Will Online Shopping Spell Doom for Retail Property?

Will Online Shopping Spell Doom for Retail Property?

A more convenient shopping experience and a wider range of products, coupled with the increasing capabilities of digital technology and a generation that has grown up in a world where digi-tech is an integral part of everyday life, has led many to predict that online shopping will replace retail as the preferred shopping experience.

If you have an interest in property investment, the question you may be asking at this point is whether this shift will render retail property an unsound investment. Let's take a look.

Revolutionising retail

According to Centre for Retail Research (CRR), retailers will be forced to adapt to the prevalence of digital technologies by transforming themselves in a way that allows for online shopping to be incorporated into the retail experience.

Failure to do this could mean their demise, with a study from CRR saying that the number of retail stores could fall from 281,930 to 220,000 by 2018. However, success may enable the retail industry to benefit from online shopping almost as much as their consumers have.

According to the Commonwealth Bank of Australia, online shopping accounts for 39% of retail industry growth in the UK. Click and Collect, a service whereby products are ordered via Internet and collected at the retail store itself, is one example of how savvy retailers can turn online shopping to their advantage.

Ninety-five per cent of UK shoppers plan to use a click and collect service, according to Crendon Insurance Brokers Ltd. In this way they gain the benefits of online shopping by choosing the time and place of their collection, while the retail store benefits by bringing in more consumers – at least 40% of whom are likely to pick up additional products during their visit.

Location, location, location

Region will be an important factor in determining whether or not retail properties can still thrive in the current climate. CRR predicts that retail properties in prosperous areas and tourist areas will perform much better than those situated in smaller neighborhoods. London, in particular, will not be as hard hit as retail chains in Wales, the North and the Midlands.

The proximity of the store to business and entertainment centres also needs to be taken into account. In fact, converting stores that have been shut down into commercial and residential properties is one way to provide remaining retail properties with a significant boost.

The type of retail store will also play a role. When it comes to food stores, for example, online shopping has a significantly smaller proportion of market share; about 3.7% as of 2012 versus the 19.2% share it has in the non-food retail industry.

Professor Joshua Bamfield, director of CRR, believes retail will still have an important role to play but retail investors will need to take all the above factors into account, while making strategic decisions that will enable the online shopping revolution to work to their benefit.

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