Forget bricks vs. clicks, it’s all about distribution

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Forget bricks vs. clicks, it’s all about distribution

By Al Urbanski - 08/23/2017

Everything you know about the battle between online and physical retail is probably wrong, according to a report issued this week by CBRE.

As business analysts and retail pundits focus on store closings, they miss the fact that 58% of retail warehouse space was leased by brick-and-mortar retailers in 2015 and 2016. Only a third of such space was leased by pure-play Internet sellers.

“As the brick-and-mortar brands continue to do more online business, they can’t rely on the single distribution center anymore. They’re realizing that they need more, smaller warehouses that are closer to their consumers,” said Melina Cordero, CBRE’s head of retail research for the Americas.

In the report, “Is the e-pocalypse here?” CBRE points out that 90% of retail sales still take place in stores and that traditional brick-and-mortar retailers account for more than half of e-commerce receipts. When it comes to the so-called GAFO categories (general merchandise, apparel, furniture, and other), three-quarters of purchases took place in stores during first quarter 2017, according to U.S. Census Bureau statistics.

At the same time, the report points out, several brick-and-mortar mainstays are implementing successful omnichannel strategies. In Q1, Williams Sonoma did 51.8% of its business online, Restoration Hardware 44.8%, and J. Crew 37.7%.

“The number one thing that surprises people when they see this list is the fact that less than 10% of retail sales take place online, but the fact is that the apparel category is still very fragmented and big brands like this are still a small percentage of the whole,” Cordero said.

The bottom line, according to Cordero, is that retailers are shifting to the most efficient supply chains in order to survive. That, in some cases, even means stores serving as local fulfillment centers.

“One retailer told me that they’ve started having store associates receive local online orders and then package them and send them,” she said.

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