Contrary to popular perceptions, physical retail stores and elements of the property, building and construction industry which service them should hold up reasonably well over the internet age both in Australia and around the world as retailers embrace multi-channelling, a landmark study canvassing the opinions of 50 leading international retailers with a combined store network exceeding 32,000 stores indicates.
In its study, The Role of Real Estate in the Multi-Channel World, leading real estate services firm CBRE International says that despite concerns regarding future demand and provision of real estate for retail use, the immediate outlook for retail construction was not bad as store locations continued to play a significant role in multi-channel sales and distribution strategies.
CBRE says that in two years’ time, 72 per cent of retailers around the world say they will operate the same or greater number of stores in their domestic markets, while 60 per cent say they will need more shop space across their overall network.
“Our message to the retail and real-estate industry is don’t panic,” Peter Gold, head of cross border EMEA retail for CBRE. “Consumer-driven technology continues to advance and contrary to widely held assumptions multichannel retailing is actually complementing, not competing with, existing store networks. In reality, multichannel is encouraging shoppers to visit stores and is driving additional business to retailers – the overall retail pie is getting bigger and it is critical for retailers and landlords alike to embrace multichannel, understand that it does not have to be expensive, and secure a greater slice of the market.”
The report does not say that online commerce will not impact the retail environment, noting that retailers expect their proportion of online sales to double from five per cent to 10 per cent over the next two years. The report also states that online retailing is set to grow faster than store expansion over this period, with especially strong growth in emerging economies in Central and Eastern Europe, Asia Pacific and the Middle East.
It says, however, that the role of retail networks in a multi-channel environment will change rather than evaporate. As shoppers increasingly favour pick-up from stores as opposed to home office delivery, physical stores are set to play an increasingly prominent role in fulfilment of online orders.
Another facet that bodes well for retail construction is a desire on the part of retailers to upgrade their stores in terms of technology is that 80 per cent want kiosks in their stores within the next two years where shoppers can take advantage of multi-channel capability, creating additional demand for retail store fit-outs.
From an Australian standpoint, CBRE regional director of retail services, Pacific region, Joshua Loudoun says physical stores will remain important despite the increasing popularity of online commerce.
“The rapid rise in internet shopping in Australia has been driven in part by the fact that very few global brands have re-priced online goods for Australia, given the relatively small size of our market,” Loudoun says. “This, combined with the high dollar, has made it particularly appealing for Australian consumers to buy online. However, a number of global retailers are now limiting the ability to access international sites and are redirecting Australian buyers through local channels to ensure there is not such a wide price differential.”
Loudoun adds that shopping relies on a strong degree of trust between retailers and customers, pointing out that “there is no better way to build trust than by having a physical store presence.”