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Physical store presence integral to success

Physical stores remain an integral part of the retail sales mix despite the growth of online retailing according to the 2011 edition of the research report How Global is the Business of Retail?

GENERAL MERCHANDISE

Physical store presence integral to success

Physical stores remain an integral part of the retail sales mix despite the growth of online retailing according to the 2011 edition of the research report How Global is the Business of Retail?

The report is published annually by commercial real estate adviser CB Richard Ellis (CBRE).

CBRE surveyed 320 retailers in 15 countries around the world to assess the current online capability of international retailers, the growth potential of the online sector, and the importance of multi-channel retailing. The research found that although an online platform was a minimum requirement for retailers seeking international expansion, a physical store was still an integral part of the equation due to the supply-chain difficulties faced when operating via the internet only.

The research showed that there was little difference by country in terms of a consumer’s ability to view a retailer’s online catalogue – ranging from 75% in Australia to 90% in the UK. However, consumers could purchase and take delivery of goods from only a quarter (26%) of retailers. The UK had the highest proportion of retailers (44%) that delivered goods bought online, followed by Germany (41%), US (39%), France (48%), and Spain (37%).

It also highlighted that retailers with a physical store presence were more likely to have a better online transactional capability. In most cases, the physical store had arrived first, with the online operation set up later to help maximise sales potential and create a multi-channel platform; however, an increasing number of retailers were now using their online operation to enter and test new markets before committing to a physical store presence. Of those retailers that had a physical store presence, 40% were able to deliver online goods in that market – this compared with just 26% of all retailers.

Peter Gold, head of EMEA cross border retail, CB Richard Ellis, commented: “The presence of a physical store makes it easier for a retailer to operate an online platform. Not only is the store a place for buying or viewing a product, it is also the location where consumers go to pick-up goods that have been bought online. However, while those with a physical presence are more likely to have an online transactional capability, some retailers such as Top Shop in the US or Next in Germany began trading in those markets using internet only and J. Crew recently announced they would be coming to the UK this year – but just with online.

“There is no doubt that ecommerce presents an important sales channel for retailers as it hugely increases a consumer’s awareness of brands and the choice of products available to them; however, retailers are still concerned about how to capture the essence of their brand and whether the internet represents incremental or cannibalised sales. The effective distribution of goods bought online also remains a key challenge; therefore, the extent to which ecommerce will change the fundamentals of retailing remain to be seen.”

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