EUROPEAN GATEWAYS

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ABOUT THE AUTHOR
DHIRESH BHARDWA
Managing Consultant
uk.linkedin.com/in/dhireshbhardwa
dbhardwa@caci.co.uk
+44 (0)20 7605 6109

PLANNING FOR SUCCESS

Retailers pursing growth in Europe face an increasingly challenging task. Identifying the first few locations for new stores
within a single European country is relatively easy for experienced property directors and agents. The difficulty arises in
objectively quantifying the potential and prioritising those top locations across multiple European markets. It becomes
even more difficult when trying to understand the opportunity that every individual retail destination represents within
each European country, and how that compares across all of Europe.
Even the most experienced property professionals need to provide an evidence base to executives and investors
supporting their retail expansion strategy before investments in new store openings are made. Retailers seeking to
pursue growth in Europe will typically seek to understand the answers to five key questions in order to help them
develop an effective store growth strategy:
1. Where are the European Gateway cities and what is the size of the opportunity in each?
2. How do you prioritise store openings in second tier locations across Europe?
3. Can you treat Europe as a single market or do you need a different strategy in each country?
4. What are the alternative store opening strategies to pursue growth?
5. Is the existing proposition and format fit for purpose?
Only once you have an understanding of the five key questions can you successfully develop or refine your existing
strategy. An independent, unbiased view, free from existing preconceptions is essential to developing a strategy that
will maximise the return on investment for both stores and the brand. A fresh, impartial view of the European retail
landscape is arguably even more important for those retailers with a significant pan-European presence seeking to
refine their strategies and challenge the status quo within their organisations. With stores representing the frontline
for retail brands, the cost of poor decisions can seriously undermine the credibility of the brand with consumers and
investors alike.

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RETAIL MARKETS
Retail Markets is CACIs pan-European comparison goods gravity model, covering over 10,000 markets across 38
countries. It is built using a proprietary retailer database of 84,000 retailer premises covering more than 200 of the
most important national and international brands present across Europe. Each red point on the map represents a Retail
Market for a selection of European countries. Retail Markets provides a consistent framework for understanding each
centre and delivers an ability to consistently benchmark, and compare locations across all of Europe.

Retail Markets provides insight on where a residential population is likely to shop based on the level and relative
accessibility of local retail provision. Market catchments overlap reflecting the fact that people will shop at a number of
different retail destinations.

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The catchment map for Dsseldorf demonstrates how the gravity model catchments are built up by considering the
interaction between residential zones and competing shopping destinations; a greater proportion of shoppers frequent
Dsseldorf from the zones with a deeper shade of red. The shape and extent of the catchment is clearly influenced by
the large competing centres of Cologne and Dortmund, as well as Regional Markets and Regional Malls.

EUROPEAN GATEWAY CITIES

Gateway cities represent the largest Retail Markets in Europe. They are defined as the dominant Retail Markets within
cities that have a population greater than 500,000 people. Gateway cities are typically locations where retailers site
their flagship and superior stores. For retailers entering a country for the first time, locating stores in Gateway cities is
often recognised as being in part a marketing investment to promote the brand, raise awareness and drive online sales,
as much as opening profitable stores in their own right.
It is not difficult to identify Gateway cities, most property professionals and even casual observers would be able to
generate a list of target locations for flagship stores in Europe based solely on population.

