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Industry News

Why online sales growth is good for the shopping center industry

April 5, 2019

Physical retail will prevail and thrive, and the substantial growth of online sales in recent years poses no threat, industry experts say. On the contrary, a sound omni-channel strategy is key to physical retailers' success.

Though pure-play e-commerce sales volume has grown by 92 percent since 2013 — about nine times the pace of physical-store sales growth for the period, according to JLL — the numbers look scarier than they actually are, according to industry players quoted by National Real Estate Investor. Brick-and-mortar sales (which JLL says hit nearly $4.4 trillion in 2017, versus $262 billion in online sales) will always vastly outstrip e-tail, experts say. Nearly 90 percent of sales are conducted in stores, says JLL.

“Brick-and-mortar will always have that stronger ratio or percentage [relative to] online sales”

E-tailers have learned that they need to have a physical presence to grow and thrive, observers say, citing ICSC’s study titled The Halo Effect: How Bricks Impact Clicks, which shows that opening a store boosts a retailer’s web traffic by some 37 percent, on average. This is why native brands Allbirds, Bonobos, Untuckit, Warby Parker and a host of others are opening stores, these experts say.

“Most people think, ‘Oh, online sales are going to take over all retail sales.’ That’s not true,” said Brandon Famous, a CBRE executive managing director, as reported by National Real Estate Investor. “What it will do is enhance brick-and-mortar retail to a significant degree.”

Though growth of online sales will continue to outpace that of physical stores in the near term, “brick-and-mortar will always have that stronger ratio or percentage [relative to] online sales,” said Famous. “Right now it’s about 85 to 15; it may get to 80-20 looking out five years. I don’t see it going past 75-25.”

“If you read a lot of the reports out there and [the] information, the perception is [that] everybody is shopping online, when in actuality brick-and-mortar retail is growing”

Only those retailers that fully embrace omni-channel retail will thrive, argues Famous. Others concur.

“If you don’t embrace the omni-channel approach, you will die,” said Greg Maloney, CEO of JLL Retail, as reported in the publication. “If you read a lot of the reports out there and [the] information, the perception is [that] everybody is shopping online, when in actuality brick-and-mortar retail is growing. Sales are growing [and] they continue to grow.”

By Edmund Mander

Director, Editor-In-Chief/SCT

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