E-commerce? Retailers Just Fine, Thank You

May 1, 2000

The numbers were quite extraordinary. During the 1999 holiday season, 97 percent of 3,000 Internet users polled gave online shopping a thumbs-up. The survey, conducted by PC Data Online and Goldman, Sachs & Co., found that 73 percent said the experience “exceeded” or “significantly exceeded” expectations. Another survey, conducted by InsightExpress, revealed that 86 percent of 300 adults polled preferred online commerce to a trip to the mall.

Despite the explosion of online shopping, however, traditional stores are a dynamic property type that will continue to evolve, thrive, and remain attractive to investors. Consider the following:

  • According to the International Council of Shopping Centers, sales at the nation’s malls from Nov. 26 to Dec. 25, 1999, spiked by 7.7 percent compared with the same period in 1998.
  • The U.S. Department of Commerce reported that retail sales totaled $2.7 trillion in 1998, whereas estimates of e-commerce sales vary from $3 billion to $15 billion, because the industry has yet to determine the scope of this category.
  • Institutional investors remain bullish on retail and continue to pour money into stores. The second quarter 1999 issue of CCIM/Landauer Investment Trends Quarterly report on national sales activity stated that in 1998 and early 1999 there was “a rise in dollar volume of retail property transactions . . . and an upward move in the average price per transaction.”

Since shopping has evolved into a social function, retailers have responded accordingly. Expect more stores to feature kiosks with interactive screens that display everything from film or music video clips to directions to merchandise and store locations. Customers, in turn, enter valuable demographic data for the privilege. And shoppers should be prepared to enjoy more book signings, beauty contests, concerts, and other events at stores.

Even with a seemingly solid foundation for the immediate future, traditional national retailers like Wal-Mart have begun to market products and services online. Through “360-degree marketing,” customers can order products online and choose to pick them up at the store or have them delivered. This concept is especially appealing to retailers with established brand names, because the Web address gets promoted on shopping bags, receipts, print ads, and delivery trucks.

The viability of retailers, however, won’t depend solely on a dot-com affiliation. Some local and regional retailers with high overhead costs, small profit margins, increased competition, and the lack of a real niche have been forced to merge or shut down.

Savvy leasing agents have been able to reposition those properties into new retail concepts or alternatives such as ministorage, telephone call centers, and even condominiums marketed as part of a “shopping lifestyle” concept.

Clearly, e-commerce will continue to expand as more consumers purchase computers and embrace online shopping. But like the advent of television, which initially cut attendance at movie theaters, the coming-of-age of e-commerce will coexist with the traditional bricks-and-mortar shopping experience.

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