The argument of whether or not online retailers are affecting the retail commercial real estate industry negatively or positively has been a popular topic over the recent years. It is very likely that you’ve read an article or blog post somewhere discussing that brick-and-mortar is dying and that e-commerce is the future of retail. Is this true? Stephen Pohl of NAI Black recently attended ICSC RECon in Las Vegas among a few of our other brokers and listened to Michael Beckerman, Founder and CEO of the News Funnel, and Brendan Wallace, Co-Founder and Managing Partner of Fifth Wall Ventures speak about digitally native brands expanding to brick-and-mortar. Since 2012, the number of new stores being opened by digitally native brands has grown in excess of 100% annually. It seems as though brands that are trying to be strictly digital, still need a brick-and-mortar presence to be truly successful.
Although it is true that e-commerce is rapidly growing right now, far more than brick-and-mortar, 90% of retail dollars are still being spent at brick-and-mortar stores. According to a U.S. Department of Commerce census, the total amount of retail dollars spent in the 1st quarter of 2018 compared to the 1st quarter of 2017 only increased by 4.5%. A recent census study also shows that retail sales for the 1st quarter of this year were at $1,306,692M and of that only $123,672M came from e-commerce sales. That is roughly 10% of American retail dollars being spent on e-commerce sales. The amount of money being spent at brick-and-mortar is still substantially more than e-commerce.
On top of the fact that 90% of the American dollars spent on retail sales are still coming from brick-and-mortar sales, there are many other benefits to the physical shopping experience. It is still important to consumers that they are able to try on and experience products in person before purchasing. They want to know exactly how it looks, feels and functions. Being able to do this in person strengthens the trust between the brand and customer.
Having a physical location can serve as great marketing. Location is everything. Good sites will help your brand. Google also prioritizes brands that have a physical location over brands that are purely digital. Having a physical address will increase your online visibility as well.
Brick-and-mortar retail is not dead. Modernizing brick-and-mortar stores is the key to keeping them alive. The omni-channel approach to having a physical shopping experience that complements a digital one is a great way to bring success to a brand. There are still so many reasons to have a brick-and-mortar store. Purely digital brands are only beginning to realize that now.