MRICS, published on LinkedIn in November 2017

The reinvention of stationary retail

The global retail trade has no longer simply been undergoing radical change; it is being reinvented. Companies and brands, that are not adopting, perhaps due to a lack of financial ressources, or because their business model has already been disrupted by the internet giants Amazon or Zalando, will dissapear.

Previously, especially retailers like this were successful if they had the largest possible network of stores to achieve a greater purchasing power which they combined with the higher turnover. In the stores, a wide and extensive selection was offered over the largest possible retail space so that big stores were often (and often still are) nothing more than rouged multi-floor warehouses.

Nowadays, retailers with a large stationary network of stores are no longer automatically successful. The formerly expanding brands that have no strong e-commerce distribution channel are often precisely those which are in difficulties, because consumers can shop for everything online in more comfort. The often blandly-furnished and old stores belonging to large chains in small towns are not really a magnet to draw people into the town or shopping centre.

The situation is different in the centres of trading, that is to say in large cities in which brands are now stepping up modernisation and changeovers in order to make a new start. The epicentres of the retail trade, world-renowned shopping streets with famous names like 5th Avenue in New York, the Champs Elysees in Paris, Via Monte Napoleone in Milan, New Bond Street in London, Causeway Bay in Hong Kong, Ginza in Tokyo, Kohlmarkt in Vienna, and of course Bahnhofstrasse in Zurich, are the trend setters for changes in trading. Here, in places where the stream of global tourists congregates and inhabitants with high levels of purchasing power live, consume and go out, brands show their best sides and invest in store concepts of the future.

It´s funny, we actually don´t call them "stores" anymore

Angela Ahrendts, Apple Senior Vice President on Apple keynote event, 12th of September 2017

The new iPhone was not the most striking part of the latest Apple keynote event on 12th of September 2017. This was instead the speech given by Apple’s senior vice president of retail and online stores, Angela Ahrendts, at the start of the sales presentation. The former CEO of luxury fashion house, Burberry, had already said publicly last year that Apple “don't really need to open more stores”. In her keynote address, Ahrendts now made clear again what should come in the place of simply having more stores. The new Apple flagship store is intended not to be a ‘store’: “It’s funny, we actually don’t call them ‘stores’ anymore. We call them ‘town squares’ because they’re gathering places for 500 million people who visit us every year — places where everyone’s welcome, and where all of Apple comes together.”

Ahrendts was making the point about the way many markets’ retail spaces should be in the future: meeting places, showrooms for products that can also be bought online, event rooms for showcasing the brand and image-builders, but no longer ‘stores’. Apple was a pioneer in using retail spaces to showcase products, but other brands are doing something similar. Canadian yoga fashion brand Lululemon Athletica, which opened its first Swiss store in Zurich’s old town last year, uses retail spaces as ‘community building’ platforms. Here, free yoga sessions take place on a weekly basis, during which fans encounter the brand. Lululemon’s staff in the branches are brand ambassadors, educators and community builders, but not sales assistants, because even if people can buy the products in the shop, stationary sales should occur in passing when people are in a good mood or online at home after their visit to the shop.

The latest addition to H&M’s portfolio, Arket, which opened the world’s first store in London’s Regent Street in August 2017, integrates a cafe as a fixed component of the store’s construction concept, and this is now being rolled out. Cafes are intended to be even larger in other stores than the one in the pilot store.

What do these developments mean for Bahnhofstrasse? IKEA, with its pop-up store opening in Q4 2017 in the former Yendi shop at 89 Bahnhofstrasse is merely a sign of things to come for the ‘new kids on the block’ who will change the face of Bahnhofstrasse. 

Bahnhofstrasse in 2025

We will venture to paint a (fictional) picture of 2025 at Bahnhofstrasse:

The department store Manor will have left the site on lower Bahnhofstrasse after its tenancy expired in 2019 in the wake of a lost battle in the courts to extend its tenancy term. This will mark the end of a 100-year history of a department store at 75 Bahnhofstrasse. After three years of renovation and a complete re-build of the interior, the building is now being rented by new tenants: Apple, whose store at 77 Bahnhofstrasse is full to overflowing, especially on Saturdays in 2017, takes advantage of the renovation of the former department store and sets up a ‘town square’ there totalling more than 2,500 sq m with access to Bahnhofstrasse. An enormous atrium which extends through several floors has light pouring through a glass roof onto trees and benches scattered in the hall, inviting people to linger here. On certain days of the week, music performances or other cultural events take place here. There is an integrated cafe with tablets that people can borrow for free and these are as thin as newspapers and can be rolled up or used to watch videos or news. Floor-to-ceiling multi-media screens show scenes from other Apple town squares across the world. In certain areas, training takes place to help people get to know the latest products.

Around the Apple town square, other tech brands have secured equally large spaces. In a high-ceilinged flagship store, Chinese drone manufacturer DJI presents its latest consumer drones, which visitors can try out and fly straight away behind a safety net.

Zalando, Amazon and Aliexpress are also in the former Manor building and have showrooms and Click&Collect zones for products that have been ordered. Swiss online electronics trader, Digitec, can be found not far away in Migros City in Löwenstrasse.

