By Neil Soskin, at Retail Real Estate Consultant & Advisor
A recent article from the research group at ICSC: “ICSC The Halo Effect III: Where the Halo Shines“, supports the concept that physical and online retail is so inter-related and physical retail is not going anywhere regardless of the naysayers out there.
Retail Real Estate Consultant & Advisor, Neil Soskin, agrees and had further to say about the topic:
“Online Sales Are Killing Brick ‘n Mortar Stores”
I continue to hear that refrain from friends, clients and others not connected to the retail or retail real estate world. Yet shopping center occupancy throughout the United States is at the highest it has been in over a generation. Most surveys have it at more than 95% or 96% throughout the country. Online sales are in no way killing brick-and-mortar stores. Quite the contrary, the two sales channels are proving to be synergistic.
So then, NO to the above statement…
A recently published report based on a study prepared by independent research firm Alexander Babbage Inc. for ICSC continues to support what other stories and anecdotal evidence has shown for years. There is a Halo effect between stores and on-line sales channels. They analyzed the opening of over 2,000 stores, in all 50 states, representing $850 billion of sales from 2019 to 2022. The results were quite striking.
The following are a few highlights:
Impact to Online Sales in the area of the store opening in the 3 months after the opening:
- Overall retail, 6.9% increase to online sales from that area
- Established retailers saw a 6.8% increase to online sales from that area
- Emerging/DTC brands enjoyed a 13.9% increase to their online sales
The impact varied by different retail categories, but in all but one, cosmetics, online sales from the community surrounding that new store increased.
Additional investigation showed that the favorable impact on sales had mutual benefits. Review of credit card data and specific customers revealed the following:
- For every $100 purchased online, within 15 days an additional $131 was purchased in the nearby store of the same brand
- For every $100 purchased in the nearby store, an additional $167 was purchased online for the same brand
Talk about synergy! Not only do brands improve their online sales, but also their in-store sales benefit from the online customers. Customers are clearly telling us that they want both retail experiences. So stores are not simply “billboards” for the brands they drive measurable new sales.
Not only do brands improve their online sales, but also their in-store sales benefit from the online customers.
Finally, the study also considered store closures, and the impact to online sales.
- All brands saw a drop to online sales of -11.5% in the market area of a closed store
- Established retailers saw a drop in online sales of -11.6% with a store closing
- Emerging/primarily DTC retailers saw a drop in online sales of -5.2% with a store closing
So, to my friends that are not in the retail space, we appreciate your concern, but please let go of the fantasy that the internet is killing brick-and-mortar retail. It simply is not happening.
Related Articles:
- Brick-and-Mortar Retail Can Benefit from E-Commerce
- CoreSight Sees Light in Malls’ Future… Mixed-Use on the Rise… A.I. Use in Retail for Good
Neil Soskin
| Retail Real Estate Consultant & Advisor
For more than three decades Neil has led teams and worked in almost all aspects of commercial real estate. That professional journey has enabled him to develop a unique toolbox of leadership and problem-solving skills in order to confidently advise and support his clients. More recently Neil has directly coached several business owners or senior executives. For more about Neil’s experience and projects, visit his website.
