Changing Real Estate Trends: Online Retailers Go Brick and Mortar
E-commerce has been on the rise over the past 3 decades, transforming retail and global supply chain. With Amazon leading the way, e-commerce has sustained over 20 percent growth the past 5 years. At the same time, the recent failures of household brick and mortar, namely Sears, Toys R Us, and David’s Bridal, has led to the perception that retail as we know it is dead, and that the future lies in e-commerce sales.
So why are innovative brands that have captured most of their sales online, like Allbirds, Bonobos, Marine Layer, and Warby Parker, looking to expand their physical footprint? The reality is that while there is a perception of decline in retail stores, nearly 90 percent of sales are represented by brick and mortar locations. The change in the retail landscape has not been defined by the irrelevance of physical locations, but rather, by the transition from mass retailers to smaller open front stores in urban markets. Digitally native companies, called “click to bricks” are leading the way in this transition.
According to a report by JLL, “click to bricks” are expected to open 850 physical locations in the next 5 years. These companies are incorporating physical stores as part of their retail strategy, expanding their brand and adding more touchpoints to the consumer. Their initial target markets tend to be in affluent neighborhoods of New York, Los Angeles, San Francisco, and Chicago.
“Click to bricks” are highly advantaged as they search for physical retail space — they have proof of concept and extensive data on their customer base that helps them narrow locations. They are also finding that rent is relatively more affordable, as landlords hoping to fill vacant spaces are willing to be more flexible in negotiations. The challenge these companies tend to face, however, is navigating the real estate process. With limited experience in real estate deal processes, compared to traditional brick and mortar, physical expansion can be time consuming and inefficient.
The multi-step and non-linear real estate process of finding an optimal location, negotiating a lease, and communicating with stakeholders requires good organization and easy access to information. Often, however, as information sharing and communications tend to be conducted over spreadsheets and emails, there are few standard processes and decision making is slowed.
To meet store growth plans efficiently, tech savvy companies are looking for a platform to help them centralize their workflow and manage communications. Occupier’s deal and portfolio management software supports “click to bricks” in making better real estate decisions. Our software serves as a collaboration space for companies’ real estate teams, aggregates existing portfolio details, and ensures seamless deal process communication with all stakeholders. By providing a centralized space for all real estate matters, growing retailers are able to find, open, and manage stores that support their retail strategy.