Is E-commerce Killing Brick-and-mortar Stores?

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It has been just over 20 years since the first online purchase (a Sting CD), and consumers are now more comfortable with online retail than ever.

With the amount of hype in the media about the rapid growth of e-commerce, you could be forgiven for thinking that we are seeing the death of brick-and-mortar stores. But you would be wrong.

Growth of E-commerce

Yes, e-commerce is growing. The growth of e-commerce is expected to out pace sales growth at brick-and-mortar stores over the next few years. US research and advisory firm, Forrester, is predicting that e-commerce will grow to $414 billion in the US by 2018.

That sounds like a lot, but it is only 11% of the total retail sales in the US. Which means that approximately 9 out of 10 retail sales transactions will still take place in a physical space, not online.

Why E-commerce is Growing

There is no doubt that digital technology is having a strong influence, with the number of online transactions increasing. The wide-spread use of smartphones and tablets are increasing the amount of time that people spend online.

Nearly half of e-commerce sales are going to retailers with physical stores. Brick-and-mortar stores continue to invest in their online sales divisions, chipping away at the pure-play online retailers. These traditional retailers are developing “omni-channel” retail experiences. This is a multichannel approach to sales that seeks to provide customers with a seamless shopping experience, whether the customer is shopping online, by telephone or in a physical store. Using their store networks as an advantage, many have programs where shoppers can buy online and pick up in store.

In most industries, digital technologies are transforming physical businesses rather than destroying them. The fusion of digital and physical innovations creates opportunities that most businesses have barely begun to tap.

A surprising fact is that only a small amount of ecommerce’s growth can be attributed to new online shoppers. According to Forrester, most of the projected growth is coming from existing online shoppers who are choosing to purchase a wider range of products online.

Move to Brick-and-mortar by E-commerce Businesses

Pure-play online brands like Amazon are now taking the step to expand into physical store fronts. These stores stand out because they have built an established customer base online and plan to continue growing shopper numbers through a brick-and-mortar presence.

Online brands have greater opportunities to participate in this trend of integrating brick-and-mortar stores with online platforms, as they are more likely to have developed the tools to offer interactive features to shoppers.

Also, stores don’t need as much foot traffic as they have in the past to succeed. If a percentage of their sales are adding to online transactions for the overall business, they are still valuable.

What Does this Mean for Specialty Leasing?

All of these developments lead to the conclusion that specialty leasing is complimentary to selling online. Examples of specialty leasing include pop-up shops, short-term use of common area spaces, kiosks, experiential events, vending sites and parking lot events.

If you have an online business, specialty leasing provides the perfect opportunity to attract new customers and raise the awareness of your online brand. Build a stronger connection with your target customers and get feedback that can help with your product development and marketing strategy. Try different locations, see what works for you without being tied into an expensive long-term lease.

Omni-channel retailers, using both online and physical spaces, are likely to enjoy significant advantages over retailers that try to pursue either channel alone. An omni-channel strategy, when well executed, almost always outperforms competitors and increases profitable growth.


References

https://hbr.org/2014/08/e-commerce-is-not-eating-retail/

http://blogs.forrester.com/sucharita_mulpuru/14-05-12-ecommerce_grows_but_physical_stores_will_live_on

http://www.forbes.com/sites/fionabriggs/2015/08/11/shift-of-online-brands-to-bricks-mortar-stores-set-to-create-omni-channel-experience-for-malls/#5d38474a64e3

Photo credits: © Gaudilab | Dreamstime.comFemale Hipster Student In The Dress Using Mobile Phone For Connect To Wireless Photo

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