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Posted By:  ECT News Network on 12/18/2017 in Ecommerce

Adding Bricks To Clicks: Guiding Ecommerce Into Commercial Real Estate

Adding Bricks To Clicks: Guiding Ecommerce Into Commercial Real Estate

By Brandon Singer 

It’s common knowledge that ecommerce has inflicted damage on the conventional retail or "brick" segment of the commercial real estate world. Yet, there are ways that web-based shopping is helping to boost retail real estate.

A reverse flow is arising as growing numbers of ecommerce-only players are waking up to the commercial value of offering goods both online and also in physical stores.

As online vendors, they’ve begun generating revenue and attracting investors. But now they see opportunities to literally cement their competitive advantage by adding bricks to their clicks.

For certain consumer goods, some shoppers will make purchasing decisions solely by viewing items on screens and devices. But for large numbers of end-users, viewing just isn't enough. Indeed, just last September, the National Retail Federation reported that 78 percent of all consumers "are shopping at brick-and-mortar stores just as much as or more than they did a year ago."

Many consumers always long for the tactile experience of a physical location -- and even prefer to purchase in-store, but typically only after shopping online first. Indeed, 59 percent of millennial shoppers say a nearby physical store is important to them when they buy products online.

That’s why many retailers that had started out on ecommerce-only platforms are now broadening their business model and adopting omnichannel strategies.

But seller, beware!

Because expanding from click into brick requires care and counsel.

Many online CEOs enter the brick-and-mortar scene with a head start, because their ecommerce success has taught them about the need to build a retail experience rather than just build a retail store.

Yet, while these entrepreneurs have proven themselves to be nimble and intuitive about online business dynamics, a surprisingly large number of them know little -- or, seemingly, next to nothing -- about the actual logistics of commercial real estate.

Thus many risk stumbling blindly into the world of physical storefronts and falling short, thereby diminishing the competitive edge they’ve achieved online. And, ironically, these e-entrepreneurs are launching themselves into the storefront universe during a period of growing vacancies, which only gives them more opportunities to make errors.

Yet all the location options also make it a propitious time for retailers to be seeking first-ever space -- but only if they have a good idea of what they’re doing, and only if they’re getting proper strategic counsel.

These retailers often won’t know enough about the world of bricks to comprehend their wide spectrum of options:

What’s the best location? Which side of the street is better? What are the relative merits of streets versus avenue? How much space should we take? How much rent should we pay? What lease length and terms make the most sense? How about a short lease with an option to extend?

And what about neighborhood trends and transit access? What are foot traffic counts on various blocks? What times are prime foot traffic hours? What’s the density of competition?

What about testing the waters with a pop-up shop? Or pairing up with a smaller office space in a co-working-type configuration?

To successfully develop a physical presence, let alone a broader market penetration strategy, a company also has to deal with capital expenditures, attorneys, construction companies, engineers, and architects, HVAC needs, zoning and regulations.

Despite the challenges, an ever-growing number of retailers that started life as online-only operations have been successfully crossing the Rubicon into physical stores, starting with the great progenitor itself, Amazon.

Other formerly click-only firms that have created winning or promising brick locations include Bonobos, UNTUCKit, Warby Parker, Rent the Runway, The RealReal and Birchbox.

So, bottom line, what’s our key message to ecommerce entrepreneurs ready to move into brick?

Don’t act precipitously. To ensure that your brick success will dovetail with your click success, partner with a seasoned, commercial real estate broker focused on retail and consumer-facing brands. These are professionals equipped to serve as business advisors -- identify and clearly evaluate all options -- walk you through the full process -- and provide ongoing counsel.

As the old world and the new world come together at this transformative moment, one thing remains constant: real estate is central to virtually any retailer’s successful long-term planning.

And with the right support and guidance, you can combine bricks with your clicks and create a thriving, long-term, omnichannel enterprise.

Brandon Singer is a Managing Director of Retail Services in Cushman & Wakefield’s New York office. During his 10 years in the industry he has negotiated some of the most prolific retail leasing transactions in New York City, and in several gateway cities across the United States. His negotiated transactions have surpassed $2 billion of aggregate value for national retail tenants and landlords like Dean & DeLuca, H&R Block, Nike Inc., TD Bank, Restoration Hardware, and more. Brandon was an inaugural member of 2012’s Commercial Observer’s 30 Under 30 list for Commercial Real Estate professionals in New York. Brandon is a member of the International Council of Shopping Centers and the Real Estate Board of New York.

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