Abstract

This paper reviews the literature on parking and retail with an emphasis on establishing a link between provision of parking facilities and the impact it has on retail success. It includes recent

trends regarding the global financial crisis and the digital influence that impact consumer behaviour. Furthermore, market distortions that arise due to inefficient parking price schemes

are addressed. This paper points out that retailers overestimate car usage and under estimate the impact pedestrians and transit consumers have on generating revenues for store managers.

Word count: 7978

Date: 28/07/2016

PARKING FACILITIES AND THEIR ROLE IN THE SUCCESS OF THE RETAIL INDUSTRY

ABHINAYA CHANDRA (385617)

IntroductionRetail centres compromise an essential part of the economy of major urban cities, with Great Britain employing a total of 4.4 million people in 2014 and holds a stake of roughly 10.3% of all the businesses in the United Kingdom (Rhodes, 2015). In the context of this paper, a retail centre is defined as the main shopping street of a particular city or area and compromising of at least ten shops. To put it briefly, the industry in general consists of all businesses that sell goods and services to the final customers. It is vital to understand that the emphasis has to be placed on the final customers, as they are the ones who ultimately are responsible for generating revenues for the retail industry. Hence, retailers ought ensure that their shops are accessible for consumers.

The prevailing notion amongst retailers and store managers is that majority of their customers travel by car for their shopping purposes. Reasons for such belief could arise due to store managers’ judging that majority of their customers are visitors to the store area or their shopping habits. As a result, retailers attach a lot of value to investing in parking facilities which will, in their minds, make their stores more accessible and in the process more attractive to potential customers. However, judging consumer behaviour inaccurately could have harmful consequences to businesses, as would fail to cater to the exact needs and preferences of their customers. If retailers continue to misinterpret what draws consumers to their stores, they will pursue more car access and parking since they have no additional knowledge and in the process disregard investing in alternative measures to improve their accessibility by foot, bike or public transport. This misperception creates errors in transport and planning policy. Findings about the link between parking facilities and retail success is therefore of great significance and social relevance for business planning as well as for land use and transport planning. Despite previous research efforts, the amount of literature dedicated to this particular topic remains inadequate, therefore this paper could be of scientific relevance as it aims to explore and establish a further link between parking and whether it benefits retailers. This paper strives to answer the following research question:

“What is the relevance of parking facilities in determining the success of urban retail centres?”

In order to do so, this paper will be based on previous academic literature with regard to the following topics: the development of retail and the economics of parking. These literature will serve as means of getting theoretical insight on the link between the two topics. Furthermore

literature will be predominantly limited to articles that were published in the last decade, this is of importance because the research question clearly deals with current circumstances and thus this will be a way to ensure that findings can be related to current context.

The aim of this paper is to determine whether there is a viable link between more parking and retail success and is therefore structured as follows:

Section 2 discusses the major trends that have occurred within the retail industry to give a deeper insight as to how the industry came to its existence as we know today.

Section 3, regards the economics of parking and offers theoretical background information as to how parking prices are determined within an abstract context and how inefficiencies arise regarding the parking market and its consumers.

Section 4 draws a link between the two previous sections by linking the retail industry to car usage by consumers and sheds light on predicted and actual customer behaviour regarding the means of transportation shoppers opt for.

Finally, section 5 consists of a discussion and conclusion where the main findings will be summarized and the conclusion to the research question will be restated and answered. This final section will also include insights on possible future trends within the retail industry, policy recommendations and suggestions for further research.

2. Evolution of Retail This section serves as a brief introductory to the retail industry. As this paper focuses on the extent to which providing customers with parking facilities has an effect on the earnings obtained by the retail industry, it is important to get an idea of how the retail landscape as we know today came to existence. Therefore, section 2.1 discusses the in short the history of the retail industry and illustrates how the industry matured from focusing on local consumers to operating at a big scale by mass producing. After this, section 2.2 highlights the impact of the global financial crisis on the retail industry. It mainly stresses on how consumer attitude changed due to the crisis and that is was the change in purchasing attitude that led the retail industry to a crisis as well. Section 2.3 gives a perspective on how technological developments of the Internet has given power to the

consumer. Consumers now have more access to information than ever before and certainly make use of this when it comes to their shopping habits. The retail industry therefore needs to find means to cope with this phenomenon. To bring this all together, section 2.4 aims to characterize the typical 21st century consumer by taking the most important takeaways from the preceding sections. By doing this, retailers will have a good idea on who they cater to and how to best target their consumers. Finally, at the end of section 2 a table will be provided giving an overview of the major trends in the retail industry and the impact they have on the retail landscape.

2.1 History of the Retail IndustryThe retail industry is responsible for the distribution and delivery of final products to the general public (Higon, et al., 2010). The industry consists of activities ranging from personal good-store retailing, such as home appliances, to soft goods (apparel) and food retail as well as the emerging market of non-store retailing (Martinuzzi, Kudlak, Faber, & Wiman, 2011).

