Finding Successful Retailers in Today’s Digital Economy

E-commerce continues to be one of the biggest drivers of change in the retail sector, pushing retailers and property investors to think more critically about their digital strategies.

This change requires new ways of looking at retail tenants from a risk perspective. With the rise of online shopping, a strong tenant is no longer defined by local demographics, credit-worthiness or covenant alone—retailers must be assessed from a number of angles, including their digital platform, their brand uniqueness, as well as their value-offering for consumers.

Supported by our ongoing research on the topic, this Research Note offers three perspectives on how gauging retailer success is changing for property investors and managers, particularly within a digital framework. Despite its immature state in Canada, e-commerce has already changed considerably—meaning its impact on retailers today is different from even a few years ago and continues to evolve.

Trend 1: Understanding the importance of a retailer’s digital footprint

A statistic real estate professionals focus on is the share of retail sales that occur online within a sector—low e-commerce penetration suggests less risk. According to Statistics Canada [1] , online sales is estimated to be 3% of total retail sales, with that figure slightly higher for categories such as clothing (3.8%) and electronics (4.6%) and lower for food and grocery (0.15%). These numbers suggest that overall online penetration in Canada is low, especially compared to the United States and the United Kingdom where online sales make up 10%-20% of total sales depending on category.

More important than the division of online/offline sales however, is that fact that all retail is now digitally influenced. PwC [2] notes that 40% of Canadians under 34 interact directly with brands through social media platforms such as Instagram and Twitter, with survey research from WisePlum [3] showing that consumers increasingly start their path of purchase online. Whether a transaction is made in-store or online, consumers are going online to guide their sales decisions. This includes all categories, including clothing and electronics but also for grocery and quick and full-service restaurants.

From a tenant perspective, this has important implications. First, it suggests that a retailer must have a digital footprint, regardless of size or retail segment (e.g. be it the national apparel retailer or the independent coffee shop). This digital requirement is less about having an online sales platform (an imperative for retailers in some sectors), but rather the ability to be found, mapped, researched and referenced online. Search optimization is key. ‘Foot’ traffic in retail accordingly, is now ‘Web’ traffic. Second, it presents an opportunity for landlords to support a retailer’s digital initiatives (e.g. websites, social media, and promotions) by integrating tenant strategies with those at the property level.

Trend 2: The need to discover a retailer’s ‘true’ omni-channel platform

When e-commerce first started to expand in Canada more than a decade ago, having online shopping was the dividing line between a successful and non-successful retailer. This was particularly relevant for retailers in segments such as electronics, clothing and department stores and made it easier for landlords to assess the ecommerce risk of their tenants.

Today however, virtually all major retailers have a website, and offer services such as online shopping, in-store pick-up and free returns. For property investors, assessing stable retailers is increasingly difficult as the playing field has levelled in recent years.

Looking ahead, successful companies are integrating their sales channels with digital investments at the forefront in four key categories from our analysis:

  1. Inventory, supply chain and distribution integration (e.g. integrating in-store and online product consistency)
  2. Digital platform investments including social media, service and search optimization (e.g. brand enhancement and consumer engagement)
  3. Consumer-oriented pick-up, delivery and return processes (e.g. developing the ‘last mile’), and
  4. Data investments including machine learning, spatial/mobile analytics and artificial intelligence (e.g. data-led retail strategies).

Accordingly, focusing on the true ‘omni-channel’ innovation of retail tenants compared to their competitive segment/benchmark is important.

Trend 3: Focusing on how a retailer is positioning their competitive offerings

Retailer differentiation is growing in importance. To be successful, research suggests that retailers must offer one or more of the following benefits for consumers:

  1. Value: price point relative to quality
  2. Convenience: speed and accessibility of products
  3. Experience: service and connection with consumers
  4. Uniqueness: product or brand differentiation

Why these differentiating traits? With the rise of e-commerce, consumers are more efficient and discerning with their shopping activities. Retail competition is intensifying.

Value refers to offering products at attractive prices relative to quality. Dollar stores, fast fashion and warehouse clubs for instance, continue to see strong demand due to low prices and discounts in their segments. Convenience refers to making the researching, buying, shipping and return process as easy as possible. Experience refers to a retailer’s overall interaction with consumers and their ability to identify and connect. Uniqueness focuses on retailer differentiation within its segment–be it through products or brand identity.

Overall, retailers who have all four traits are positioned to perform well.

Looking ahead

With retailers taking a more pro-active approach with their digital strategies, it is imperative for retail property investors to take a different view of risk and opportunity for tenants. Outperformers will be groups that can innovate their digital platforms and provide product and brand differentiation. Underperformers will remain those stuck in the middle in terms of digital investments, uniqueness and connections with consumers.


Data source: Statistics Canada. Table 20-10-0072-01 for 2017 overall sales totals and Table 20-10-0065-01 for 2016 sales by category. Note that other sources suggests online sales in Canada to be upwards of 7.5% of total retail sales (See eMarketer “Ecommerce in Canada 2018” Report)


Data Source: PwC Total Retail Report (2017)


Data source: the Blended Commerce Imperative (2018)

Anthio Yuen
Senior Director, Research Services & Strategy

Based in Vancouver, Anthio brings more than 15 years of experience to GWLRA’s Research and Strategy team specializing in property market analysis, applied research and portfolio strategy. He has a Master’s in Urban Planning and Development from the University of Toronto.