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What Will The Mix Of E-Commerce vs. Brick-And-Mortar Look Like In 10 Or 20 Years?

National Retail
Neighborhood Goods CEO Matt Alexander, JLL Americas Retail President and CEO Greg Maloney and Thyng CEO Ed LaHood discuss the innovative products coming to retail at ICSC RECon 2019 in Las Vegas.
Neighborhood Goods CEO Matt Alexander, JLL Americas Retail President and CEO Greg Maloney and Thyng CEO Ed LaHood discuss the innovative products coming to retail at ICSC RECon 2019 in Las Vegas.

No one has a crystal ball of course, but based on recent trends we can make some solid assertions. The first is, brick-and-mortar isn’t going away any time soon. While e-commerce sales have continued to increase steadily, the rate of growth, or how much market share it is gaining, has started to decline. We are headed toward an inflection point where online will stop eating into physical sales’ market share. It sits at around 10% of total sales now — where it ends up is not certain, but it won’t be anywhere near some of the more ostentatious projections. 

Greg Maloney | JLL Retail CEO | Atlanta

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It’s not hard to conclude that e-commerce will continue to skyrocket. Convenience and infinite availability continue to attract consumers. Products are also delivered to homes at a faster speed each consumer cycle. Trends in e-commerce are unlikely to see a dramatic reversal. The brick-and-mortar aspect is a bit different. I think you will see less brick-and-mortar retail in the traditional sense. Consumers are looking for integrated experiences in their out-of-home consumption, such as food and beverage establishments that offer themes like ax throwing, cart racing and holographic gaming. Dining experiences imported from other countries or cultures have also increased in popularity.

Apparel retailers are trending toward experiential retail as well with exquisitely designed spaces worthy of social media posts. Clothing stores will continue to decrease inventory stock at the retail outlet. Instead, AR and holographic tech will allow customers to try on different looks or articles of clothing customized to their bodies or specific tastes, all while making the experience more enticing. Customers will simply place orders in-store for home delivery, or capture the information to use online later. These things provide consumers more of an entertainment activity value — unlike purely transactional retail.

Steven Janeway | Hoefer Wysocki Principal, National Commercial Practice Leader | Dallas

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It’s very hard to tell because the world is rapidly changing. Part of me feels that the world may come full circle in that the customer may want to return to physically shopping. I can see something like the consumer staying online for everyday purchases but getting off the couch and going to a store for specialty items. 

Tom Papadopoulos | Papadopoulos Properties principal broker | Washington, D.C.

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Much, much more complementary. The line between the two will be invisible. Access to retail will be in person, through virtual reality, online as well as accessible through automated cars, drones, etc. The best way for e-commerce to get dedicated eyeballs will be through brick-and-mortar locations, which will be areas of display, distribution and experiences.

Sandy Sigal | NewMark Merrill Cos. President and CEO | Woodland Hills, California

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Either small brick-and-mortar stores or real flagship “experience” stores will be more the norm, like a monster Restoration Hardware or a Nike flagship. Others will be smaller brand extension boutiques offering some greatest hits, being a billboard for the brand and bridging the gap between online and personal service. I also believe we will have fewer regional shopping centers. Open-air town centers or urban street retail are likely to be more dominant than in the past and include much more food and “experience” retail.

Bill Miller | Miller Walker Retail Real Estate Principal | Washington, D.C.

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What Will The Mix Of E-Commerce vs. Brick-And-Mortar Look Like In 10 Or 20 Years?
LBG Real Estate Cos. Managing Partner Leslie Lundin

The European model uses showrooming and warehousing whereby the consumer has multiple methods of procurement depending upon their needs. This creates efficiencies and provides the needed services. Delivering every item to one’s doorstep same day is not a sustainable model so there needs to be a middle ground whereby goods can be sourced locally and moved around efficiently to increase the service element which consumers increasingly desire while also being economically feasible. What does that mean? There are new shopping services that locate the desired product based on price. Why not locate based on availability nearby or a service that provides a comparable product that is in close proximity? There are many ways to increase the efficiency of the system that we are just starting to see. I see those increasing in the future as the environmental impact of packaging and delivery is just now starting to be felt. 

