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CBRE’s Head of Retail Research discusses shopping centre and e-commerce trends The significance of omnichannel convergence, massive mobile data and vacant big boxes within retail

The Analyst

No single event attracts more retail real estate aficionados than the International Council of Shopping Centre’s RECon convention, which drew roughly 37,000 people to Las Vegas May 20-23 to discuss deals and the latest retail trends.

It stands to reason, then, that the primary topics of conversation at RECon are those of most importance to the shopping centre industry, the factors driving it forward. In my meetings with clients, analysts and media at RECon, three topics emerged most often. These are the industry’s focal points this year.

Omnichannel Convergence

Pure-play online retailers are experimenting in increasing numbers with opening physical stores to enhance their brands. Conversely, nearly all retailers born of bricks and mortar have expanded into e-commerce.

While retailers understand the importance of embracing an omnichannel approach, few are able to stay in the black while doing so. A 2017 survey of 350 major retailers by JDA and PricewaterhouseCoopers found that only 10 percent could fulfil omnichannel demand profitably.

The secret to a seamless and profitable omnichannel network is a Holy Grail of striking the right balance of in-store and online operations, knowing your existing and potential customers and pinpointing the best location for your stores and your distribution centres. And, as with any true conundrum, the answer is different for each company.

Among the many important steps of understanding omnichannel retailing is getting a firm grasp on e-commerce and its trajectory. For example, while e-commerce as a whole has grown at a heady 15 percent clip each year since 2010, it’s important to understand various components of that growth. Specifically, mobile commerce – browsing and purchasing goods on smart phones, tablets and other mobile devices – is expected to account for more than half of e-commerce by 2021, according to research firm eMarketer.

Another important guidepost in the road ahead for omnichannel retailers: The rate of e-commerce penetration of various retail categories. It’s no secret that e-commerce has made massive inroads into categories such as books, electronics, small appliances, office products and computers. Meanwhile, its impact is much less for retailers of food and beverage, home-improvement goods, over-the-counter drugs and furniture.

The catch, though, is that some of those minimally penetrated categories are expected to see the highest growth rates of e-commerce in the coming years. Among those forecast to see double-digit percentage gains in e-commerce sales by 2022 are the previously insulated categories of home improvement, furniture and sports equipment.

No doubt, the shopping centre owners gathered at RECon discussed the retail categories that offer them the best mix of resiliency and customer draw. That’s why many landlords continue to add restaurants, bars and entertainment uses to their centres.

Meanwhile, retailers must navigate the challenging logistics of e-commerce fulfilment. The rush is on to establish “last touch” distribution facilities as the final point of staging before goods are delivered to customers’ doorsteps. In most major cities, those facilities are within six to nine miles of the population midpoint. That means retailers and distributors must choose from pricey, infill facilities that often need extensive modernising.

Still more potentially unexpected costs lurk in online returns, which create the challenge of moving goods in the reverse direction through the e-commerce fulfilment network. This flow can be significant, given that e-commerce return rates range from 15 percent to 30 percent of sales, depending on the category. The best routes for most retailers to minimize those potential losses entail establishing separate distribution facilities to process returns or hiring third-party-logistics firms to handle the process for them.

Massive Mobile Data

Clearly, few tools are gaining as much popularity with retailers and retail-centre owners these days as is massive mobile data. That term refers to monitoring smart phones and other mobile devices to discern valuable insights such as the neighbourhoods from which a store’s shoppers originate, where they spend most of their time within a centre and how often they visit.

That tracking data then can be cross-referenced with census data and other sources to create an average-customer profile, including the demographics and shopping preferences of a given store or centre’s patrons.

The value of this type of data can’t be overstated. It allows retailers and landlords to get an accurate read on their trade area and, in turn, ensure that they’re pursuing the right retailers to serve their customer base’s tastes and needs. It helps retailers to expand wisely by selectively opening outposts in locations identified with extensive data analysis rather than simply flooding the market with stores.

Several companies, including CBRE, showcased tools and services at RECon that incorporate massive mobile data. Such data, and the wider field of location analytics, will only gain significance within retailing and retail real estate.

The Analyst

About Melina Cordero

Melina Cordero

Melina Cordero is Americas Head of Retail Research for CBRE, the world’s largest commercial real estate services company. She analyzes the influence of industry and consumer trends on retail real estate for clients and for CBRE’s more than 500 retail professionals in the Americas. Ms. Cordero, based in Washington, D.C., joined CBRE in 2016 after working for three years for U.K.-based data and consumer-analytics company Path Intelligence. Earlier in her career, she worked as a global industry analyst tracking retail and consumer-goods industries for Euromonitor International in London and for the U.K. Parliament in urban planning and business policy research. Ms. Cordero wrote her Master’s thesis on shopping center development and consumer behavior in Brazilian cities. Follow her on Twitter at @melinascordero.

Articles by Melina Cordero

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