3 Myths About Investing in Brick and Mortar Properties

Nov 29, 2018

The growth of e-commerce had led many investors to assume that brick and mortar retail is dead. While it is true that some retail sectors are struggling, this is not the case for many brick and mortar businesses. In fact, some asset types are not just surviving but are thriving despite the competitive environment from online retail.

Myth #1: E-Commerce Is Taking Over Brick And Mortar

brick and mortar vs e-commerce

It can seem that e-commerce online shopping has completely overtaken brick and mortar retail shopping. However, the truth is that many brick and mortar stores in the retail sectors are doing quite well. Customers do make many purchases online, but they also often browse online before then making a purchase in person at a brick and mortar store close to home.

In fact, CBRE’s head of research states that “over 50% of online sales are actually going to brick and mortar brands.” Additionally, according to several more sources including Forbes, brick and mortar stores make up 90% of retail sales in North America. Many stores are not only doing well but are still growing.

Myth #2: Amazon Is Destroying Retailers

brick and mortar or ecommerce

While it’s true that some retailers – even some large brands – have collapsed under the weight of Amazon, the true picture is much more complex.

Retailers that compete on price are still doing well. Premium retailers also still successful as brick and mortar locations, because the high-end, in-store experience is what some people are looking and paying for. However, the retailers who compete on price and promotion, offering products or experiences that are widely available, are struggling. These are the retailers that make up the majority of the wave of store closings taking place around the country. Several of these closings are creating the impression of a retail apocalypse.

Additional factors include changes in the average household income, growing competition, and macroeconomic changes. Whether or not a consumer purchases a product online has less to do with their age, or comfort level with shopping online, and more to do with how much they make per year.

Myth #3: More Stores Are Closing Than Opening

Hundreds of stores have already closed this year, with several more on track to shut their doors soon. With so many closings in the news, it might seem that retail at a brick and mortar store is coming to an end.

Although several stores are closing, thousands more are building and opening up in new locations. Dollar General, for example, plans on opening more than 1,000 stores this year. Aldi isn’t far behind, with plans to open up another 900 stores nationwide. Other retailers, such as TJ Maxx, Target, and Nordstrom also have plans for expansion. Additionally, many U.S. retailers are expanding internationally.

To Wrap it Up

brick and mortar retail

While it is definitely true that the retail landscape is experiencing a tremendous amount of change, it can also be viewed as a call to action for retailers to adapt their strategy in order to better meet consumer needs. Retailers who use data and other sources to understand consumers changing needs, behaviors, and desires (such as catalog pickup and return centers) will have a greater chance of success in this new retail landscape.

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