Is Traditional Brick-and-Mortar Shopping Dead?

Assistant Vice President / Senior Director of GAI’s Community Development Western Pennsylvania Market Sector Pat Gallagher joins us as a guest blogger to talk about market trends and demands in the retail and development market.

With the emergence of online shopping and the convenience of smartphones, tablets, and computers, it seems only natural that brick-and-mortar shopping would begin to suffer. The world of shopping has changed and will continue to evolve, but how will these fluctuations affect the retail real estate and development market?

According to the Urban Land Institute’s “2014 Emerging Trends in Real Estate,” the commercial real estate market will actually continue to grow over the next three years. In fact, the report forecasts that commercial real estate transactions will reach $445 billion by 2016. This number sounds convincing, and from what I have seen, the commercial real estate market is going gangbusters – but how is this possible if people are turning more and more to e-commerce shopping?

It’s not a question of physical or digital shopping; instead, it’s all about physical with digital.

People want convenience, but they still want the traditional store experience. We are seeing a blending of brick-and-mortar shopping with virtual shopping, which creates a unique experience. It’s not a question of physical or digital shopping; instead, it’s all about physical with digital. In a recent study by ORC International, 72% of digital shoppers across the globe reported that the traditional store experience was most valuable to them. What I am seeing is e-commerce stores that are seeking brick-and-mortar, not the other way around. Customers want the technology that online shopping can provide but still want the option of interacting with customer service and merchandise. In order to compete with online shopping, traditional stores are beginning to mix the digital experience with the physical side by offering access to their website while in store. This allows shoppers to order items that may not be on the shelf or to price compare before making their final purchase.

The purchasing demands of the millennial generation and requirements of online shoppers have created the need for retailers to move to an omni-channel experience. The omni- channel system combines brick-and-mortar and online operations to create a seamless customer experience when making a purchase. The retail world is changing and adapting to the consumer, which will cause needed adjustments in the marketplace and how retail centers are developed. This will require developers to create opportunities for e-commerce, retail store locations, and warehouse facilities to operate in close proximity. This new way of consuming is generating the need for additional retail development and re-use of older facilities, along with the creation of big box centers to meet consumer demands. The increased use of e-commerce will necessitate the development of regional warehouses in close proximity to major transportation facilities and densely populated areas.

Over the next 10 years, I don’t see brick-and-mortar stores leaving the marketplace. I believe the market will evolve around the consumer preference of blending the brick-and-mortar experience with the virtual experience. This fully integrated experience and omni-channel type delivery system will create retail, commercial, and warehouse development needs for years to come.

Gallagher-Pat-EMPhotoGAI will continue to report on changes and trends in the retail and development industry—look for more updates in future blog posts from Assistant Vice President, Senior Director of GAI’s Community Development Western Pennsylvania Market Sector Pat Gallagher. Pat can be reached at 724.873.3545.

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