Why 'Bricks And Mortar' Retail Remains A Solid Bet
The internet has had a huge influence on how we live our lives, perhaps nowhere more than how we buy things. The growth in online shopping has been staggering, and online retailers such as Amazon.com Inc. (AMZN) continue to claim an increasing share of shoppers' dollars. That’s prompted many analysts to proclaim that traditional “bricks and mortar” shopping was going the way of the dodo.
Well, those analysts may want to think again.
A new study, shows that the traditional shopping experience is alive and well for many Americans. Physical retail spaces aren’t going away. In fact, they are thriving. With that in mind, investors may want consider adding the owners of these retail locations to their portfolios.
Bricks and Mortar: Alive and Kicking
According to new study by global consulting firm A.T. Kearney, consumers continue to flock to physical retail locations and are actually crucial in generating online sales for retailers (see showrooming). By a wide margin, bricks and mortar remains the preferred channel for shoppers. (For related reading, see: How Wal-Mart Makes Its Money.)
That’s a sharp contrast to what many analysts and investors have predicted.
According to the study, 90% of all U.S. retail sales conducted last year were done in a physical store versus only about 9% done online. What’s more, 95% of all sales were accounted for by retailers with a bricks and mortar presence. A.T. Kearney found that just over two-thirds of customers purchasing online used a physical store before or after the transaction. Kearney noted that stores make a significant contribution to generating sales, even if the transaction is eventually done online. Through the five stages of a retail transaction — Discovery, Trial & Test, Purchase, Delivery or Pickup, and Returns — at some point along the chain, the majority of consumers will use a physical store.
The study can only serve as bullish news for those owners retail-focused real estate structured as real estate investment trusts (REITs).