With food becoming an increasingly integral part of the shopping experience, and restaurant brands finding their way on to supermarket shelves, the boundaries between retail and hospitality are blurring more every day. Elly Earls reports
Eating out has become a fundamental part of the shopping experience. Although consumers may be spending less on high-value items, a quick cup of coffee or a foray into a shopping centre restaurant are luxuries we can still just about afford. Indeed, dining has become such a key part of large retail premises' offers, that the percentage of floor space dedicated to food service provision has trebled in the last 10 years.
"Westfield Stratford has 320 retail units and 70 places to eat and drink - food and dining are a massively key part of our offer," confirms Myf Ryan, Westfield UK's general manager for marketing.
"The sales in large shopping centres' food provisions have gone up again in the last two years, despite the recession, and landlords are very happy about it," Jonathan Doughty, of Coverpoint Consultancy, adds. "They're having real problems leasing shops so they're happy to convert more space to food than they were before."
Food and beverage operators are equally keen to find innovative ways of making the most of the increased retail space on offer, according to David Campbell, head of restaurants and bars at BDO.
"There are more concepts that directly blur the boundary between retail and hospitality, such as sandwich shops," he explains. "Quite a lot more of these operators are looking to see if they can flex the way they do their food preparation to get into A1, rather than A3, sites."
Some established brands have even started operating out of upmarket office buildings in an effort to compete with their B&I counterparts. "Caffè Nero, for example, has taken out a commercial lease on a space inside Plantation Place in central London," Doughty notes.
Large retailers are certainly not sitting on the sidelines. Marks & Spencer, for example, opened its 300th café, in Westfield Stratford City, in September 2011.
"From the retailers' perspective, it's fundamentally about footfall," Campbell remarks. "It's about driving people in through the doors and keeping them there."
Not only has eating out - be it a grab-and-go sandwich from the local deli or a sit-down dining experience - become a key part of consumers' day-to-day lives, diners are also a lot more discerning than they used to be.
"Consumers are more experienced and hospitality operators need to evolve and enhance their offerings because of this," Ryan confirms. "Operators have to differentiate themselves and give the shopper something new and exciting," Campbell agrees.
For this reason, shopping centres such as Westfield Stratford City are increasingly allocating space to independent operators with innovative concepts or local flavour. The east London shopping destination, which has a catchment of more than four million people within 45 minutes, has also introduced the Great Eastern Market which, Ryan says, caters to the eclectic taste of the catchment around Stratford.
"You've got to have some regionality, some ethnicity," Doughty confirms. "Otherwise you won't attract those local customers."
While up-and-coming independents certainly have the opportunity to diversify by branching out into shopping centre operations, for Campbell, they shouldn't take their retail operations too far. "It's very difficult for smaller independents to make any real money by moving their products into supermarkets," he says. "However, if you have an established brand, such as Jamie's Italian or PizzaExpress, it's an obvious opportunity to extend that."
It's no coincidence that the amount of floor space dedicated to food service in large shopping centres worldwide has increased significantly in recent years. "There's an awful lot of science behind it - one in five people who go to shopping centres eat substantially," Doughty explains.
"And landlords can make a lot of money out of them - if they get it right." It's no different for high street retail outlets or small independent hospitality operators, which is why the importance of food to retail will only continue to grow.
hopping in and out of hospitality
The large retailer: Marks & Spencer Marks & Spencer (M&S) has been involved in cafés since its original store opened 125 years ago, but over time the company has "hopped in and out" of hospitality. "We're taking it far more seriously now," says Jason Danciger, M&S's head of hospitality. "From talking to customers, we've found out that people don't come in just to go shopping, it's part of an experience, and cafés and restaurants add that theatre."
Moreover, the company has discovered that 15% of its customers were representing 50% of its sales and that most of these customers were using the hospitality part of the business. "Having such a small group representing such big sales is normal in any business - they're your regular, loyal customers. But we found them sitting in our cafés. That brings a different perspective," Danciger says. "It's not just about a £1 cup of coffee; it's a real part of our customers' social journey."
