As the option of ordering everything from groceries to clothing to furniture online continues to grow, so does the landscape for retail stores and the buildings that house them. Many retailers are now fulfilling online orders in-store, but it's a process not without its challenges.
Why Fulfill Orders In-Store?
It was once believed that online ordering, with orders fulfilled via distribution centers like Amazon does, would ultimately lead to fewer physical brick-and-mortar stores. However, according to an article published by Retail TouchPoints, this isn't necessarily true. Consumers don't want to completely replace retail stores; they want the option of either shopping in the physical store, shopping online and having their order shipped, or shopping online and picking their purchases up in-store. An additional channel of retail that involves online ordering and delivery from the nearby store is also growing in popularity.
In fact, according to a 2014 Forrester study, cited by Retail TouchPoints, at least 60 percent of survey respondents stated that they expected omnichannel services from retailers. And what's more: they want the processes of purchasing and returning items, regardless of the channel used, to be seamless.
Some additional statistics on the matter:
- Forrester Research anticipated that, by 2019, online sales would increase to $480 billion.
- 20 percent of grocer and food revenues would be derived from online channels.
- 15-20 percent of in-store pickup customers make an additional purchase while there.
What Challenges Do In-Store Channels Face?
There is an old adage: "It takes money to make money." In order to gain a piece of the revenue pie that online channels offer to stores, a significant investment is required. Retail TouchPoints noted that many stores don't have the space to provide both a physical store in which customers can purchase items as well as an area in which to keep products for online order fulfillment.
Further complications include the need for distributed order management software that keeps the management of online order fulfillment, online ordering, and shipping or in-store pickup in line. This technology needs to be sufficient to keep up in terms with the growth and scale of the company itself. Retail TouchPoints notes that companies who fail to fully implement software sturdy enough to handle their business, or who attempt to forge ahead without implementing a software approach at all do so at their own peril.
Additionally, stores adopting the in-store pickup model must have sufficient merchandise to cover both in-store purchases as well as pickups. Borrowing merchandise from one channel to fulfill needs in another channel often leads to inefficiencies.
How Does Omnichannel Retail Impact Real Estate?
As previously mentioned, joining the omnichannel retail revolution requires additional space. According to a Cushman & Wakefield post, eCommerce has changed the way companies view real estate. For example, retail industry giant Amazon built nearly 100 million square feet of distribution centers across the country in order to ensure that nearly every one of its U.S. customers is within range of next-day delivery. Companies are moving out of smaller sized locations within malls or shopping centers and looking for physical buildings that are large enough to not only house a store, but also a distribution point.
For every American, there is currently 22.9 square feet of gross leasable space in U.S. shopping centers, Cushman & Wakefield notes. However, this space is no longer being occupied by department stores who also seek to be distribution centers for online ordering. Instead, it's being occupied by restaurants, fitness concepts, and other offerings that fall in line with the statistic that increasing numbers of people are looking to spend their time and money on experiences, such as eating or working out, rather than spending on the purchase of a physical item.
Commerce channels are continuing to evolve at a rapid pace, in line with customer expectations and the capabilities of the Internet. New concepts are pushing retailers out of traditional models and into the experiential. As this happens, expect software makers to respond and the commercial real estate industry to continue to shift.
Would you like to explore your options for online order fulfillment? If so, contact us.