Internet effect on retail smaller than expected – CBRE
The continued sluggish lettings activity in the UK retail market is due to the economic downturn and not to the rise of Internet retailing, says CBRE in a recent Viewpoint article. The amount of sales diverted from shops by the rise of internet shopping has been smaller than commonly thought.
More than 50% of Internet sales captured to date have cannibalised traditional non-store channels such as mail order, home delivery and TV shopping. CBRE says that in three to four years’ time, sales capture from these channels will be “all but exhausted”. Bricks-and-mortar retailers have been struggling to capture viable multi-channel formats, and so the rate of online sales growth overall is slowing. The dwindling opportunities to divert further traditional non-store sales and electronically transferable trade online are resulting in click-and-collect becoming the key driver of online sales, rather than home delivery. Click-and-collect has a largely neutral effect on demand for retail space, so the impact of online sales growth is proving to be rather smaller than expected, says Mark Teale, CBRE’s head of retail research.
CBRE says online sales are set to reach just 14%-15% of total retail sales by 2020 – much less than the optimistic predictions of recent years. In order to grow now, internet sales need to divert store trade, but as the firm points out, multi-channel trading carries with it sizeable logistical and marketing costs that require long-term investment. Logistics costs will ultimately determine which channels will win out in future.
