It Is Not The E-pocalypse: Brick-And-Mortar Claims More Online Retail Space

E-commerce is not taking over traditional retail. A report from CBRE outlines how brick-and-mortar retailers account for roughly half of online sales and related activity. 

The latest installment in CBRE’s “Beyond the Headlines” series shows how, rather than being wiped out by e-commerce, many traditional retailers instead have evolved into omnichannel merchants, operating both online and physical stores. As a result, traditionally brick-and-mortar retailers collectively generate slightly more than half of U.S. online sales, according to CBRE’s analysis.

Traditional retailers are also expanding into more U.S. distribution space than their online rivals. CBRE calculates that traditional retailers accounted for 58% of new leases for retail supply chain space, or retail-specific warehouses and distribution centers, in 2015 and 2016. By comparison, e-commerce operators claimed 32% while wholesale retail users took 10%.

“Physical retail and online sales aren’t mutually exclusive,” CBRE Americas Head of Retail Research Melina Cordero said. “Modern, adaptive retailers have embraced e-commerce as one of several channels to best serve customers. And shoppers increasingly research products both online and in stores before making their purchases.”

The challenge for retailers goes beyond recognizing the importance of omnichannel capability. Assembling an omnichannel network of precisely positioned stores and distribution centers is a necessary, but often complicated and expensive, endeavor.

E-commerce players have also invested in physical storefronts. Brands like Warby Parker, ModCloth and Bonobos have used brick-and-mortar space to allow customers to try on products before purchasing. Amazon’s recent acquisition of Whole Foods will marry the former’s online delivery services with the latter’s nationwide network of supermarkets. 

“Consumers expect their experience with retailers to be seamless, whether they’re researching the product online and buying it in the store or vice versa,” said Brandon Famous, CBRE Americas retail leader and co-lead of CBRE’s Omnichannel Real Estate Practice. “Retailers that make the investment to build and perfect truly omnichannel networks are ensuring the long-term viability of their brand in the changing marketplace.”

To read the full report, click here.