E-commerce Isn’t Replacing Retail

This year, online shopping has been record breaking. It is no surprise. Consumers had few other options this year other than to buy goods online. The surge in demand has lead to a similar frenzy for industrial development, but Jonathan Needell of KIMC says that the exuberance may be premature.

“Everyone talks about the pandemic accelerating things that were already afoot, and that includes e-commerce,” Needell, the president and chief investment officer at KIMC, tells GlobeSt.com. “We saw the growth in ecommerce go through the roof with the pandemic started. I think that we can expect the growth rate to decline fairly dramatically just because the denominator is so much greater and there will pent-up demand. That could mean that the growth declines, flattens or it goes to a lower growth rate. It is hard to say—and it could re-accelerate.”

Online and omni-channel retailers will likely see a decrease in activity next year. “If you are omni-channel, there is going to be some drop-off in delivery demand,” says Needell. “Now, there is also pent-up demand to get out of the house. That pent-up demand will take notch off of the growth rate for ecommerce.”

Traditional brick-and-mortar retailers will see a similar change in activity due to the pandemic. Many of these retailers will be forced to adopt omni-channel platforms. “We saw this acceleration of change that changed retail as well. Retailers have gone out of business and those spaces will need to be filled by other concepts, not the same kind that went out of business,” says Needell. “I think those concepts are going to be more omni-channel concepts.

The adoption of omni-channel will also lead to a significant change in the retail store. Many retailers will use physical locations to satisfy the last mile, altering demand for both retail and industrial product. “Retailers are going to use store space for some last mile delivery,” says Needell. “There will be an impact on industrial as well as retail for that reason.”

For omni-channel platforms, a dual use of brick-and-mortar will ultimately be a cost saver and ease supply chain challenges. “When the customer drives to the store and satisfies the last mile, it is better for you as a retailer if you are operating the retail space anyway,” says Needell. “If you are not operating a retail space, the delivery is a better margin and lower cost option. We are in a strange world where ecommerce is no longer a disruptor; it is now that omni-channel it the way of the future. The customer expects you to be both.”