Browse Tag: e-commerce

Commercial Real Estate News Roundup for August 11, 2014

Pretending the property business is easy, St. Louis and its hot industrial market, retail lagging the recovery (but not in Miami)  and Macy’s goes shopping for commercial real estate talent – it’s all here in the Commercial Real Estate News Roundup for August 11, 2014.

General

Office

Industrial

Retail

Multifamily

Hotel

Land

 

Rattling Retail: Mobile E-Commerce Posts Eye-Popping Recent Gains

E-Commerce forced upon you

The brick-and-mortar retail universe of ten years ago is gone and won’t be coming back. The intercession of the internet has rewritten the retail equation and disrupted a great many decades-old practices in fulfilling customer need under a roof.  While it may not be news that parking, malls and traditional retail are finding more selective appeal, what is news is that the rate of change is increasing and mobile-enabled shoppers are accelerating the trend.

How fast?  The Custora E-Commerce Pulse Report published this month puts some genuinely shocking numbers together.  While retail is only a part of e-commerce as a whole, the mobile e-commerce growth in the past four years has made the previous growth patterns in e-tailing look tame by comparison. As RetailCustomerExperience.com writes:

According to the new Custora E-Commerce Pulse Mobile Report, in the past four years the percentage of traffic to e-commerce sites from mobile devices (phones and tablets) jumped from 3 percent to nearly 37 percent, while US mobile e-commerce sales grew from $2 billion in 2010 to $43 billion in 2013.

The Custora E-Commerce Pulse Mobile Report analyzed data from more than 100 retailers, 70 million consumers and $10B in transaction revenue to gain a deeper level of understanding as to which mobile e-commerce trends marketers should pay the closest attention to.

Highlights of the report include:

  • US mobile e-commerce is a $40 billion market, poised to hit $50 billion in 2014. In the past four years, the mobile e-commerce market grew nineteenfold: From $2.2 billion in 2010 to $42.8 billion in 2013. This represents 1875 percent growth over four years, and 111 percent four-year CAGR. 2014 is off to a strong start with $12.2 billion in mobile e-commerce sales in Q1 alone; it’s likely that mobile e-commerce will hit $50 billion in 2014.
  • Email marketing drives mobile purchases; social media not so much. Email marketing drove 27 percent of sales on mobile phones, compared to only 21 percent on desktop, and 23 percent on tablet. This is a surprising data point considering the challenges of displaying email correctly on mobile devices, and deep-linking into mobile apps. Social media accounted for only 0.6 percent of sales on phones and 0.2 percent on tablets.
  • Cross-device shoppers are a small but highly valuable customer segment. As of Q1 2014, just 12 percent of online shoppers make purchases on more than one device type, however this represents significant growth from only 4 percent in 2012. This customer segment is also 19 percent more valuable, in terms of customer lifetime value, than the average single-device shopper.

When markets change, we get in front of those changes or we risk disaster. The rise in e-commerce always suggests that data center and logistics property plays become more attractive.  But when a rise looks this steep – a twelvefold increase in mere years – I think we can replace “suggests” with “screams”.

(Photo credit: Rakeman)

Beneficiaries Of Showrooming: Showrooming Panic Is Overblown

Image representing BizRate as depicted in Crun...

 

As a business trend and a disruptive force in retailing, e-commerce seems to move in only one direction: toward displacing brick and mortar retail business.  The line on e-commerce is that it upends all our industry’s careful research tying profitability to location, and that it promotes “showrooming”, where consumers, armed with smartphones and cutthroat price standards, use retail floor space only to browse products, placing the actual orders only when the lowest price has been found online  – even a couple of bucks and any competitor will do.

We’ve reported lots of research about showrooming here, none of it especially good news for people who are invested in retail using 1990s-era assumptions about commercial real estate.  There’s not been much pushback from the e-tailing community about the fundamental assumptions concerning showrooming.  Until now.

In his piece for RetailCustomerExperience.com, Doug Stephens mentions that Bizrate,  a major name in e-tailing business, has conducted a survey of 9,000 online shoppers and found that fears about showrooming are overblown.

A recent and relatively robust survey from Bizrate of 9,000 shoppers who had just consummated an online purchase, concluded that even among the relatively small percentage of shoppers who actually showroom (almost 80 percent do not), the majority end up buying from that same retailer’s online store — not from a competitor, as we are often led to believe.

