For consumers, there is no ambivalence. In the merry mix up of their everyday online, offline, mobile, and social life, they will shop wherever it is more convenient, more cost-effective, and best suited to their lifestyle. But for retailers, who need a more precise reading of consumer sentiment, it’s a little bit opaque.
Where huge investment money is at stake, they need to preen more closely in the looking glass. Is multichannel retail here to stay, or is it a mere medium-term hype? It is easy to be taken for a ride by the frenzy of fads, but businesses need a grounded approach for the long haul.
A study commissioned by real estate services firm CBRE Group showed that retailers’ sentiment on the issue is that multichannel retailing will complement, not compete with bricks and mortar retailing.
One of the key findings of the study is that majority (70 percent) of retailers today see themselves primarily as bricks and mortar stores. On average, they said their online sales today represent only 5 percent of their total.
However, it will be a different landscape altogether in the next two years as most (63 percent) international retailers said they have plans to convert their businesses into fully integrated multichannel businesses. Majority has plans to offer mobile apps or smart phone enabled websites (77 percent) as well as kiosks in their stores (80 percent) in the same period.
Allowing consumers to transact with stores and retail shops via connected channels such as in-store, online over a computer, and via a mobile site or app, are clearly changing the way people shop, and retailers are merely following suit.
But it has also raised concerns in the industry over the future demand of real estate for retail use. It seems that these concerns are unfounded as the study established the primacy of the physical store over other channels, at least for now.
While investment in multichannel is important, retailers said investment in new and existing stores remains a top priority. This may appear contradictory to current direction toward multichannel retailing, but retailers said they actually need more shop space across their network as a result of their growing multichannel strategy.
Within the next two years, 72 percent of retailers said they will operate the same or a greater number of stores in their domestic markets as the physical store is expected to play a significant role in the delivery network, with shoppers favoring pick-up from store and home or office delivery equally.
Retailers also said they will require more regional distribution centres rather than local or on-site storage.
Peter Gold, Head of Cross Border Retail EMEA, CBRE, said that multichannel is actually encouraging shoppers to visit stores and is driving additional business to retailers.
Thus, the study established retailers’ investment priority are as follows: opening new stores (37 percent), maintaining existing stores (27 percent), opening stores in new countries (24 percent), and multichannel (12 percent).
“The future is a function of the past. While some sectors, such as books or CDs, have suffered, shopping will continue to be a social experience – store portfolios are not about to shrink. The fundamentals of good retail management remain, but ultimately it is the retailers with strong brands and who understand their engagement with customers that will succeed," Gold concluded.
The study entitled "The Role of Real Estate in the Multichannel World" included opinions of 50 leading international retailers with combined 32,000 stores globally.
Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.