We’ve all used the internet to research a product before purchasing it. With the ease of reading online reviews written by other users beforehand, as well as using smartphones while shopping, it is now clearly essential to research products online or on your mobile before making a purchase.
The growth of e-commerce and what effect it will have on the future of commercial property in an increasingly virtual world is a very hot topic at the moment.
According to this insightful presentation by NYU Professor Galloway, pureplay retailers are going away and etailers either need to open stores or they will go out of business. Furthermore, retailers need to be excellent at digital or they will go out of business as well. He even goes as far as to suggest Amazon won’t survive as a pureplay retailer!
Retailers who adopt a multi-channel retail strategy, integrating the internet, mobile and in-store experiences, will thrive in this new environment. Our team have explored the impact of e-commerce on the UK’s retail market and the recent evidence of the benefits of seamless multi-channel retail. We are therefore optimistic that the physical space is still fundamental to retail.
The ‘places’ that provide us with our choice of retail are being redefined in response to a changing retail world, and the better locations are strengthening. Whether through embracing technology, adapting tenant mix to include increased food and leisure, or stepping up efforts to serve and communicate with customers, retail places and retailers are adapting.
It is clear that the some of the Christmas winners were those retailers, like House of Fraser, Next and John Lewis, who have embraced technology and provide a seamless multi-channel retail offer, combining the best of both the physical and the virtual worlds.
Leading department store group, House of Fraser, who have invested heavily in their website, and also their flagship store on Oxford Street in the last 18 months, reported a record Christmas. The retailer’s total LFLs increased 8% in the six weeks to January 3. Additionally, online sales were up 31.2%, while physical store sales increased 4.2% on a LFL basis.
Next has also emerged as one of the early Christmas winners, after reporting total sales were up 2.9% in the two months to Christmas Eve. This is a solid result, particularly when viewed against tough comparatives from last year, when total sales increased by 11.9%. While sales at physical stores were only just in positive territory, Directory sales (which includes their online business; Next.com) were up by an impressive 7.5%.
Furthermore John Lewis, a firm family favourite, has also reported strong Christmas sales. In the five weeks to December 27, total sales were up 5.8% to £777m. LFLs increased 4.8%, driven by online growth and click-and-collect. The retailer’s multi-channel advantage helped stimulate last minute purchases towards the end of the Christmas trading period when many customers, including myself, took advantage of click-and-collect available at John Lewis and also Waitrose combined large store portfolio.
It seems that House of Fraser, Next and John Lewis are benefiting increasingly from their multi-channel capabilities. We expect this not to just be a Christmas trend, whereby the high street fares reasonably well, but any sales growth tends to be driven by multi-channel in general, and by click-collect in particular!
This blog was originally posted on the JLL European Retail blog