A growing number of formerly ‘pure-play’ online retailers are taking physical stores as the rate of internet sales growth looks set to slow during the next few years.
New research from Colliers International shows that by 2021, the rate of growth in e-commerce sales is expected to decline from the current level of around 11 percent to seven percent.
In anticipation of this, online retailers are increasingly using physical stores to increase their sales and showcase their brands.
The new trend is being labelled ‘showrooming’ as the primary intention of these stores is not necessarily to generate sales through the tills but to reinforce customer loyalty – and spending – online.
The global real estate advisor has analysed more than 30 different online brands across the EMEA region which are becoming ‘showroomers’.
An example of this migration is the French fashion brand, Sézane, which had its beginnings on eBay before moving to a branded online platform. Having opened physical stores in Paris and New York, the brand’s creator, Morgane Sézalory, is now exploring the London market with a pop-up store in South Molton Street and is considering a permanent presence.
Paul Souber, Co-Head EMEA Retail at Colliers commented: “With the rate of web sales forecast to level out over the next four years, many e-retailers have identified ‘showrooms’ as one of the remedies to a decline in profits.
“Increasingly ‘Showrooms’ in physical shopping environments which both generate online sales, raise awareness of their company, promote brand loyalty and offer the customer an opportunity to see, touch and feel the products.
“The trend is also driven by cost considerations: it’s not uncommon for 40 per cent of online fashion orders to be returned by the customer without making a purchase. This is imposing a huge logistical and cost burden on the online brands.”
Taking physical space also delivers benefits for landlords and retailers. Etienne van Unen, Co-Head EMEA Retail at Colliers, observes: “Because showrooms are often located in a non-prime property and in units which would not appeal to mainstream retailers, the rents they command are often acceptable to both landlord and occupier.
“The landlord is letting a property which may have been problematic or not in demand and the pure-play is getting a lower rent than they would pay for a mainstream store”.
Colliers’ Head of Forecasting and Research, Mark Charlton, comments: “The trend for ‘pure-plays’ to take physical stores will undoubtedly accelerate as increased online competition and lower rates of sales growth requires them to find a competitive edge.”