Barrier Diminishes Between Brick-and-Mortar and Online Retailers
When meeting with investors interested in purchasing retail space, from single-tenant assets to small shopping centers, I have recently noticed that their primary concern is the impact of e-commerce weakening the demand for retail space. This is a valid point but I respond that there is also an e-commerce trend fueling demand for brick-and-mortar stores. Online retailers are realizing that launching traditional retail stores can be a great marketing tool to drive online sales.
As a result, the barrier between established brick-and-mortar retailers and e-commerce startups is diminishing with the omnichannel retail trend, according to a recent article by Bisnow. Known as e-tailers, innovative online retailers are entering the traditional retail world. For example, Amazon has unveiled an experimental grocery store and three bookstores—just one of many companies signing leases and hiring sales staff, as recently reported by CBC News. For example, Bisnow reports that Indochino, a Vancouver-based online seller of men’s made-to-measure suits, has opened 13 showrooms in Canada and the United States and expects to open eight new brick-and-mortar locations by the end of August 2017 with plans for 100 more stores over the next five years.
Clearly, new players are entering the market. As the CBC News article reported, online retailers are testing the value of opening traditional stores as a means of driving new customers to their sites. In markets where online retailers have a store, online sales tend to grow much faster than in markets without a physical presence, according to industry observers.
My advice to my clients: Retail is far from fading. Instead, it is morphing in front of our eyes as e-tailers are shifting the market. Keep an eye on trends and make sure to add online retailers to your list of potential tenants. Who knows where the next tenant will come from?