Online Sales Impacting Retail Real Estate Market
Just as there were many factors leading to the recent economic recession in the United States, many factors are also leading to the slow economic recovery, none more apparent than the proliferation of online retail stores.
According to a Goldman Sachs research study in 2010, it is estimated that by the year 2019 retailers will see online sales surpass 50% of their dollar growth. As online sales continue to increase, the importance of online stores will only grow.
Previously, when one started their own retail business, one of the biggest decisions was where to open their store. Now, the decision is often how to best balance an online store vs a physical retail store. Offering lower overhead costs upfront, wider coverage, and greater convenience for customers, the idea of starting with an online store first and adding physical stores later is becoming more and more common. Online advertising increased 22% in 2011, a testament to the growing importance of online sales and the changing trends in consumers’ buying habits.
Despite growth in online sales, reasons still exist to not ignore the importance of a physical store. Maintaining a physical retail store can lead to both brand legitimacy and brand differentiation. The ability to touch and feel products in person is still important to consumers, and the ease of handling returns and refunds still favors offline stores. Physical stores give consumers the ability to speak face to face with a customer service representative. Offline stores also still have an advantage in allowing consumers to receive their products the same day as purchase.
Almost every new retail business today needs to have an online store to be competitive. The question is whether offline stores are becoming less important. This depends largely on two factors: financials and product type. As long as the store’s financials are strong, having an offline store is still a good idea. Similarly, stores which handle products that consumers prefer to touch and feel before buying will continue to see the importance of their physical stores. There’s no question, though, that increasing online sales is negatively impacting the retail market.
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