Global developments concerning contraction of the world economy resulting in a state in which national economies are more interdependent, rise of the number of retail channels as well as major advancements in technology and the internet enabling growth of the mobile consumer base have all had a remarkable impact on the global retail landscape with regard to the means, modes and manner in which consumers shop (Waxell, 2014).

Historically speaking, this industry has experienced many changes from the supply side (Dobson & Waterson, 1999). In other words, the means by which products were available to consumers were constantly adapting to either technological or economical developments (Carden, 2011). What started of as an industry restricting itself to mainly local corner or general stores, which could be categorized as single-product stores that solely buy and sell merchandises in the late 1800s and early 1900s, the realm gradually changed due to the introduction of department stores in the United States (Whitaker, 2011). For the first time, consumers had a variety of products and services from different product categories available to them all at one location, making shopping more convenient (Carden, 2011). In addition to this, department stores presented consumers with an environment in which shopping was more than just a transaction, shoppers could enjoy the “customer experience”, an intangible aspects, that transformed shopping from being an simple transaction activity to an occasion (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros, & Schlesinger,2009). Meanwhile, local grocers utilized this shift in action as a guide to their own and transformed their business model from small general stores

to bigger supermarkets (Carden, 2011). In a span of a few years the global retail landscape shifted from being dominated by single category outlets to outlets consisting of integrated products from multiple categories which enabled consumers to do all their shopping within one-stop (Carden, 2011). The movement of people to suburban areas nudged the relocation of these one-stop shopping centres. Initially the suburban shopping malls were smaller, however substantial amount of parking spaces along with the large variety of products enabled consumers to buy more at once and no longer needed to make frequent shopping trips to the city (Hix, 2015). After World War II, the industry once again went under a changeover as the era was mainly driven by efficiency and advances in mass production and distribution (Carden, 2011). According to Carden, majority of the retailers managed to undercut traditional store pricing by eradicating overhead expenses for a large part and producing high volumes of products which initiated a new retail category of discount stores, a clear example of such a discount chain is Wal-Mart stores Inc. which is currently the largest retailer in the world with over 11,500 discount stores in operation in 28 different countries (Walmart Inc., 2016)

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Figure 1: Private Consumption Expenditure (2007 vs. 2008), (KPMG, 2012)

2.2 Financial CrisisHowever, recent trends have influenced the consumer attitude, or the demand side of the industry (Hix, 2015). That is, the global financial crisis and well as the rise of the Internet have had a severe impact on consumer shopping preferences. The stagnant state of the world economy that was a result of the 2008 financial meltdown can be categorized as a period of economic hardships that suffered under precipitously deteriorating market conditions (Allen & Carletti, 2009). The global retail landscape was

confronted with challenges of weakened consumer spending and a more cautious consumer attitude along with a highly unsteady and illiquid market environment affecting the business models and financial practices of today’s retail industry causing a large number of high profile bankruptcies, such as Circuit City, which used to be one of U.S.’s top retailer in electronics, and Blockbuster, an American movie hiring retail company (Wahba, 2015). The recessionary aftershock evidently caused a surge in the unemployment rates and upset the investment and credit climate, which, not surprisingly, tightened consumer spending in major markets on a global scale S (Allen & Carletti, 2009). According to the KPMG Retail analysis report (KPMG, 2012), directly after the economic meltdown of 2008 was announced, the private consumption expenditure levels decreased in France, Germany, United Kingdom, Italy Russia, Canada and the United States by ranging from 0,7% in Germany to 10,3% in the United Kingdom, refer to figure 1. Furthermore, the United States unemployment rates reached its peak since 1983 rising to about 10,2%, while the country’s GDP experienced negative growth of roughly 0,7% during the second quarter of 2009 (Bureau of Labor Statistics, 2009). Appendix figure 2 illustrates the consumer confidence and sentiment indexes, indicating the degree of optimism of consumers that can be inferred from their spending and saving patterns, which signal consumer anxiety as they have taken a sharp turn downwards (Bloomberg , 2009). Though the environment is slightly improving, the figures are still at a historically low level, which indicate a slower recovery than many retailers would have hoped to see. As for the volatile and illiquid global economic state, the International Council of Shopping Centres has registered over 8000 bankruptcies within the retail sector (ICSC, 2009). The retail industry mainly relies on debt to keep their business going under current business circumstances (CSIMarket, 2015). The relatively low level of consumer expenditure put retailers in a position in which they struggle to finance their operations as well as keeping up their inventories. Since the dependency on debt is higher than usual, it is vital for businesses to keep up a worthy credit standing which can be achieved by decreasing overhead costs, shutting down stores or laying a substantial amount of employees, all of which will only impede on possible future growth (Allen & Carletti, 2009). The phenomenon of credit dependency is made even more difficult as banks and other financial institutions have more rigid rules on interest rates and payment terms, as they fear any possible default (Allen & Carletti, 2009). Taking all these aspects into account,

Moody’s rating agency predicted a continuation of defaults within the retail industry as of 2010 (Moody's, 2010).

