How E-Commerce Impacts Retail Real Estate

E-commerce is a major challenge for twenty-first century retailers. Along with the economic recession, online shopping deals a two-fold blow to brick-and-mortar stores. As Internet sales grow and mature, e-commerce will impact real estate in a big way. This is good news for the residential and industrial sectors but bad news for retail real estate.

E-Commerce and Traditional Stores

E-commerce takes a huge bite out of brick-and-mortar sales, and it won’t stop any time soon. In fact, online shopping will only increase as people use their mobile devices to do research and make purchases. Smartphones, mobile apps and tablet computers make it easier than ever to buy things online.
The spikes in gas prices also have an impact on traditional stores. These days, people would rather have goods delivered to their home than use gasoline to drive to a store. Many websites, such as Amazon and Google, offer same-day delivery – and more shoppers are taking advantage of this e-commerce benefit.
Millennials are used to doing business online. Their shopping patterns differ from those of their parents and grandparents. As their way of life takes over, it will likely phase out brick-and-mortar sales. Traditional stores react to this loss in different ways.
Some retailers blame uneven sales tax distribution for their loss of sales. Others adapt to the changes and use e-commerce to augment sales. Smart retailers combine their brick-and-mortar business with a strong online presence through search engine optimization (SEO), social media and other marketing strategies.

E-Commerce and Retail Real Estate

From a real estate perspective, business owners must consider how their space is used. While e-commerce hurts retail real estate, it’s good for industrial real estate. It is less expensive and more efficient, to spend retail money on a distribution center with an Internet storefront than on retail space.
Residential real estate is a different matter. It certainly benefits from e-commerce, especially when it attracts wealthy residents who are searching for high quality properties. The Internet allows house hunters to comparison shop through virtual tours, and real estate agencies are making sales. Where e-commerce is concerned, however, the industrial sector comes out ahead.

Changing Footprints in Real Estate

Stores of the future will have smaller footprints that are different from those of traditional stores. Many retailers have already configured their stores with less space for inventory. Banks are one example. Instead of big buildings, many banks are opening micro-branches where tellers help customers using tablet computers.
Increased exposure is one benefit of micro-banks and stores. Cheaper, more efficient operations are another advantage. Many online issues are changing the look of stores in the twenty-first century, and brick-and-mortar stores must adapt or lose out.
Retail real estate will suffer from the changes, but residential real estate will benefit. However, industrial real estate will probably come out the winner. Online auctions are a common aspect of commercial real estate today, and retailers can find all types of products to create a strong online presence.

Advertisements

Author: Kar

Dr. Kar works in the interface of digital transformation and data science. Professionally a professor in one of the top B-Schools of Asia and an alumni of XLRI, he has extensive experience in teaching, training, consultancy and research in reputed institutes. He is a regular contributor of Business Fundas and a frequent author in research platforms. He is widely cited as a researcher. Note: The articles authored in this blog are his personal views and does not reflect that of his affiliations.