Does E-commerce Leave Space For Retail Expansion?

Posted by Retail Attractions Blog on April 21, 2016 in Blog | No Comments

It was only a few years ago that people like software guru and investor Marc Andreessen were announcing the impending end of retail brick-and-mortar stores. Now in 2016, we’re starting to see these predictions were mistaken. Retail stores are not dying. Yet even though retail stores are still around, there’s a concern that the rising popularity of e-commerce will negatively affect retail expansion in physical locations. As a community looking to attract new retail development, or an investor looking for a location to build next, how worried should you be about e-commerce?

Percent of Sales Online

While e-commerce will affect physical retail stores, it is not going to do away with them. The percentage of retail sales that happens online is climbing, but not as quickly as you might think. In 2006, online stores accounted for about 3% of sales. In 2015, the adjusted figure was 7.5% according to recent figures released by the U.S. Census Bureau. That still means well over 90% of sales are taking place in physical stores.

Really, webstores are replacing paper catalogs more than they are physical stores. People like the convenience of online shopping, but it can’t replace the experience of shopping in a physical store where they can try on clothing and see the quality of items in-person. Physical stores also offer the instant gratification of taking home your purchase immediately and you don’t have to pay for shipping.

Retail Expansion Continues

Further proof that retail is not dying can be found in the expansion plans of major retailers. According to a March report from CBRE, only 1% of surveyed retailers said they did not plan to open any new stores in 2016. More than half plan to open 11 or more new stores this year.

The expansion efforts are pretty evenly balanced between urban shops and shopping malls. 76% of executives described urban locations as key to their expansion plans, and 72% indicated they plan to expand into shopping malls. Both types of retail locations are still seen as valid and lucrative regardless of e-commerce’s popularity.

A Few Concerns

The CBRE report reveals that some of retail investors’ key concerns regarding retail expansion don’t relate to e-commerce at all. Rising real estate costs around the world are a major concern for 56% of survey responders, 42% express concern about the economy, and 37% are worried about the quality of retail spaces available. These responses call attention to the vital role communities must play in attracting new retail. There are investors looking for a location to build, but they need a situation that’s both economically feasible and offers quality retail space.

Whether you’re a community wanting to attract new retail development or a retail investor searching for the best location for your new project, Retail Attractions is here to help. We understand the needs of both investors and communities and are dedicated to helping you make the most of your partnership. Contact us today for more details.