2.3 Technological DevelopmentsIn like manner, the digital wave has managed to reshape consumers’ preferences even more with regard to retail (Goldmanis, Hortacsu, Syverson, & Emre, 2008). Digital technology and easy access to information via the internet not only affects online sales, but surprisingly also targets sales in the physical stores and in-store consumer behaviour, known as ‘digital influence’ (Digital Deloitte, 2015). According to a study conducted by Deloitte Global, the conventional belief that digital technology offers consumers means to purchase their products online at cheaper rates and that they therefore tend to buy less in physical stores does not prove to hold in reality. In fact the opposite, customers utilizing digital devises are more inclined to purchase their products in physical stores, tends to hold (Global Deloitte, 2016). However, many fail to recognize this, as technology is always in flux, the digital behaviours and expectations of consumers are similarly evolving so fast that retailers are unable to keep up with it (OECD, 2001). In the process, as retailers are not in a position to live up to the standards of the consumers, a phenomenon called the digital divide comes into play (OECD, 2001). A study, in which Deloitte member firms examined consumers in nine different countries, considered both mature as well as developing markets and concluded that despite the economic differences across countries, in general the use of digital technology largely impacts the retail industry and retailers are at a risk of underestimating this impact and eventually do not recognize opportunities that may add value to their business (Global Deloitte, 2015). For example, large retailers attempt to establish a link between digital influence and in-store customer traffic by introducing a concept that allows customers to purchase their goods online and pick them up at one of the retail centres, more commonly known as Buy Online Pick Up in Store

Figure 2: Consumer Confidence and Sentiment Index, (Bloomberg , 2009)

(BOPUS). However, research claims that there is a significant gap between the number of customers that claim they would use BOPUS and who actually use it in reality, please refer to appendix figure 3 This indicates that retailers lack in determining the functionality of the system and inaccurately estimate customers’ preferences with regard to digital technology (OECD, 2001). This misconception leads to a missed opportunity for retailers as empirical research claims that consumers who use BOPUS are more likely to spend more than customers that do not use BOPUS (Pincott, 2015). Another factor that retailers should take into account is the digital influence factor/mobile influence factor, which is the percentage of sales influences by consumers’ use of digital/mobile devices, per product category (Digital Deloitte, 2015). As digital presence is increasing at a global level, there is no one quick-fix solution that can be applied to all categories as each product category is not impacted to the same extent by technology (Digital Deloitte, 2015). For instance, in both mature and developing markets the highest digital influence rate is present in the electronics category, while food products rank as the lowest. Furthermore, in developing countries such as India and China, digital influence is higher for apparel as compared to other categories. For these reasons, retails should refrain from applying strategies that aim to target all product categories at once as what might work for one category will not be as efficient in another product category (Solis, 2012). The all time digital connectivity and access to information for consumers have spawned into a state in which consumers seek advice from both retailer and non-retailer provided tools to make their purchase decisions (Muller & Damgaard, 2011). This means that retailers are no longer the only ones in charge that influence potential customers and this impact of the digital technology was understated by retailers (PWC, 2013). In matured markets, majority of the consumers determine their own shopping journeys and are there fore less influenced by traditional retail marketing. Also, majority of the consumers are more likely to consult online reviews in order to verify qualities of a product instead of seeking advice from an employee at the store itself (Muller & Damgaard, 2011). This suggests that retailers ought to focus their resources on influencing how their products’ information reaches their customers and brand maintenance (Solis, 2012).

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2.4 Other TrendsFrom the previous section, it is possible to attach the following characteristics to the typical 21st century consumer: hybrid and powerful (Gronroos, 2013). Firstly, the mass consumer has become a hybrid consumer. That is, individuals turn to premium brands when it comes to certain goods, for example staying at an upscale hotel, while preferring budget products in other product goods, flying by budget airlines, leaving mid-prices alternatives to lose their share in the consumers’ consumption basket (Lepannen & Gronroos, 2009). This change in consumers’ attitude towards products forces retailers to increase their market share in not only one, but multiple product categories. For example, Apple Inc. has a business model that does not only sell computers and technology, but is dedicated to aid their customers by teaching them how to use their products by providing them with tutorial sessions (Heisler, 2015). The crossover consumer also led to private-label/store brands to gain market share as the recession has lead to not only discount shoppers but middle and up-market buyers turn to such stores as well causing national brands to lose consumer base (Aguirre-Rodrigueza, Bóveda-Lambieb, & Montoyac,2014). Secondly, retailers are no longer in control of the communication that takes place between their products and consumers, the power of handling this communication has shifted from producers to the consumers (Holland, 2013). This puts pressure on retailers to offer a higher level of disclosure with regard to their products. To illustrate, research firm Aberdeen published a report of which can be concluded that firms that manage their online reputations regularly surpass those who no not as they intentionally absorb all the feedback from customers, both good and bad, solving issues that might be holding them back. As a result Aberdeen

suggests that such retailers are the ones that will see their shareholder value increase within the industry (Ostrow & White, 2011). Furthermore, consumer power and activism stimulates retailers to confine to customer-centric business models, this entails that customer involvement is vital to their production chain and for the retail industry as a whole (Achilles, 2014). For example, one of Ikea’s main strategies is focusing on customer engagement. The multinational furniture brand hands their customers the responsibility of transporting and assembling their purchases, enabling direct involvement with the company’s operations (Reynolds, 2016). Ultimately, retailers must continue to examine the impact of each factor that shapes the retail landscape, those who fail to cope with developing trends, whether it is technology and economics trends, will risk losing touch with their consumers and potentially jeopardize their survival within the industry.

