A lot has been written about brick and mortar retail, and how it would fair in a world that has become globally digitized and interconnected due to wireless internet. Some went as far as to say that ecommerce would ultimately wipe out traditional brick and mortar stores. While this didn’t occur, many retailers have prioritized their online presence which resulted in scale backs for physical retail space, which has created a large influx of commercial properties on the market, resulting in falling rental rates.
How And Why Physical Retail Is Making A Comeback
The greater availability of retail space resulting from many retailers scaling back and focusing on ecommerce has resulted in an environment where many service companies, such as schools, spas or restaurants, can set up shop. There are some businesses, such as hair salons or massage centers, which will never be performed over the web; these services must always be rendered in a physical space. Many businesses which are service based also have lower startup costs (when compared to the manufacturing and technology sector) so the lower rental rates is perfect for them.
Another advantage that physical retail stores have over ecommerce is the ability to get what you want faster. Even with expedited shipping, it can still take days to receive a product ordered online, whereas most people can drive to a store in their neighborhood and have what they need in less than sixty minutes. When a good or service is urgently needed, nothing beats a physical store that is located near you.
Despite Being Digital, Ecommerce Still Depends On Physical Space
Although ecommerce transactions take place digitally over the web, they still depend on a huge amount of physical space in the form of distribution centers, which for companies like Amazon can encompass lots of square footage throughout the country. There is also a need for space for industrial supplies, as well as new construction. Ecommerce must maintain pace with those that have a “need it now” mentality. While next day shipping is fast and impressive, it still might not be sufficient for those that urgently need something.
Until recently, companies such as eBay and Amazon concentrated heavily on distribution facilities. However, a need has emerged to set up warehouses which are smaller, yet situated in key metropolitan areas which will give them optimal retail accessibility. These have been referred to as “hubs” and are giving customers the opportunity to continue buying things over the web, with the added perk that they will be able to pick up the merchandise just as fast as they would from a local retailer.
Big box stores such as Best Buy will benefit greatly from this arrangement, as will supermarkets, due to the growing popularity of online grocery shopping. Regional grocers are well positioned to prevent ecommerce businesses from capturing too much market share. There has always been a desire for last minute purchases for groceries, but there is also a demand for the convenience and delivery of online shopping. A regional grocer can deliver food directly from specific locations, which will enhance their profits.
If you are a retail shop owner and want to get a commercial mortgage to bring your business to the next level, talk to us today.