Why Can’t We Be Friends? Survey Shows E-Commerce And Brick-And-Mortar Models Can Work Hand-In-Hand To Benefit Retailers

During all of the confusion and uncertainty of the coronavirus pandemic, one thing became very clear: e-commerce is here to stay.

The global e-commerce market saw a significant boost in its share of all retail sales, rising from 16% to 19% in 2020, due in no small part to people changing their habits during the pandemic. However, online sales were rising long before 2020, hitting $26.7T in 2019, up 4% from 2018.

All of this has led some commercial real estate professionals to assume this signals the “death” of the traditional brick-and-mortar shop, but what if that doesn’t have to be the case? What if traditional retailers could use e-commerce to their advantage, while still keeping their physical stores? 

To answer these questions, Colliers Real Estate Management Services surveyed 254 tenants out of its 11M SF Canadian national retail portfolio and came away with some surprising findings. 

“E-commerce sales are growing, but traditional brick-and-mortar sales have been rising as well, with more growth projected in both sectors,” said Jane Domenico, the study's co-author and senior vice president and Canada national lead for retail real estate for Colliers Real Estate Management Services. “These two shopping strategies no longer need to be mortal enemies.” 

The survey found that while e-commerce sales are growing, retailers are still keeping their stores and are focused on creating an omnichannel experience for their customers. This term refers to creating a seamless experience for customers whether they are shopping online or in a store — they can purchase an item online and have it shipped to their local retailer, or speak with an associate in-store about an out-of-stock item and have the associate locate it online and have it shipped to their home. This presents an opportunity for owners of retail properties to help their retail tenants find ways to create a seamless omnichannel experience.

Domenico and her colleagues found that 54% of retailers surveyed have an e-commerce platform, up from 27% reported before the pandemic. 

“E-commerce and physical stores are no longer separate entities,” Domenico said. “They are being combined to create the best experience for shoppers.” 

The survey found that 57% of retailers say that e-commerce allows them to sell more products, but only 7% said that online sales are more profitable than in-store sales. Through the omnichannel model, retailers are able to continue to experience the benefits of both systems. 

As a result of this new model, retailers are changing the layout of their physical spaces. Close to 55% of survey respondents said they are using their stores to fulfill customers’ online orders.

This means converting some of the space they traditionally use as customer sales areas into “back of house” space for inventory storage or adding dedicated pickup areas to the front of house. Additionally, the omnichannel model is helping to fuel the industrial boom, as 16% of retailers surveyed said they are leasing, or plan to lease, industrial space to help with online order fulfillment.

One interesting benefit of the omnichannel system was that a majority of survey respondents — 51% — reported that customers purchase additional items when they pick up their online orders in-store. These additional purchases, on average, tend to be about 31% of the value of the original order. 

A particularly significant survey finding for CRE brokers, Domenico said, was that when asked whether the pandemic has changed the importance of physical retail space for their business and, if so, whether they plan to increase or decrease the amount of space they have, most retailers said they are satisfied with the amount of space they currently lease.

This, and other findings, led Colliers Real Estate Management Services to forecast that Canada’s national retail vacancy will remain stable — at approximately 8.5% nationally — over the next two years. Overall, Colliers predicted that total Canadian retail sales will surpass $180B over the next four years, and thanks to that growth, e-commerce will not cause a decline in brick-and-mortar sales during that time frame. Indeed, Colliers added that there is room for growth for both e-commerce and brick-and-mortar.

“The key takeaway here is that when it comes to e-commerce and brick-and-mortar, retailers are not looking at them as one versus the other,” Domenico said. “Instead, they are adapting, and creating a new model that can help them boost sales and better cater to their customers.” 

This article was produced in collaboration between Studio B and Colliers. Bisnow news staff was not involved in the production of this content.

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