Trends Effect on RetailGlobal Financial Crisis Weakened and more cautious consumer

spending.Higher credit dependency for retailers.

Technological developments Traditional retail marketing no longer attracts customers.Consumers influence each other and are in control of their own shopping journeys.

Hybrid consumerism Forces retailers to diversify in different product categories.

Crossover consumerism Rise in consumer power and consumer activism.Table 1: Summary section 2

3. Economics of ParkingThis section discusses the economics of parking and the theory behind it. Parking markets can provide a lot of data on how to enhance the quality of urban life. For example, this chapter will explain how from a theoretical/graphical point of view, the parking market could be more efficient than it already is, reaching a higher level of efficiency translates into higher level of welfare which ultimately results in improving the quality of urban life. Therefore, this section strives to explore this topic from a theoretical perspective, theoretical in this instance refers to a graphical representation of ideal parking schemes that would work in an abstract setting. Section 3.1 discusses the main effects of underpricing of the parking market based on inferences from previously published literature. Following, section 3.2 restricts itself to a strictly theoretical model that illustrates the effects of underpricing with inferences based on

a graphical representation of the demand and supply curves of on-street/curb parking. Alternatively, section 3.3 discusses off-street/garage parking and explains why garage-parking prices in many cases refrain from the socially efficient and optimum prices. Finally, this section again concludes with a table consisting of the main takeaways from the articles that were discussed.

3.1 The costs of underpricingAs mentioned before, parking is not only one of the most vital intermediate goods in the economy, but also a vast use of land and together parking policies are capable of determining consumers’ attitude towards the retail industry. In order to support this statement, a study in Edinburgh (Hu & Saleh, 2005) on general parking concluded that the main hurdle individuals face when visiting shopping areas in city centres is not the level of congestion, but the access to, and supply of, parking spaces. Further findings of the survey detected that the importance of parking availability was not consistent amongst all product categories, with 85% of the customers saying it was important when buying groceries, 76% for household goods and 60% for apparel and shoe shopping. Parking can be supplied to consumers in two manners; on-street or off-street (Kobus, Puigarnau, Rietveld, & Ommeren, 2013). On-street parking refers to curb parking which usually tends to be underpriced or even available for free at times, this poses a classical economic problem in which neglected externalities with regard to cruising for parking that arises from such parking policies result in circumstances that distort the parking market (Ommeren, Wentink, & Dekkers, 2011). If curbside parking is underpriced or free, according to conventional law of demand, consumers’ demand of such parking spaces will exceed the supply by far. This results in a scenario in which some drivers may have difficulties in finding a vacant parking space immediately, thus will cruise for parking. Drivers cruising in search of a parking spot usually drive more slowly than drivers in transit, this slows down traffic imposes external costs on all drivers by contributing to congestion (Arnott R. , 2012). Moreover, Shoup (1997) claims that there is no such thing as free parking. In his work ‘The High Cost of Free Parking’, Shoup illustrates that the cost of free parking is party borne by the government as provision for land, construction and maintenance as well as the opportunity cost for what that land could have been alternatively used for (Shoup, 1997). The resources for such parking products is ultimately financed by taxes or fees on residents and businesses, thus from this perspective free parking is fundamentally unfair as it actually serves as a subsidization of car driving provided by those who use alternative modes of transportation (Ommeren, Wentink, & Dekkers, 2011). Another complication that appears due to underpriced parking is that it might attract the wrong target group since majority of the

available spaces ends up being occupied by commuters for a long period of time and not visitors, who have short term parking necessities (Kobus, Puigarnau, Rietveld, & Ommeren, 2013). To illustrate this, the COST report obtained data from several cities in Germany where free parking for the first one hour was introduced as a trial. Consequently, this trial resulted in no rise in the gross sales around the areas where the new parking policy was introduced, but did experience a rise of 75% in the number of cars parked for less than an hour and also an increase in traffic volume (COST, 2005).

