Online shopping transforming commercial property

5:00 AM Wednesday September 2, 2015 Colin Taylor

Central Hamilton shops have suffered at the hands of mega malls and city fringe business hubs.

Retailers are realising they need to establish themselves as destinations, rather than outlets if they are to compete with online shopping which changing the face of the retail and industrial property markets, says John Church, Bayleys national director commercial real estate.

As a result, the proliferation of online shopping has led to the birth of a new generation of brick and mortar retail stores, along with a huge increase in demand for bigger warehouses and industrial premises for logistics, freight forwarding and courier services.

Church says.

“The physical store is seen now as more of a gallery or showroom to display product and teach customers about the brand, rather than a space to stockpile merchandise,” he says.

Global research firm Nielsen reports that almost two million New Zealanders are now shopping online, citing convenience, price and range as the biggest draw cards. 

New Zealanders spend a staggering $4.6 billion per annum purchasing items online, with the most popular retail categories being flights and travel services, and fashion apparel such as shoes and accessories.

“Despite this, data from international commercial real estate firm Cushman and Wakefield shows an overwhelming 79 per cent of shoppers still prefer a tactile in-store experience of physically trying, feeling and seeing products in the flesh,” Church says.

The surveys conducted by Nielsen show that customers rarely shop exclusively online or in-store, but tend to use a combination of both to purchase products depending on their individual circumstances at the time – hence the birth of the “omni-shopper”.

Church says there remains a strong case for retailers to occupy a physical store, but one outside the traditional realms of retail – with retailers adjusting their in-store compositions to accommodate the “omni-shopper”.

“Cutting edge retailers such as Apple, Lululemon, Superette and The Department Store in Takapuna have reconfigured their stores to offer more experiential elements to their customers, as opposed to just a shop floor filled with shelves, racks and a payment counter,” he says.

“We are seeing the introduction of barbers and video game consoles in menswear outlets, personalised style assistants, nail salons in womenswear sections, and pharmacies or the likes of coffee bars and cafes in department stores.”

“Omni-shoppers are well-informed and purposeful customers. Many research their options online and by the time they enter the store they know their product, they know what constitutes a good price and they are less willing to spend time browsing, leading to fewer impulse buys.”

Nielsen’s Online Retail Report shows more than 80 per cent of online New Zealanders have engaged in ‘web-rooming’ – where they have been prompted to go in store to purchase an item following browsing online.

Church says retailers who neglect to add either a physical or online store to their existing stable risk missing out on an important source of revenue.

“It’s a bit of ‘Darwinism’ at play, evolve or get left behind. Those that are surviving and thriving in the era of internet shopping understand how both physical and online stores can complement each other.”

Moves like the introduction of an ‘online CBD’ to revitalise Hamilton’s central business district are set to become more commonplace as retailers face the prospect of less foot traffic and more web-hits.

Central Hamilton shops have suffered at the hands of mega malls and city fringe business hubs that have cropped up on the CBD outskirts particularly around The Base at Te Rapa.

In a bid to help Hamilton retailers move with the times, and in some aspects lead the market, e-commerce software firm Storbie is developing an online marketplace, giving retailers an online presence and shoppers the ability to browse and purchase products with the click of a mouse.

The web page will include a unified checkout where customers can send multiple purchases to a single shopping cart and make just one payment, regardless of which shop the products are from. Shoppers will also have the option to have their items delivered, or to collect them in-store.

The innovation is hoped to extend the reach and generate support for local and long –established Hamilton businesses.

“Online shopping is a bit like television on-demand, customers can pick and choose what they are exposed to. Temptation is mitigated and there are fewer opportunities to upsell,” Church says.

“Click-and-collect options are helping retailers to overcome these challenges by encouraging online shoppers into their physical stores where they are likely to spend more.”

Auckland is experiencing record lows in industrial vacancy rates. Warehousing and yard space is in particular demand, due in part to the positive business growth of logistics, freight forwarding and courier services.

“Omni-channel retail has spawned massive growth in third party warehousing and logistics enterprises, and concurrently in the courier and transport sectors too.

“The increase in parcel traffic has driven demand for large scale industrial property as these firms look to upscale in order to take on more business from retailers.  In order to cater for the exponential increase in workflow, these firms must undergo major expansion and warehouse acquisition,” Church says.

Cainiao, the Chinese logistics company charged with handling all of Alibaba’s deliveries, announced plans to almost quintuple its warehouse space over the next 12 months to around five million square metres, large enough to hold New York’s Central Park and then some.

“When people think of internet based retail, they think it means a smaller physical footprint, but this is just not the case. Whatever is being lost in High Street retail property is being recovered in office and industrial property to the tune of millions, or in China’s case billions, of dollars,” Church says

“It will be of particular interest to see how this changes the dynamics of our central business districts over the next five to ten years. We can be confident this is not a dying off of physical retail, but rather a rebirth that will serve to benefit the shopper and improve efficiency for the retailer.”

John Church of Bayleys.jpg

John Church of Bayleys.