Leslie Lundon | LBG Real Estate Cos. Managing Partner | San Francisco

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Concepts like Warby Parker, Casper and Amazon Go show that e-commerce and retail real estate are really two sides of the same coin. Consumers like the convenience of online shopping, and there is an equal desire to connect with brands in the real world. Add in potentially game-changing technologies like Amazon Go’s cashierless checkout, and chances are that the landscape will look quite different in 10 years. Retailers are integrating the online and in-store aspects of the business to deliver a unified shopping experience, regardless of how you buy — as long as it’s fun, convenient and provides value. They’re calling it “clicks to bricks,” and e-tailers are set to open about 850 stores in the U.S. through 2023. As that trend continues, more internet-based retailers will see the benefit of opening physical stores, and established retailers will make their online components just as important to operations as traditional stores.

Michael Leon | Rappaport leasing representative | Washington, D.C.

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I’d be surprised if it wasn’t close to 50-50 [ratio of e-commerce vs. in-store sales], vs. about 15-85 today (once you correct for retail items that can’t be bought online, like gas).

Peter Braus | Lee & Associates NYC, Managing Principal | New York City

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Here I follow the old 80-20 rule. Plan for 80% of purchases to be made automatically without the consumer cognizant or caring of “the channel.” The 20% of purchases that are left will be a combination of many different touchpoints, without the consumer conscious that they are even different. Gen Z, today’s 12- to 22-years-olds, are a great indicator of this. While many retail and consumer brands are still talking about omnichannel, as if they are independent from one another, Gen Z lives uniworld, where the concept or distinction is nonexistent. 

Marcie Merriman | Ernst & Young Americas Cultural Insights & Consumer Strategy Leader | Columbus, Ohio

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I expect the “hockey stick” growth of e-commerce to flatten sooner than most, well below the significantly higher penetration we see in the UK (about 20%), which is more than double the U.S. (about 9%, or 4.5% if you include only the “pure” online retailers). The reason is that the U.S. is much less densely populated than the UK (and most of the EU for that matter) and I see more rapid adaptation from traditional brick-and-mortar retailers both to be more accommodating to returns and omnichannel and more “experience” mixed with goods particularly at the high and low ends of the markets. The “soft middle” of fast-fashion will adapt (through stores like Primark) whose price point allows them to sell “store only” (i.e. no internet).

Spencer Levy | CBRE Chairman of Americas Research | Baltimore

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As retail evolves, the division between online and physical retail store purchases will be fun to watch. Right now only 10% of retail purchases are online vs. physical stores. The proportion of online sales will increase in the next 10 to 20 years. For example, the NRF predicts that half of consumers will shop online at some point this holiday season. Different and creative ways of mixing online and brick-and-mortar sales will emerge. Retail is evolving and it is exciting.

Barbara Stewart | University of Houston Professor & Coordinator, Retail and Consumer Science, Global Retailing | Houston

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Urban Edge Chief Operating Officer Chris Weilminster
Urban Edge Chief Operating Officer Chris Weilminster, then with Federal Realty, at Bisnow's 2018 Future of Bethesda event

The mix of brick-and-mortar and e-commerce is becoming more harmonized every day. It’s not about one or the other, we understand the consumer shops wherever they are. In 10 years, nobody will ask “which channel” we shop. Customer experience (wrapped into service) will reign and delivery options will be tailored to a specific customer’s preference — an hour, 24-hour (Nordstrom in NYC is already doing this) or same-day. Time is the only universal commodity and it is priceless. If you are going to pay for it, make sure it best serves the needs of your customer!

Chris Weilminster | Urban Edge Properties Chief Operating Officer | New York City

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While the future of shopping seems like it will be online in 10 to 20 years, to me that seems short-sighted. Shopping has always been a social activity, and even in the Victorian era stores combined shopping with restaurants and social events. I would predict an increase in experiences tied to brands in a space that brings people together. That space probably won't be a mall as we know it and will be more local, connected to food and including local artisans and handcrafted arts.

Elizabeth von Goeler | Sasaki Principal | Boston

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A continuation of convergence. Most [direct-to-consumer retailers] are seeking physical space within the U.S. for the following reasons: Mobile data is isolating and must be layered with information collected from the shopper, i.e., your product can be improved or we like this particular color, etc.; returns are 50% less when purchased in stores vs. online, reducing the shipping costs and DTC margins; and DTCs see a lift in online sales in locations they open physical stores — the store openings tend to be in markets where they have the highest online sales. Shoppers are interested in learning more about products and thus we will see educational programming in stores, increased engagement with the shopper journey through classes, social experiences and in-store testing. Online sales are increasing, and outside of Amazon, it’s occurring in the grocery space. Midsize retailers are forecasted to have significant growth that are vertically integrated, like Allbirds.

Anjee Solanki | Colliers International U.S. National Director of Retail Services | San Francisco