Traditional Brick and Mortar Brands Can ‘Crush It’ Online

By Dennis Kaiser

Successfully competing in e-commerce comes with a hefty price tag, but retailers need to be on this platform to survive and stay relevant to the consumer. Strong omnichannel retailers have thinned out and heightened the competition. This competition has also negatively impacted the retailer’s profit because of the high cost of e-commerce technology and talent, distribution centers, digital marketing and more. Some noteworthy competition includes Walmart, Target, Home Depot, Staples, Best Buy, Target, Kroger and Macy’s.

Colliers International’s Anjee Solanki shares insights into the traditional brick and mortar brands that are crushing it online in our latest 3 CRE Q&A.

Q: Why are brands moving from a physical store strategy to one that also includes online? Should landlords be worried?
A: It’s important to note that the physical store strategy is not going away. As highlighted in Colliers’ Fall 2019 Retail Spotlight Report, the localized physical space of a brick-and-mortar store contributes to the overall experience a consumer has with a brand. Instead, a convergence between in-store, online and mobile shopping has emerged, providing flexibility and convenience to the consumer. The omnichannel shopper will be doing more as retailers prioritize investments. For example, omnichannel shoppers expect to do more product look up, more buying online and picking up in store, and higher demand for same-day delivery. Retailers are seeking to emulate the marketplace model by offering a much wider selection without bearing the cost of buying, storing and shipping a lot more merchandise. For example, Walmart, over the past several years, expanded its online catalog from two million to 75 million SKUs, allowing third-party merchants to sell on Walmart.com. More than 10% of shoppers say they have returned an Amazon order to a store not operated by Amazon.

Landlord’s should not worry though: Physical stores influence 39% of U.S. online retail sales. However, at what point are sales from online purchases and store pick-ups shared with landlords in an effort to bill percentage rent, or discussed to allow for additional transparency when negotiating terms? In other good news, the percentage of Black Friday online spend that ‘touched’ a store – meaning bought online and picked up in-store was 42%. Having a strong in-store customer satisfaction score that is on par with the online shopping experience is key for a retailer. For landlords, there is significant potential of increased cross shopping to occur, pushing sales for other retailers and the food and beverage sector.

Q: What are some of the ingredients to brands executing this transition smoothly?
A: Knowing the customer and their behavior must always be top of mind if retailers intend to capitalize on the continued growth of e-commerce. Focus should be placed on the following ‘ingredients’ to create a seamless shopping journey:

• Both desktop and mobile
• Web design
• Flexibility to check product availability online
• Free shipping and returns
• Assortment online
• Convenience of pick-up in store
• Same-day delivery
• Warranty and receipt management
• Rewards and loyalty program

Q: How should landlords prepare for this reverse retail strategy?
A: Online retail will continue to evolve to stay relevant in our insta-society by making it easier to shop online, and most landlords recognize this shift as the future of retail. But, let’s not dismiss the power of retail sales in physical stores that grew 3% (excluding online growth) this year. The retail chains that are closing are due to lack of store experience, an omnichannel platform and not understanding their consumers buying patterns; while the stronger chains are thriving and increasing their e-commerce share.

Digitally native brands are flourishing, and we are seeing consumer brand manufacturers investing more into direct sales to get their consumers attention back. We are also seeing Amazon’s biggest competitors provide more products on their website to keep customers on their site. On the other side of the spectrum, we are seeing some stores, namely Kohl’s, embrace Amazon by collaborating with the e-commerce giant. They are heavily investing in robotics within warehouses and distribution centers to stay ahead of the competition.

E-commerce will continue to grow and cut into retail profits, but this should never interfere with the customer in-store experience, something e-commerce can’t offer.

Connect Retail West is coming to Newport Coast, CA on Feb. 13. For more information, or to register, click here.

For comments, questions or concerns, please contact Dennis Kaiser