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Country

City

Country

City

Country

City

Austria

Vienna

Greece

Portugal

Belgium

Brussels

Athens
Thessalonica

Lisbon
Porto

Bulgaria

Sofia

Hungary

Budapest

Romania

Bucharest

Croatia

Zagreb

Ireland

Dublin

Serbia

Belgrade

Czech Republic

Prague

Italy

Spain

Denmark

Copenhagen

Finland

Helsinki

France

Bordeaux
Lille
Lyon
Marseille
Paris
Toulouse

Milan
Naples
Palermo
Rome
Turin

Barcelona
Madrid
Seville
Valencia
Zaragoza

Netherlands

Amsterdam
Rotterdam

Sweden

Gothenburg
Stockholm

Norway

Oslo

United Kingdom

Poland

Krakow
Lodz
Poznan
Warsaw
Wroclaw

Birmingham
Glasgow
Leeds
Liverpool
London
Manchester
Sheffield

Germany

Berlin
Cologne
Hamburg
Munich

Beyond identifying these locations, Retail Markets provides a framework to quantify, prioritise and benchmark the top
locations within Gateway cities consistently across all of Europe. The map shows the shopper population for each such
location derived from the gravity modelled catchments. This could equally be based on income, affluence, expenditure
on products by category, etc. The accuracy for such indicators derived through retail markets is greater than a simple
radius or drive-time as the catchment considers the proximity, strength and road accessibility of all the competing
shopping destinations.

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SECOND TIER LOCATIONS
Identifying Gateway locations across Europe is a relatively simple process, with the quantification of potential for each
location adding a layer of objective insight to support the decision-making process. Pursuing growth in Europe becomes
far more challenging when retailers are seeking to continue expand their retail presence beyond the Gateway cities.
Each of the 10,000+ Retail Markets across Europe has been classified based on their size, offer and market position.
The table lists the Class types with examples. The Classing architecture provides a valuable filter for targeting specific
market types in its own right.
Class

Example

Principal Markets

Paris Centre

France

National Markets

Madrid Centre

Spain

Major Markets

Zurich

Switzerland

Regional Markets

Mulhouse

France

Inner Suburban Markets Principal Markets

Paris Haussmann-Opera

France

Outer Suburban Markets Principal Markets

Paris Velizy-Villacoublay

France

Suburban Markets National Markets

Milan Varesine

Italy

Metropolitan Markets Principal Markets

Crawley

United Kingdom

Metropolitan Markets

Amstelveen

Netherlands

Small Metropolitan Markets

La Ciotat

France

Local Markets

Worms

Germany

Small Local Markets

Setubal

Portugal

Provincial Markets

Nueva Andalucia

Spain

Small Provincial Markets

Hradec Kralove

Czech Republic

Rural Markets

Talavera de la Reina

Spain

Small Rural Markets

Alghero

Italy

Large Premium Regional Malls Principal Markets

Westfield London

United Kingdom

Large Regional Malls Principal Markets

Westfield Stratford City

United Kingdom

Regional Malls Principal Markets

Paris Rosny 2

France

Premium Regional Malls

Bluewater

United Kingdom

Regional Malls

Trafford Centre

United Kingdom

Small Regional Malls

Silverburn

United Kingdom

District Centres Principal Markets

Paris Arcades

France

Small District Centres

Naples Galleria Auchan

Italy

Premium Outlet Centres

Leonding Uno

Austria

Metropolitan Outlet Centres

Freeport Outlet Alcochete

Portugal

Rural/Standalone Outlet Centres

Fashion House Gdansk

Poland

Small Outlet Centres

Siauliai Bruklinas Factory Outlet

Lithuania

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Combining all of the Retail Markets with the Classes high-lighted in red, which all have a shopper population of more
than 200,000, provides the definition of second tier centres in this context. This approach is easily adaptable to
consider the inclusion of target Retail Markets based on individual classes, catchment affluence, purchasing power,
product expenditure, proportion of premium retail in centres etc.
Mapping second tier locations clearly demonstrates the disparity in the retail landscape across Europe along the
traditional lines of East and West. Retail Markets provides the framework to identify and prioritise store openings by
taking a universal view of Europe; with this approach, it is evident that beyond Gateway cities, alternative strategies
need to be developed in the pursuit of consistent market share across the continent.

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EUROPE AS A SINGLE MARKET
Gateway cities provide a fairly representative opportunity for breadth of coverage across Europe, whereas the second
tier centres begin to offer greater penetration within their respective markets. The options for pursuing growth within
each European country varies significantly; by taking the combination of Gateway cities and second tier centres it is
possible to identify the number of Retail Markets that are available and the combined reach they offer in each country.

