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Commercial

Brick and Mortar and E-Commerce “No Longer Mortal Enemies”: Colliers

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Brick and mortar retail has been upended in recent years by e-commerce — a trend that has doubtlessly accelerated through the COVID-19 pandemic — but a new report from Colliers suggests a measure of co-existence between the two.

Retail vacancy Canada-wide is expected hover around 8.5% for the next couple of years, at which point it could decline by fewer than 100 basis points on account of healthy economic activity and, by extension, retail sales, as well as population growth. Meanwhile, the e-commerce sector could grow to 10% of total retail sales by the end of 2024, suggesting the digital world won’t interfere too much with the material world of brick and mortar retail. Or as the report put it, the two “are no longer mortal enemies.”

In fact, as has become popular during the pandemic, as many as 60% of retailers surveyed by Colliers use the ‘Buy Online, Pick Up In Store’ (BOPIS) configuration. According to American retailers, brick and mortar and e-commerce are no longer considered separate. A pampered consumer base expects superlative service and that means omnichannel retail will conflate all points of sale into a better customer experience. Fifty-seven percent of retailers in Colliers’ survey reported selling more products through e-commerce, however, only 7% earned more revenue from online sales than in-store. But Omnichannel retail will enable retailers to realize the benefits of each channel — for example, some retailers stated that BOPIS shoppers spent about 31% more than the original order — and both retailers and landlords alike are taking notice.

E-commerce sales are actually driving the need for more physical brick and mortar space so that retailers can carry extra inventory, as indicated by 55% of survey respondents, who use their stores to fulfil online orders. Active growth in the percentage of physical space used means some retailers are even leasing industrial warehouse space to service their digital clients.

READ: Omicron is Keeping Toronto’s Office Sector in a ‘Holding Pattern’

The return of office employees will be a boon for retailers, particularly the ones with downtown core locations, as greater foot traffic invariably boosts sales. Although the Omicron variant of COVID-19 has delayed these plans, 85% of companies in Canada intended to return to their offices by this quarter, the report says, adding that 74% of downtown retailers and 68% in non-core locations anticipate a positive impact on traffic.

The really good news for Canadian retail is that sales are forecasted to grow through a confluence of in-store and digital sales. Colliers says total retail sales will surpass $180 billion over the next four years, in large part because of economic growth and positive consumer confidence. The projection is why e-commerce, it is believed, will not eat brick and mortar’s market share, signifying the latter still holds a lot of value for retailers and landlords. By 2025, e-commerce will grow by 300 basis points to 10% of the retail sales market.

Fifty-four percent of retailers surveyed already have e-platform services, doubling from 27% pre-pandemic, with another 8% reporting that they have a platform in development. But perhaps a more interesting development is that retailers have adapted to conditions foisted by COVID-19, as more than half surveyed by Colliers have converted their physical units to offer additional services, namely fulfilling online orders through BOPIS or as a node for home and office delivery. Sixteen percent will lease industrial space to help fulfil these orders, the report also noted.

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