Now, does this mean that consumers aren’t making better use of the data at their disposal via mobile devices? Certainly not. Plenty of studies have confirmed the growing influence of mobile on pre-purchase and in-purchase behavior. And that’s only likely to continue. What it does suggest however, is that just like restless leg syndrome isn’t the likely cause of most lost sleep, showrooming isn’t the cause of most lost sales — not yet anyway.

So what’s the real problem?

From my point of view, it’s that we live in a world of one-click convenience and no one really needs what you sell anymore. They do however, need why and how you sell it. But if your store isn’t substantially differentiated or remarkable enough to hold a distinct and powerful position in the consumer’s mind and win their love and loyalty, you’re going to lose sales to online players every day. Not because consumers are sneaky, not because showrooming is rampant and not because technology is evil. But because your business and the shopper experience you’ve offered simply aren’t compelling enough to command the sale.

So don’t be taken in to believing that you’re being afflicted by some new, obscure condition. And don’t look for a pill to miraculously cure you. There isn’t one I’m afraid. Instead, go back to the drawing board and ask,”What does my business offer the world that it can’t get elsewhere?”

If you can’t come up with an exceptionally good answer, showrooming isn’t your real problem at all.

Frankly, I have a hard time taking at face value the e-commerce industry’s findings that it’s just off in the corner doing it’s own thing and not poaching business from retailers.  The problem is complex and convenience absolutely affects choice in ever-expanding terms.

But the bolded part above – about consumer value – seems to me to be an eternal law of all commerce, whether e- or…not-e.

 

 

Multichannel Retail Is Remaking Distribution Networks

Some big-box retail stores are over-illuminated.

Last month’s holiday season brought the seasonal retail push.  Coast to coast, goods moved at peak volumes, as they do more or less every year. But the radical change brought to retail by online shopping technology has, more than ever, redrawn the landscape in all areas of retail, from customer-facing to logistics and everywhere in between.

A recent Jones Lang LaSalle report put the number of retailers selling online at 92 percent, with 68 percent operating brick-and-mortar retail stores.   The past five years have seen increases in online sales for 80 percent of retailers, and some of those are pegged at 25 percent increases.

The pre-internet retail distribution network is undergoing a significant reorganization as e-commerce and its younger sibling m-commerce (mobile) are commanding ever greater shares of the pie.  The bedrock retail conception of store location itself is breaking down.   Shopping is increasingly located in every customer’s pocket, hours of business now 24/7.  The retail business depends less and less upon square footage as time goes on.

Combating “Showrooming”

The translation in square footage almost certainly means two things: first, for some, it will mean smaller physical stores. Retailers will want to pay less for space to avoid supporting the consumer behavior of “showrooming” where the shopper visits the expensively kept, heated, lit and staffed store merely to try out products, then order the product from the lowest-priced online retailer.

The major operations tactic used by retailers to combat showrooming is to have customers order online to then come to the store for pickup. According to Forbes, 7 out of the top ten retailers provide in-store pickup for e-commerce orders.  Completing purchases in the store means ending the customer’s impulse to research prices; retailers successful at this get that way by maintaining consistent pricing in e-commerce and mobile channels.

More Logistics Centers, And A Drive To Separate Real Estate Costs 

The retail ecosystem, while likely to lose customer-facing square footage in the coming years, still must handle product inventory for fulfillment.  This has set the stage for the sharply rising market in third party logistics (3PL) facilities.

The 3PL proposition as a pure real estate deal is not easy to find.  Commercial practitioners are often called upon to have logistics experience, because real estate costs are often bundled with logistics agreements in comprehensive service agreements for major clients using 200,000 sq. ft. and higher 3PL facilities.

But while lease negotiations for 3PL providers are often combined or “bundled” with logistics and management agreements, the prevailing retail e-commerce trend is raising demand for service from such facilities.  Development of new facilities takes time, but operators and clients don’t want to wait. Operators are looking for ways to unbundle such deals in order to gain the flexibility to service a range of clients under one 3PL roof.

Commercial practitioners working the retail sector would do well to notice that any general decline in customer-facing square footage strongly suggests a matching rise in 3PL demand.