The real estate sector in the commercial area must be prepared to face the global trend that points to online purchases causing physical stores to close. As a result, retail companies’ online presence and efficiency are becoming more critical every day due to existing competition and the growing number of digital consumers.
The United States is a good example. The participation of online commerce (e-commerce) has increased retail sales volume and impacted business levels at physical points.
Once large and numerous, retail stores are becoming more personalized and strategic, which has impacted sales and store closures.
Two examples are Target and JCPenney. Both are experiencing different financial conditions, but they share a process of change in their physical facilities in terms of location, number, and format. In 2017, Target announced the closure of between 10 and 15 traditional physical stores and the opening of 30 stores in a small and personalized form.
JCPenney’s strategy has shifted towards an increasingly digital and less physical presence. In March 2017, it announced the closure of 140 stores in the US and two distribution centers to align its physical presence and strengthen its online channel.
As a result of this transformation, others that have been affected are class B and C shopping centers (smaller than a regional mall, such as City Mall), explained Priscilla Argüello, a senior associate at Cushman & Wakefield / AB Advisory.
These malls are becoming obsolete from the point of view of retail companies.
First, because a more modern and stable technological and digital infrastructure is increasingly required, and second since many companies are closing physical stores, the aesthetics and brand presence that the remaining stores must have must be robust and attractive.
What once represented a simple buy-sell transaction has now evolved into a complete experience around it.
“This is why retail companies have had to reformulate their location and relationship strategies with consumers. As a result, corporate real estate services associated with retail firms have seen the impacts of this issue on two levels: digital and physical”, assured Argüello.
In Costa Rica, consumers increasingly trust online purchases.
In other words, of an online panel of 604 people between the ages of 18 and 54 who reside in the Greater Metropolitan Area, a third of buyers tend to make purchases every 1 to 3 months.
What do Developers See?
Some commercial developers are aware of the trend in our country, and others see it in the long term, although none underestimate it.
“Much of our focus is on digital marketing. At Grupo Roble, we constantly research international, regional, and local markets. We know that some of our merchants plan to venture into e-commerce for the next few years,” said Rojas.
The project director at Garnier & Garnier, Alberto Bonilla, commented that he is observing an increase in Costa Rican retailers selling online and delivering packages directly to homes. This increase is why he estimates a more significant impact in the short term, perhaps in five years.
“The global trend of buying online or e-commerce and the development of smaller and local centers (community centers) indicates that the traditional massive shopping center or mall has its days numbered,” said Bonilla.
Garnier & Garnier believes that a mixed real estate project should have a commercial area to serve the needs of its users but does not see that the retail centers of the future serve populations further away from a radius of 1.5 km.
For this reason, its commercial component focuses on offering the amenities that clients and tenants of industrial, residential, and office developments require.
Who Said that Physical Stores are in Extinction?
Between the boom in digitization brought by the pandemic and the consequences of the lockdown, the outlook for the future of brick-and-mortar stores looked bleak. Instead, they appeared to be polarized: they were digitized or disappeared. But extremes are not good friends, as demonstrated by the data of a recent study that we carried out together with Euromonitor. It is true that, as a consequence of the global context, retail sales in Latin America decreased during the pandemic. On the contrary, however, e-commerce retail sales increased by 54% in Latin America, with peaks of 87% in countries such as Peru.
How is it possible? According to the study, 70% of Latin American consumers do not care where they buy (online or offline) as long as they can get the product they want. 2 In fact, 78% enjoy shopping online and in physical stores. 3 Also, everything seems to indicate that, by 2025, electronic commerce will grow 96% in the region and represent almost half (43%) of the total growth of retail sales in the area. However, these predictions do not mean the extinction of physical stores. 4 What’s more, they will continue to account for 57% of growth and 82% of total sales by 2025. 5. Stores will not disappear; businesses will transform them. And against this background, the future of online stores is directly linked to the Omnichannel.
Omnichannel Retailers Will be the Winners
The Omnichannel is no longer a differentiator. It is essential. And those who are capable of providing both online services and physical interactions will take the podium. The secret is to stop thinking of e-commerce as a separate platform from physical stores. On the contrary, we must understand that the best channel is the one that works for the consumer, the one that best meets their needs. And that our success will lie in the type of experience that we can offer you through the different channels that are part of our trade.
The stores will not disappear; businesses will transform them. And against this background, the future of online stores is directly linked to the Omnichannel.
The Four Challenges of a Winning Strategy
The Omnichannel, added to the unpredictable changes in consumer needs, presents some barriers to its development in Latin America. According to the market interviews, the main ones are:
- high implementation costs
- the complex integration with other channels
- low short-term profit margins
- the traditional management/executive strata still consider these adaptation and investment strategies unnecessary.