Omni-channel retailing is transforming the consumer shopping experience while creating new considerations in the leasing, management and development of retail properties, according to a new research report, “Omni-channel Retailing and The Rise of The Digital Consumer,” from GWL Realty Advisors.
“We’re in a unique market where retailers in traditional segments like clothing, accessories and electronics, for most of the last several decades, were in a position that more store growth was the only way to increase market share,” said GWL Realty Advisors portfolio analysis and research services manager Anthio Yuen.
“The difference now is that, with different sales channels emerging like web and mobile, that store strategy is changing. Store growth and growth in general isn’t just focused on physical space, but on the integration of different sales channels.”
Omni-channel retailing focuses on online shopping activities as well as the connection to other consumer channels such as social media, mobile applications, product logistics, physical store visits and providing opportunities to engage with products and brands.
Canadian e-commerce behind other countries
E-commerce accounts for about five per cent of total retail sales in Canada and the country is behind the United States and several European countries in that regard, but its reach is growing and impacting all facets of the shopping experience.
Depending on what goods or services they’re offering and what their customer expectations are, different retailers may concentrate on particular areas in the omni-channel universe. Some may emphasize rapid delivery times, others may key in on having convenient pick-up points, while still others may focus on presenting a unique in-store experience.
Things are changing most rapidly in segments such as clothing, electronics, media and small accessories, where consumers expect integration between stores, websites, mobile devices, and product delivery and returns. But even within the household product segment, larger retailers like Wal-Mart are adapting by investing more in website, infrastructure and supply chain development.
“The rationalization of space varies between retailers,” said Yuen. “There are some groups that are having smaller store sizes, but others are expanding or experimenting with different store formats.
“There are quite a few retailers that are opening up flagship store locations that might not offer the full product line, but they offer very specific or highly desired product lines and they become the showcase for the retailer in terms of branding, customer service and the products that they’re offering.”
New considerations for retailers and landlords
While a good leasing program, competitive rental rates and sound financial management will all remain critical for Canadian retail real estate players going forward, awareness of demographics and innovation are expected to become more important in the future.
Some retailers and shopping centres are becoming more involved with their communities by adjusting their environments and layouts to cater more specifically to their shoppers or by hosting events. Examples include Lululemon having morning yoga sessions or Starbucks presenting local artists to play music.
The omni-channel effect will likely change the composition of shopping centres, according to the report, as it may make more sense for stores to become more clustered by product lines or experiential, functional and convenience offerings.
“As omni-channel becomes more integrated with our daily lives, people are becoming more efficient with their shopping activities, driving shopping centres to become more efficient in their tenant mix,” said Yuen.
“In the future, it will be important for some shopping centres to look at the omni-channel presence of the tenants that you’re looking to sign,” said GWL Realty Advisors portfolio analysis and research services director Wendy Waters.
“If you’re the type of shopping centre that’s going to compete with other shopping centres that are big in omni-channel brand interaction with customers, you may need to make sure that you also have those brands and those tenants that are interacting with their customers and giving them lots of reasons to come into the store as well as going online and keeping track of them on social media.”
Web integration, in terms of web search for product capabilities, is becoming more prevalent in both individual stores and shopping centres. Retailers and landlords may have to introduce or upgrade technology at their properties to adapt to this as more consumers start to expect it.
Positive outlook for Canadian retail
The report is generally positive about the future of Canadian retail real estate, noting that it remains a stable asset class for investors and has relatively low vacancy rates. While there’s evidence suggesting that some retailers are reducing their space requirements to be more efficient, population and spending growth — as well as new market entrants — are helping to maintain total retail square footage demand.
“The unique thing about the Canadian market, and why e-commerce and omni-channel are at a relatively young stage, is that we have a very controlled development market,” said Yuen.
“The amount of new development over the last 15 to 20 years hasn’t been to nearly the same scale as it has been in the U.S., where a lot of similar retail space has been built. They’ve built power centres beside power centres.”