3.2 Theoretical approach to parking pricingThe above-mentioned complexities are mainly due to the fact that authorities fail to recognize the time costs incurred when searching for a parking space (Hu & Saleh, 2005). While cruising for parking, drivers incur costs in terms of fuel consumption and contribution to air pollution, which can be defined as user costs. In addition to this, the presence of cruising suggests that drivers prepared to spend time and effort in searching for a parking space and thus, their willingness to pay exceeds the existing parking prices (Inci, 2015). Parking authorities solely consider user costs and neglect the fact that drivers are willing to incur time costs as well when determining parking prices. Eventually this causes distortions in the parking market caused by underpricing (Inci, 2015). To clarify this phenomenon, consider figure 1a below which depicts a welfare analysis in which the price of a parking spot is represented by trip price on the vertical axis and the number of cars in transit (which points out how busy an area is) by throughput on the horizontal axis. In the case of no parking capacity constraints, equilibrium will occur at point E3 at which the demand curve and the user cost curve intersect. However, there is restraint on the parking capacity, thus equilibrium settles at point E1 where the demand curve intersects the parking capacity constraint. In the case of (under)priced parking, the user cost curve shifts upward, while the equilibrium remains at E1. As demand, T2, exceeds the supply, T1, some cruising in search for parking space will still occur, though it will be less as opposed to a situation with free parking where demand is T3. The fact that cruising still occurs, although revenue from parking is collected suggests that underpriced parking is associated with welfare losses. Figure 1b illustrates an equilibrium situation does incorporates market clearing prices. That is, if parking authorities were to increase their parking charges, shifting the user cost curve even further up as compared to in figure 1a, it will intersect the demand curve and the parking capacity constraint at the same point, while the consumer surplus and the equilibrium price remain constant and the revenues collected from parking increases. What is even more striking is that in the scenario presented in figure 1b, cruising for parking is eradicated. Thus, by

increasing the price for parking until cruising is eliminated, authorities are enabled to convert welfare losses into parking revenues.

Figure 4: Efficiency loss due to cruising and optimal pricing, (Inci, 2015)

3.3 Off-street parkingAlternatively, consumers can opt off-street parking, more commonly referred to as garage parking. Urban centres are areas where parking garages spatially compete with each other and with on-street parking spaced (Kobus, Puigarnau, Rietveld, & Ommeren, 2013). As (Groot, 1981) observes, drivers aim to minimize the distance from where they park to their final destination, which in turn enables parking garages to act as local monopolists. Since drivers value the time costs associated with the travel distance from the parking to the final destination, he or she is willing to pay a premium in order to park in a closer parking garage. Consequently, parking garages exploit such preferences by charging distorted prices that will be beneficial to them, but inefficient with respect to the parking market (Pierce, Willson, & Shoup, 2015). Another factor that causes differentiated parking prices from the optimum is the fact that parking garages engage in spatial competition (Arnott, 2006). Off-street parking is mostly privately operated, whereas on-street parking is mostly publicly operated (Kobus, Puigarnau, Rietveld, & Ommeren, 2013). Privately operating businesses strive to make profits and do so by establishing significant markup prices for their consumers as stated before. Publicly operated parking authorities on the other hand underprice their parking leading to inefficiency as well. (Calthrop & Proost, 2006)therefore opt for an optimal regulation in which curbside and garage parking spaces act as perfect substitutes. If for instance, parking garages charge higher prices than curbside parking places, demand for curbside parking will increase

resulting into wasteful cruising in search of curbside parking spaces. On the other hand, if parking garages charge lower rates as compared to curbside parking, on-street parking will be under utilized which once again results in inefficiency (Kobus, Puigarnau, Rietveld, & Ommeren, 2013). For this reason, when garage parking and street parking serve as perfect substitutes for one another, the garage parking market is perfectly competitive (as compared to the previous scenario in which they act as local monopolies) and curbside parking prices will rise to a level at which cruising is eliminated (Pierce, Willson, & Shoup, 2015). Despite these findings, in reality curbside parking and garage parking are not perfect substitutes (Calthrop & Proost, 2006). For example, in most of the cities in the Netherlands, curbside parking is in omnipresent, while garage parking is in limited supply and are discretely positioned over space (Gemeente Amsterdam, 2004). In this case, consumers will prefer curbside parking over garage parking as there are higher chances of being closer to their destination. Since demand for each of these parking facilities differs, they can not be regarded as substitutes and cruising for parking will still occur.

Article Main takeaway

1 The Cost of Free Parking (Shoup, 1997) The cost of free parking is borne by he government.

2 The Real Price of Parking Policy (Ommeren, Wentink, & Dekkers, 2011)

Free parking serves as a subsidization of car driving provided by those whouse alternative modes of transportation.

3 The On-street Parking Premium and Car Drivers' Choice between Street and Garage Parking (Kobus, Puigarnau, Rietveld, & Ommeren, 2013)

Underpriced parking attracts commuters rather than shoppers or visitors.

4 Impacts of Congestion Charging on Shopping Trips in Edinburgh (Hu & Saleh, 2005)

Time costs are not incorporated in parking charges and thus parking is underpriced.

5 A Model to Describe the Choice of Parking Places. (Groot, 1981)

Drivers aim to minimize distance

from parking to final destination, this paves a path for parking garages to act as monopolists

6 Spatial Competition between Parking Garages and Downtown Parking Policy (Arnott, 2006)

Spatial competition between parking garages causes parking prices to differ from the socially efficient optimum.

