Why Blending Online and In-Store Retail Is More Effective

It can seem that e-commerce is supplanting bricks-and-mortar retail each time news surfaces of another national chain closing stores. But CBRE outlines in its Definitive Guide to Omnichannel Real Estate digital report that online and in-store retail actually are blending into a more effective and convenient whole, rather than one supplanting the other. Melina Cordero, CBRE’s Americas Head of Retail Research and lead author of the report, spoke with GlobeSt.com about a few of the report’s findings that go against the oft-heard narrative of a retail apocalypse.

GlobeSt.com: Your report posits that e-commerce and in-store shopping are meshing rather than competing. How is that?

Melina Cordero: Many studies have found that shoppers prefer to shop across channels, from online to in-store to mobile. Call it ‘channel surfing.’

Sure, the final purchase will take place in a single channel, but the shopper’s research beforehand easily could take place in a separate channel from the purchase. For example, a shopper might use a retailer’s website or app to determine if a given product is in stock in their nearby store and then reserve that product for them to pick up that same day.

Several proof points verify this perspective. First, Forrester Research calculates that 38.5% of in-store purchases last year were ‘digitally influenced’ in that the shopper researched the product online beforehand. Forrester predicts that share will increase to 41% by 2022. The flip side of that is the growing number of e-tailers opening stores – the clicks-to-bricks movement, if you will – to allow their customers the opportunity to view their product and sample it in person.

This omnichannel approach is effective. Consider that a recent Harvard Business Review study found that channel-surfing shoppers spent 10% more online and 4% more in stores than their single-channel counterparts.

GlobeSt.com: What will this mean for retail landlords?

Cordero: Many, many things. First, retail-center owners who support their retailers’ omnichannel efforts will succeed. That can include providing apps that steer shoppers to their tenants, offering free wifi in certain areas and simplifying parking and access for quick pickups.

Just as important for center owners is to know the e-commerce penetration ratio of various retail categories and to assemble their tenant mix accordingly. For example, most people know that e-commerce accounts for big portion of electronics sales (38% last year) and office-product sales (35%). It’s not entirely surprising that Forrester forecasts those to grow to 66% and 50% respectively by 2022.

But not many know that sporting goods, currently at 24% e-commerce penetration, is projected to rise to 39% by 2022.

Meanwhile, there are categories that remain relatively underpenetrated by e-commerce with minimal increase predicted, including food and beverage (3%), home-improvement goods (3%), furniture (8%), jewelry (15%) and footwear (15%).

GlobeSt.com: What else should we be talking about more these days regarding omnichannel retailing that we aren’t?

Cordero: Well, most discussion is focused on the growth of e-commerce, which accounted for 8.9% of US retail sales last year and is projected to reach 15% by 2022. What we should also consider, though, is that the composition of e-commerce itself is changing.

By that, I mean that mobile commerce – or making purchases from smart phones or tablets – is projected to grow from a 34.5% share of online purchases last year to 54% by 2022. That has tremendous implications for retail-center owners and retailers alike. The former need to do everything possible to connect with shoppers on their phones, namely through apps.

The latter must be fully functional and effective through mobile commerce. That entails ensuring that their mobile app fits seamlessly within their e-commerce and in-store operations. An additional benefit to the retailer is that mobile commerce yields a trove of data about their customers’ traffic patterns and shopping preferences.

GlobeSt.com: What does this omnichannel movement mean for warehouses and distribution centers?

Cordero: That market, which we call the Industrial & Logistics market, has grown rapidly since 2012. Many indicators point to that momentum continuing, especially since e-commerce distribution requires roughly three times as much space as does traditional warehousing.

Our researchers at CBRE calculate that each additional $1 billion of recurring e-commerce sales in the US results in the need for another 1.25 million square feet of distribution space. Consider, then, that e-commerce sales will grow by many billions of dollars as it expands to a projected 15% share of US retail sales by 2022. That’s a lot of additional warehouse space that will be needed.