Confusion over impact of online shopping
Copyright: David Lawson
Property Week April 2009
Online shopping’s share of total retail sales soared almost 20% last year, says a new analysis by the Office for National Statistics. That may be no surprise with the recent expansion of broadband but it will create confusion among retailers and landlords trying to assess the future.
The ONS estimates that 3.5% of sales were made over the internet in December yet the British Council for Shopping Centres said this level had already been reached in a report two years ago.Distribution giant Prologis muddied the waters further around the time the ONS was compiling its estimates by stating in its own study that internet sales reached 11% in 2006 after rising 370% in four years.
This kind of confusion makes it easy for sceptics to dismiss threats that ‘clicks’ will take over from ‘bricks’ and decimate shopping centres. But exact statistics are notoriously hard to pin down. How, for instance, do you allocate customers using the web to compare prices but then buying in a real shop? Or the increasingly common opposite affect, where customers turn up at a store to try out a sofa then scoot home to order online?
Doomsters were predicting 10 years ago that by now shopping centres would be deserted. One even predicted possible alternative uses as weird as high-rise mausoleums. Veteran retail developer Julian Markham dismissed such fears in a highly-opinionated book The Future of Shopping in 1998 and feels little different today.
He is no Luddite. In fact he is more of a ‘net head’ than many professionals half his age since establishing Cubicspace, a pioneer of 3D real time technology, including store design and visual merchandising. But he still sees clicks as an addition rather than an alternative to bricks. Time has proven him far more accurate than doomsters, with big names such as John Lewis and Tesco investing heavily in web portals but still expanding numbers of stores. But some fear the real impact will come as recession bites and retailers switch to low-cost online sales.
Markham admits that internet retailing still has a long way to go before a balance is clear. ‘In my book I was predicting over 20 years and we are only half way there,’ he says.
On the one hand change has been faster, with huge technology advances and the creation of an internet generation. But online shopping has also been held back by rising expectations and the disappointment of getting an enjoyable comparable service. Customers demand not just low prices but quick and free delivery as well as 24-hour response to complaints. Online retailers cannot cope because they are using the same systems as for the high street and these will take high investment and years to develop.
Even then, the lion’s share will remain with bricks and mortar. Shopping is often a social experience - part economics and part entertainment, he says. It will never be completely supplanted by computers, except to those who dislike social involvement or popular centres of attraction.
How much will go online and how much impact it will have on shopping centres remains to be seen. But while experts disagree about exact figures they are unanimous about huge differences within the sector. Books, videos and travel are all marked for substantial transfer online. Fashion and food, where people like to try, touch or smell what they are buying, are more protected. Secondary centres relying on bulk goods appear far more risky than glossy centres lined with boutiques and speciality food shops.
Boundaries are not clear, however. Meat and lingerie are increasingly sold online, while bookshops and travel agents remain stubbornly rooted in high streets. This is why Markham, in his role as chairman of developer Glengate, is not cherry-picking tenants for shopping schemes based on such crude divisions.
Nor is he writing off great swathes of the high street. ‘You have to put this in perspective,’ he says. ‘Retailing has been around in some form for centuries. ‘Online shopping could take a lifetime to mature but does have a part to play – how much is a matter of opinion.’
Online 'health check' for shopping centres
A comprehensive new database is claiming to offer an instant ‘health check’ of shopping centres. It will reveal trends such as tenant turnover, vacancy rates and the potential threat from online sales. The Local Data Company has surveyed more than 650 centres and integrated 310,000 business records to provide pictures, maps and details of each property, pinpointed to exact locations by software developed with partner Geofutures.
A web-based system called Town Centre Intelligence will not include rent and other financial data. Business development director Matthew Hopkinson says this is rarely accurate because deals are often done behind the scenes. Developers, planners and retailers can see the location and history of each shop but also compare ‘churn’ rates and mix of uses for whole streets or different centres to give a picture of internet vulnerability and quality mix. It will cost £15,000 pa for the average business taking three licenses.
Further information: http://www.localdatacompany.com