Table 2: Summary section 3

4. Car Usage and Retail AttractivenessThis section consists of several surveys and studies that have been conducted in real life to be able to find out whether there is indeed a significant positive correlation between car usage and retail performance. Many misconceptions that are to this day still falsely believed by retailers are brought into question and explanations have been provided why store managers ought to refrain from believing them for the good of their own business. The upcoming sections are all divided based on the 3 surveys of which they are based on. Section 4.1 gives findings from the survey conducted by the London Councils, section 4.2 depicts a small part of a piece written by the Kennisplatform Verkeer and Vervoer and section 4.3 is based on a report made my Transport Alternatives.

4.1 London Councils surveyIn order to draw a link between retail and parking, a review for the London Councils was considered (Tyler, Semper, Guest, & Fieldhouse, 2012). Broadly speaking, this review aimed to establish the relevance of parking in the success of urban centres, primarily focusing on the city of London, by examining evidence from academic literature and report from foundations from various cities across Europe and the United States.

First of all, to evaluate the relationship between car usage and shopping in the UK, the UK National Travel Survey pointed out that travel motives such as shopping and personal businesses accounted for around 31% of all car journeys in 2005 as apposed to a 21% of the trips were made for commuting or work. Also, when asked shoppers specifically, a majority of 65% states to have opted to take the car for quote ‘convenience’ and the argument that larger quantities or larger products can be carried with car

travel comes second. However, this study also mentions that a great number of consumers are unaware of the alternative options, such as the costs associated with public transport and in most cases completely disregard this option (Department of Transport, 2013). Another factor that is often overlooked is the difference between perceived and actual consumer behaviour. As for store owners and managers, they deeply believe in the principle that ‘no parking means no business’ and therefore call for free of cheap parking (Mingardo & Meerkerk, 2012). Retailers assume that the best part of shoppers drive, customers that drive are the ones that spend the most and that customers make their shopping decisions based on parking availability. These misconceptions are illustrated by (Sustrans , 2006) as they compare shoppers actual travel behaviour relative to what retailers expected see. The 2006 report highlights results from a reproduced experiment in which they interviewed retail consumers on their chosen mode or transportation, the distance they travelled and the number of shops they visit per shopping trip. The previously conducted experiment which was set in Graz, Austria, came to the conclusion that the majority of the retailers overestimate the fraction of customers travelling by car and highly underestimate those who come by either public transport, bike or walk (Sustrans , 2006). The reproduced experiment by Sustrans has similar findings. Firstly, retailers had the notion that majority of their customers were visitors to the location of their shops, in reality however, most of the customers were locals with 42% living within half a mile (0,80 kilometres) and 86% within two miles (3.2 kilometres) compared to an estimated of 12% living within half a mile and 40% within two miles. In addition to this, retailers assumed local customers to visit less shops as compared to visitors. However, this report states that almost 30% of the local customers visited more than three stores as compared to a predicted less than 10% by retailers. This could be interpreted as that local customers (who are less likely tot travel by car and more likely to travel by public transport, bike or foot) are more loyal as compared to car users, the exact figures can be seen in figure2. Secondly, an increasing number of consumers opt to walk for their shopping purposes, to be precise 78% as compared to a prediction of just 59%), since they view it as both an social activity by meeting people along the way as well as a more efficient way of shopping as it is regarded as means to make the shopping environment more noise and environmental pollution free. Lastly, parking facilities, which ranks high in priority in the list of retailers and store managers, does not carry as much weight in the mind of consumers. Shoppers care more about traffic reduction and environmental improvements that enhance the shopping environment.

City Walk Cycle Bus CarGraz Predicted 25% 5% 12% 58%

Actual 44% 8% 16% 32%Bristol Predicted 42% 6% 11% 41%

Actual 55% 10% 13% 22%Figure 5: Actual vs. prediction consumer transportation modes, (Sustrans , 2006)

4.2 Kennisplatform Verkeer en Vervoer surveyAnother well-known myth that is obeyed by retailers is that low cost parking attracts customers. In reality however it is proven that the parking prices are of hardly any influence when it comes to picking a shopping location. A study states that when questioning customers whether parking tariffs have an impact on choosing where to shop, 70% admitted to not even know how much parking charges are wherever they park. What plays a major role in choosing ones location to shop is however the distance between the parking and the final destination of the shopper, as stated in section 3.3 (KpVV, 2013). Now if we present store managers with the finding that the accessibility of the parking places is more important than the parking charges, they might argue that if the street in which their store is located becomes vehicle free, this will have bad consequences for the performance of their business. However, it has to be taken into account that proximity does not solely determine the accessibility of a location; travel time, public transport connectivity and frequency also play a major role. As long as it is easy for a customer to get from parking to his or her shopping location, they will keep returning to the stores.