Although the margins in hospitality are higher than in any other area of M&S's business, profitability is by no means the principal reason the retailer is increasingly focusing its efforts on its cafés and eateries. "The true benefit is the fact that we're keeping people shopping for longer and driving footfall into the store," Danciger adds.
The company's eateries also offer a great platform for showcasing the products that are sold in the food hall. "We have some amazing food items and having that café means we can cook it for our customers, allow them to taste it and see what great food we have," he says.
Currently boasting 300 cafés, 40 eateries in international markets and 7,000 hospitality staff, M&S has no plans to slow investment in its food concepts. Indeed, as part of a pilot store scheme, the company recently opened a brand new deli format in six stores and a new-look bakery in 15.
restaurant brands extending their reach into retail
The casual dining brand: PizzaExpress Established restaurant brands are extending their offers from food service to retail, benefiting both the brand itself and the retailers stocking the products. "Consumers will pay more for a PizzaExpress pizza than they will for a Waitrose pizza," Jonathan Doughty, of Coverpoint Consultancy, explains. "So Waitrose gets a higher average spend per pizza and PizzaExpress broadens its exposure by letting more people know about the brand."
PizzaExpress has been selling its wares on the supermarket shelves since 1998, when it introduced its first range of dressings as a response to customer demand. The brand now offers ranges of pizza, bread, dough balls, salad dressings, pesto and fresh pasta. "The reason we do it now is because it's great to be able to tell your story to more people and play a bigger role in their lives," says Harriet Rhys Williams, director of retail and business development at PizzaExpress.
Since 2009, when PizzaExpress relaunched its supermarket lines, the brand has had 58% more consumers buying its pizza than previously and accounted for 35% of the growth of the chilled pizza market. Rhys Williams says the reason for this is that the company puts so much effort into making its products as close to the restaurant's offerings as possible. "We use the same dough recipe and the same key ingredients. Each pizza is even made by hand," she notes.
As a trusted brand, PizzaExpress has to be completely uncompromising when it comes to the quality of its products. Indeed, it took the brand six months to develop one green pesto. "We went to the ends of the world to get the very best ingredients," Rhys Williams says.
This dedication to quality has meant PizzaExpress has been able to bring people into product categories who wouldn't have considered them before.
"When we launched our light pizza, a huge number of consumers were new to the pizza category. That's how we've been growing for years," Rhys Williams says.
Large centres look locally
The independent chain: Thai restaurant Rosa's in Westfield Stratford City Large shopping centres are increasingly looking to differentiate themselves from the competition by offering new, exciting, up-and-coming food concepts. However, it's not easy for small independent chains to meet their exacting criteria.
"It's very competitive," David Campbell, head of restaurants and bars at BDO, warns. "You've got to have a brand that appeals aspirationally to their consumers, you can't just be a run-of-the-mill concept. Having said that, it's very lucrative if you can get in there."
For Alex Moore, co-founder of Rosa's, a modern Thai restaurant business with sites in Soho and Spitalfields, having a presence nearby was essential to securing a spot in Westfield Stratford City. "They were very conscious of being a huge conglomerate that had come in and flattened several acres of east London," he says. "They wanted something that was from the area."
Branching out into the food court business was a huge decision for the east London restaurateur. "We had concerns about going in there and damaging our brand," he admits. "We're very proud of being independent and we wanted to keep our soul."
Yet Moore has been pleasantly surprised at the reaction from even his most loyal customers. "People have been genuinely supportive," he remarks. "The only feedback we've had about doing it has been ‘good for you'."
The move has certainly been good for business, and Rosa's has more than met its targets since opening its first shopping centre branch. "Of course we're in it to make some money, but we also wanted to do it without compromising our standards," Moore adds. "We didn't want to feel like we were overstretching and the quality of the food - or the service - would go down, and I think we've done a good job of that."
Would he do it again? "Probably," he responds. "We wouldn't like to focus on this exclusively but diversifying is a good, solid strategy for us as a business."