The Retail Dilemma: E-Commerce Costs Vs. CRE Rents
It comes as no surprise that many retailers are struggling while e-commerce continues to expand, but the grass may not actually be greener on the digital side. The economic intricacies regarding both models of the retail sector are evolving, and it may mean that e-commerce’s cost advantage over brick-and-mortar is dwindling.
As a percentage of total sales, e-commerce matched its highest point of 9.1% to close out 2017, and based on the current data, it’s estimated to make up 10% of total retail sales this year. In turn, brick-and-mortar retailers are fighting to keep their market share, and the rising vacancy rates are translating into falling rents.
At the same time, the cost of digital advertising and customer acquisition for e-commerce retailers is rising because of the increased competition. Furthermore, shipping costs are going up as companies like UPS are adjusting their business model. The profit margin for e-commerce is inherently lower, so only time will tell if e-commerce is truly advantageous over brick-and-mortar.
For comments, questions or concerns, please contact Daniella Soloway
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