From the preceding sections it is evident that retailers consistently overestimate the number of customers that come by car and undermine the potential of their customers that come by public transport, bike or foot. This overestimation can be detrimental to their business as evidence from available studies illustrate that while car drivers may spend more on a single trip, customers that use alternative transportation methods tend to spend more over a period of time (Tyler, Semper, Guest, & Fieldhouse, 2012). Part of this may be due to the fact that car ownership in general is experiencing a declining trend (The Economist, 2012). Majority of the millennials do not attach a lot of value to owning a car. The percentage of cars sold to youngsters aged between 18 and 34 has dropped dramatically as what they previously used to be able to do by car, youngsters are able to do online (Hargreaves, 2012). According to a Deloitte Study of 2012, 46% prefer Internet access as opposed to owning a car, as car ownership is not as socially important as it used to be. These days, people do not rely on vehicles in order to get to locations to interact with people, this can be

done much more efficiently online. Therefore, youngsters are inclined to invest in personal technology, such as smartphones, tablets and other devices, rather than leasing cars, as they believe adds more value to their long term success (Deloitte , 2012).

4.3 Transport Alternatives surveyBearing this in mind, Transportation Alternatives conducted a survey in order to determine how much consumers using alternative transport modes other than the car contributed in the total amount spent on retail. The survey provides a snapshot of spending patterns of both local and visiting shoppers visiting the East Village shopping district in Manhatten, New York. On contrary to what business owners believe, this study found that transit users, cyclists and pedestrians add more revenues of a business than car users (Transportation Alternatives, 2012). This in a way makes sense, car users are spend more during a single trip since they have means to carry their purchases back home. However, automobile users tend to have limited time on their hands, due to parking charges for one, and usually arrive with a plan and list that is prepared beforehand. Consumers using alternative modes of transport might spend less per trip as compared to car users, however they make more frequent trips. They are more relaxed as they do not have the same time constraint as car users and thus are able to stroll passed strolls which leads to them being more likely to indulge in impulse buying (Alter, 2012). The East Village Shoppers Study reports that the total spending of all shoppers that were interviewed was $58.587,50 and an average weekly spending of $139,50 per shopper. Customers that opted to travel by public transport, bike or foot accounted for about 95% of the total spending. As supported by figure 3, Transit users and cyclists both contributed to 28% of the collected revenues and pedestrians 35%. Car users however, added just about 4% to the total expenditures.

Figure 6: Expenditures per transport mode, (Transportation Alternatives, 2012)

Another reason to disregard the notion that retailers go by with regarding to the importance of parking is that empirical studies that follow shoppers behaviour suggest that other factors besides parking might be more influential in attracting customers to retail areas. One of the most important factors is a good mix of shops and environmental improvements that create a pleasant atmosphere (Ammani, 2013). This coincides with the fact that majority of the shoppers take their time in strolling past stores as stated in the previous section, and thus enhancing the atmosphere only adds to the customer satisfaction. This is turn ensures that retention of satisfied customers to the area.

Walk

Cycle

Metro

Car

Bus

Taxi

Others

$- $5,000.00 $10,000.00 $15,000.00 $20,000.00 $25,000.00

$20,335.00

$16,485.00

$16,507.00

$2,145.00

$1,935.00

$720.00

$475.00

Table 3: Summary section 4

5. Conclusion

5.1 Summary of the main findingsThe current paper is motivated by a series of theoretical literature in the field of retail and parking and reports conducted by multinationals. The main findings based on these works suggest that current trends regarding the global financial crisis and the rise of the internet have managed to shape consumers’ purchasing attitude. The industry faces challenges of

Section

Survey Results

4.1 London Councils (Tyler, Semper, Guest, & Fieldhouse, 2012)

Retailers overestimate the number of customers travelling by car and underestimate of those coming by alternative modes of transport.Majority of the customers are locals and not visitors.Shoppers value environmental characteristics more than parking facilities.

4.2 Kennisplatform Verkeer and Vervoer (KpVV, 2013)

Parking prices have low to no influence on determining a shopping location.

4.3 Transport Alternatives (TransportationAlternatives, 2012)

Pedestrians and public transport users add more to retail revenue than car users.A good mix of shops is the most important factor to retain customers.

weakened consumer spending and a more cautious consumer attitude along with a highly unsteady and illiquid market environment. In addition, the digital wave has shifted market power from the hands of retailers to those of consumers, which again has disruptive consequences for store managers as they are no longer in the position to influence the shopping behaviour of their customers. However, the situation need not be all bad news. The omnipresence of the internet could very well be used by retailers in order to boost their business. By shifting the focus on enhancing online retail channels, ensuring that their brand image is part of a large social network and by exploiting technology-driven opportunities for a business, like BOPUS, retailers are capable of understanding their consumers better and establishing a deeper connection with them. As for brand building and marketing presence, retailers ought to go with the digital flow. However, store managers should pay attention to their physical presence as well, or in other words in how far their store is accessible to customers. Retailers believe majority of their customers arrive by car. According to parking literature, the search or parking results into market failure as demand exceeds supply if parking prices are not accurately set. Furthermore, in efficiencies in the parking market could be avoided if curb parking and garage parking were perfect substitutes, however in reality car drivers to not value them as equal. The popular belief that majority of the shoppers come by car however proves to be false according to research reports. Retailers underestimate the potential of customers that arrive by foot, cycle or public transport and therefore are prone to lose on revenue that could be otherwise generated by them.

