E-commerce is changing how retailers use real estate, panelists say

Publish Date: November 19, 2013

Topics: e-commerce, gap, omni-channel, reit, retailer, supermarket, urban

E-commerce is changing how retailers use real estate, Wall Street analysts said today at the ICSC 2013 Real Estate Capital Marketplace Conference, in New York City.

E-commerce has allowed many retailers to open stores in locations and properties they’d never considered before, said Matt McClintock, vice president and senior retail softlines analyst at New York City–based Barclays Equity Research. He said a retailer might not consider a small market such as Greensboro, N.C., for a new store based purely on brick-and-mortar sales projections, but if a retailer factors in existing and potential e-commerce activity in the trade area, a new Greensboro store might be approved. The down side of this trend, for landlords at least, is that retailers will probably not want to open new stores in saturated markets, he added.

E-commerce is also influencing some traditionally mall-based chains to open shop in power centers and other open-air properties. Teen apparel chain Aeropostale, for example, is moving into more strip centers where it can ship goods to nearby e-commerce customers and still serve brick-and-mortar shoppers, he added. “Combining e-commerce and bricks-and-mortar strategies makes sense,” McClintock said.

And space needs may increase as well, he added, pointing out that Urban Outfitters’ CEO said earlier this week that the retailer may increase its average store size to showcase more merchandise based on e-commerce shoppers’ preferences for a wider range of goods. Other chains may want certain stores to have more space for displaying and storing items that are in high demand among e-commerce customers but not frequently purchased in-store, he added.

When it comes to apparel retailers, Gap, Urban Outfitters and Macy’s are at the forefront of omni-channel retailing, McClintock said. Gap, in particular, has seen its stock price surge in the past year due more to making it easier for customers to shop than staying ahead of fashion trends, McClintock said. For example, the retailer’s e-commerce site shows customers nearby stores that stock a certain item and allow the customer to reserve the item online and pick it up in the store. “Gap is done opening and closing stores,” he said. “Its future sales growth will come from increasing the effectiveness of omni-channel selling.”

Amazon, ebay and Google will continue to be the biggest online-only threats to brick-and-mortar stores, panelists agreed. Smart retailers will use their real estate portfolios to compete on convenience and delivery, said Meredith Adler, senior research analyst for supermarket, drug and dollar stores at Barclays Equity Research. Supermarkets in particular are vulnerable to increased competition from Amazon, because few of them see the online behemoth as a threat and have therefore not implemented strong omni-channel strategies, she added. “Nobody expects Amazon to make any money,” Adler said. “But other retailers still have to.” 

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