E-commerce vs physical retail, or the best of both worlds?

On a constant basis, I am asked about the growth of e-commerce and what the future holds for commercial property in an increasingly virtual world.

The answer is that I don’t know what the future looks like, but having explored the impact of e-commerce on the UK’s retail market and the increasing evidence of the benefits of seamless multichannel retail, I am optimistic that the physical space is still fundamental to retail.

The ‘places’ that provide us with our choice of retail stores 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 are adapting.

Why is the UK a good proxy for what lies ahead? The answer is that it is one of the most developed retail markets in the world. Here’s an example; John Lewis recorded a 7.2% sales jump in the five weeks to December 28, the key Christmas trading period, with LFLs up by 6.9%. Shop sales jumped 1.2% and online sales surged 22.6% year on year (click-and-collect orders soared 61.8%). Their online business accounted for a staggering 31.8% of the total John Lewis business over this period.

According to our recent review of UK retail Christmas trading results, retail showed signs of sustained recovery during December 2013, with over 90% of retailers posting positive like for like sales growth and c.40% posting growth in excess of 10%. Drilling down into the numbers, it is clear that the real winners were those retailers that provided a seamless multichannel retail offer, combining the best of both the physical and the virtual worlds.

E-commerce is here to stay and will gain traction globally. It will become embedded in most retailers’ strategies and will help complement retailing through physical store networks. Retail is being redefined and retail places are responding. Those that don’t will simply get left behind.

James Brown is JLL’s Head of European Retail Research. He advises international investors and occupiers on their retail real estate strategy across Europe.

Connect with me on LinkedIn

Follow JLL Europe Retail on Twitter