In the meantime, FIFA has moved its football museum complete with gastronomy from the district Enge to Bahnhofstrasse into the upper floor of the former department store. Thanks to the ever-growing number of tourists to Bahnhofstrasse, the museum’s figures are in the black finally.

Traditional luxury brands are only represented in small retail spaces in the former department store as they would rather focus on traditional locations in middle and upper Bahnhofstrasse and are renewing their retail spaces there. Only the watch brands have showrooms for the latest digital smartwatches, which are now included in the range of almost all luxury brands.

On the upper floors, besides restaurants there are also co-working offices of global providers like WeWork or Regus in which mobile and flexible project groups of international companies meet and hold discussions with creatives and freelancers.

In other parts of Bahnhofstrasse, international automobile companies have retail spaces in which visitors can obtain information about the latest luxury models, most which are 100% electric. In the stores, people can configure the models on multimedia terminals and also order them directly. In addition to seating areas, there will be accessories such as prams and fashion, but also integrated restaurants where kitchens with stars cook for top customers and where sales discussions can take place over a meal. Besides the classic purchase of a car, people can also subscribe to various car sharing alternatives, including using self-drive cars that have reserved zones in city centre multi-storey car parks, such as Uraniaparkhaus. In a former clothes shop, a tobacco company has opened in lower Bahnhofstrasse in which people can test and buy new vaping products. The retail space has the atmosphere of a British Member’s Club with comfortable leather furniture and a bar where staff from the surrounding offices like to meet up in the evenings.

IKEA’s experiment with its pop-up concept in 2017 was so successful that they decided to open a permanent retail space. By now, almost 2,500 sq m of furnishings are shown on several floors. Using virtual reality, customers can then project the furniture into their living rooms at home, and if it fits, order it online. People will have to assemble their purchases at home themselves, however.

In the middle part of Bahnhofstrasse near Paradeplatz, fashion house Grieder has moved out of Peterhof, which has been aquired by the Swatch Group in 2014. Swatch is currently renovating the listed store and developing it into a ‘House of Swiss Watches’ in which there is a museum showcasing the history of timepieces and the craft of Swiss watchmaking, in addition to the shop-in-shops of Swatch brands, such as Longines, Tissot, Breguet, Blancpain, etc.

Starbucks has opened another cafe in Bahnhofstrasse. This is not comparable to the concepts in Switzerland from 2017, however. It is a premium concept called Roastery covering more than 2,000 sq m in total area and integrating gastronomic concepts. As early as 2016, Starbucks described this flagship format as the future of Starbucks.

The luxury brands have invested a lot in modernising retail spaces in recent years and are very popular with young international tourists because of their events and a new sales strategy integrating streetwear brands. Meanwhile, there is also a luxury concept store in Bahnhofstrasse in which various global brands showcase their brands under one roof.

m3 instead of sq m

Institutional landlords on Bahnhofstrasse have adjusted to the entirely different requirements of retailers in 2025. Retail spaces are no longer supposed to be used primarily for the direct sale of the whole range, but instead for showcasing and creating an image for products and brands. So when renovating and redeveloping buildings in Bahnhofstrasse, the priority has long ceased to be the maximisation of the sales area, but instead to create a showcase for brands to be accompanied by developing extra high multi-storey spaces, large shop fronts and optimising the building's structure to integrate gastronomy. Bahnhofstrasse continues to remain one of the most expensive streets in the world in terms of rental prices, and in return for this retailers want a perfect flagship store and are not prepared to make any compromises. They are not necessarily paying more for stacked sq m on several floors, but instead for m3, that is to say, for successful spaces that give their brand the correct image.

In summary, in 2025 Bahnhofstrasse will profit from the current changes in the retail trade, because primary digital sales channels will also need a physical presence to interact with customers, to make it possible to experience products and to build a brand image. Fewer stores will be needed in retail spaces, but on global shopping streets, which will undoubtedly also include Bahnhofstrasse in the future, space will become tight for any brands which want and need to build their ‘town squares’ there.

We will merely regard the stagnation of top rents observed even on Bahnhofstrasse in 2017 as a short-term trend resulting from today’s upheaval in the retail trade. In the short term, retail spaces might stand empty like they do on 5th Avenue in New York since the new store concepts must first be developed and rolled out. Zurich mostly takes second priority in the expansion planning of international formats, after cities like London, New York, Paris, Hong Kong, etc. Since a stationary store does not necessarily need to be a profit centre for new formats with strong digital distribution channels, rents might even increase again significantly in future.  

Smaller Cities and B- and C Locations under pressure

Completely the opposite is true of the trend at B and C locations, especially in smaller cities. Here, many retail spaces in shopping streets will disappear. Some retails spaces there will be taken over by committed local retailers who have a successful niche product with regional and sustainable products, great service and a local customer base, because trends always produce countertrends too. Previous rents will not be achieved there anymore and former retail units will be replaced by appartments, offices, service companies and gastronomy, wherever possible.