The variation in the types of locations available in each European country, and the size of the opportunity they
represent, demonstrates the need for country-specific planning within the context of treating Europe as a single market.
However, the traditional regions within Europe (i.e. Scandinavia, Benelux, Iberia, Balkans, UK & Ireland etc.) provide a
suitable segmentation for developing, managing and refining store growth plans.

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DEVELOPING A GROWTH STRATEGY
There are many routes to market available for retailers and operators pursuing growth through expansion in Europe.
Concessions/
Shop-in-shop

Working with retail partners to site within their existing locations

Deal-led

Based on the property deals available from an agent

Factory Outlet first

Partnering with Outlet malls to establish trade and operations within a country, typically on
turnover based rents

Geographical Cluster

Opening a number of stores in close proximity to test a localised market and efficiently
manage stores

Hub and Spoke

Opening in a major city , followed by opening additional stores in and around the city suburbs

Hybrid

Combining two or more of the alternative routes to market

Me too

Following a larger brand or retailer believed to be complementary, which will have invested
in site research and location planning

Online first

Opening a webstore first to understand differences in consumer tastes and collect customer
data for analytics

Tier 3 centres first

Opening stores in smaller towns and building up through the retail centre hierarchy

Top-down

Opening in the largest locations first, followed by second largest etc. down through the
retail hierarchy

Wholesale first

Selling products via wholesale operations first to test the market

The selected approach is typically governed by internal business requirements, resources and attitude towards
risk; regardless of the approach, the strategy should always be informed by robust data analytics to avoid making
costly mistakes and mitigate risk. For example, take Germany and Poland as contrasting examples for pursuing
growth across Europe.
In total there are 69 Gateway cities and second tier locations in Germany, which provide retailers access to 30% of
the German population. The same number of stores in the largest shopping destinations in Poland will equally provide
access to 30% of the Polish population. This simple fact is only identified by utilising robust data and tools such as
Retail Markets.
As an overly-simplistic example, it appears as though an investment in those 69 stores in either Germany or Poland
would provide a similar yield. However, utilising additional data indicators can help support the decision making
process further. In this simple example, the absolute population with access to those stores in Germany is 25million,
which represents over double the number of people a retailer would reach from the same number of stores in
Poland (11million).
If we take our uncomplicated example and start to integrate demographics, life-stage, geodemographics, purchasing
power, expenditure by product category, existing retail provision, quality of retail and services, competitor
locations, wholesalers, and distance to existing stores, it is clear to see why the data and market intelligence
underpinning the store expansion strategy is so important when looking to consistently and objectively benchmark
opportunities across Europe.

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THE RETAIL PROPOSITION & STORE FORMAT
In an ideal situation, retailers would be able to provide a consistent proposition in a consistent format for all European
consumers. Due to the cultural differences and geographical diversity across Europe, a consistent format and
proposition is unlikely to be suitable for any operator except for the most homogenous international brands.
Operationally, opening hours are a perfect example of how a proposition needs to adapt due to cultural and
geographical differences. The number of hours of daylight in the Nordics can dictate consumer behaviour over the year
and the requirement to close stores during the afternoon in favour of evening opening in Iberia are two such examples.
Stock also needs to adapt to local styles, tastes and requirements. The store format in which the retail proposition is
delivered needs to be given equal consideration.

The composition of retail destinations forming the 69 Gateway cities and second tier centres in Germany provides
access to 25million shoppers. The size and store format in these large centres can be reasonably consistent to meet
consumer expectations. In order to reach the same volume of shoppers in Poland, the retail estate will be far more
numerous and fragmented, reflecting the variation in the retail structure and population between the countries. The
variation and potential is only quantifiable by using Retail Markets as a consistent framework for understanding the retail
landscape across Europe.

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MORE INFORMATION
For more information on CACI and Retail Markets you may wish to visit our website www.caci.co.uk
CACIs Location Planning team would welcome the opportunity to present our analysis as well as answer any questions
on Retail Markets that you may have.
Please feel free to contact Dhiresh Bhardwa on +44 (0)20 7605 6109 to discuss further.

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