Section Topic Findings2.2 Global Financial Crisis Weakened and more cautious consumer

spending.Higher credit dependency for retailers.

2.3 Technological developments Traditional retail marketing no longer attracts customers.Consumers influence each other and are in control of their own shopping journeys.

Section Topic Findings2.4 Hybrid consumerism Forces retailers to diversify in different

product categories. Crossover consumerism Rise in consumer power and consumer

activism.3.1 The Cost of Free Parking

(Shoup, 1997)The cost of free parking is borne by he government.

3.1 The Real Price of Parking Policy (Ommeren, Wentink, & Dekkers, 2011)

Free parking serves as a subsidization of car driving provided by those who use alternative modes of transportation.

The On-street Parking Premium and Car Drivers' Choice between Street and Garage Parking (Kobus, Puigarnau, Rietveld, & Ommeren, 2013)

Underpriced parking attracts commuters rather than shoppers or visitors.

3.2 Impacts of Congestion Charging on Shopping Trips in Edinburgh (Hu & Saleh, 2005)

Time costs are not incorporated in parking charges and thus parking is underpriced.

3.3 A Model to Describe the Choice of Parking Places. (Groot, 1981)

Drivers aim to minimize distance from parking to final destination, this paves a path for parking garages to act as monopolists

Spatial Competition between Parking Garages and Downtown Parking Policy (Arnott, 2006)

Spatial competition between parking garages causes parking prices to differ from the socially efficient optimum.

4.1 London Councils (Tyler, Semper, Guest, & Fieldhouse, 2012)

Retailers overestimate the number of customers travelling by car and underestimate of those coming by alternative modes of transport.Majority of the customers are locals and not visitors.Shoppers value environmental characteristics more than parking facilities.

4.2 Kennisplatform Verkeer and Vervoer (KpVV, 2013)

Parking prices have low to no influence on determining a shopping location.

4.3 Transport Alternatives (Transportation Alternatives, 2012)

Pedestrians and public transport users add more to retail revenue than car users.A good mix of shops is the most important factor to retain customers.

Table 4: Executive summary paper

5.2 Research QuestionComing back to the main research question of this paper which is:

“What is the relevance of parking facilities in determining the success of urban retail centres?”

This paper can conclude that from the data findings presented in sections 2, 3 and 4, that usage of car is highly overestimated for shopping purposes by retailers. Majority of the revenues generated come from local shoppers that opt to travel by public transport, bike or even foot. The presence of parking facilities would indeed attract those that do not have a choice but to drive ,however since this paper points out that they are not the customers that generate most of the revenues, the presence parking facilities do not play as a big a role in determining success of retail centres as is anticipated by retailers. A more effective approach would be to focus on attracting pedestrians and users of alternative modes of transport by improving accessibility by foot, bike and the public transport as these are the shoppers that mainly add monetary benefits to this industry.

5.3 Policy RecommendationBased on the inferences from this paper, it is quite evident that authorities need to seriously reconsider their policies regarding parking pricing schemes. From the theoretical sections, it is clear that underpricing has a severe impact on the functioning of consumer behaviour and has negative impact on social efficiency as well. Therefore, authorities and local municipalities ought to bring about a change to the parking charges of curb parking by estimating the actual willingness to pay by drivers/customers and setting accurate parking prices accordingly. The income generated by these up to standard parking fees can be utilized to improve public transport accessibility which in turn reduces traffic for those who no not have an option but to drive. The proceeds of the generated revenues can also be used to invest in pavements and make shopping streets more pedestrian friendly. Since recent trends suggest that majority of the shoppers are pedestrians or public transport users, this will be beneficial to them. The redistribution of the generated parking revenues will also be beneficial to the small minority of car drivers that still do come by car, since accessing the shopping location by car will be less of an hazard compared to a more congested situation for them, which would otherwise occur with lower parking fees.

5.4 Limitations and SuggestionsNevertheless, this paper does lack in empirical backing as most literature is subject to urban settings, therefore generalizing the findings to all retail settings would be unjust. Another short coming is that this literature mainly focuses on how parking availability is of decreasing value for retail performance, however decreasing value does not mean no value at all. Though this is not the main subject of this paper, parking is in fact still of some importance for those customers that have no choice other than driving to their shopping destination. Therefore, exploring literature on

how parking is of relevance could aid in establishing a balance between car and pedestrian friendly shopping areas. Further suggestions to explore the link between parking facilities and retail success could be to conduct surveys in suburban areas to see whether consumers prefer commuting in similar manners as in urban cities. Additionally, research focusing consumers in the (east) Asian subcontinent would be helpful as these areas are newly emerging markets and are starting to play an important world in the global economy. Finally, the theoretical findings from this paper could be served as a base and reference point for future empirical research within this field.

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