Omni-Channel Retailing: It’s Not Only About Online Shopping

Omni-channel retailing is an emerging theme changing the dynamics of retail leasing and tenant demand: what are the impacts and considerations for property investors in this segment?

Last month, media and entertainment retailer HMV Canada announced that it would officially close all 102 retail stores in Canada after 30 years in operation. Once a staple tenant in many shopping centres across Canada, HMV faced growing competition the last several years from e-commerce retailers offering similar products. HMV’s closure unsurprisingly, also comes at a time when digital streaming for music and movies is expanding rapidly.

HMV’s closure marks an interesting time in the market where retailers have to increasingly think about shifting consumer demands and the rising impact of digital technology. In this post, GWL Realty Advisors offers an overview of  some of the research we have been doing on omni-channel retailing.

What is omni-channel retailing?

Defined as a new retail paradigm where retailers use multiple methods such as physical stores, websites, mobile devices and social media to access and communicate with shoppers, omni-channel retailing is now on the minds of many as a powerful, emerging theme changing traditional shopping activities.

Consumers now have 24/7 access to retail products through a variety of digital, social and physical channels. As a result of this trend, retailers’ efforts are now directed towards leveraging these connection points to drive sales, with retail property no longer the only channel, but one of many. This is an important shift from only a few years ago, where store expansions were the only way retailers could distribute products and access customers.

Key Themes for Real Estate Investors:

Important to retail property investors and managers are several themes related to omni-channel retailing:

  • Retailers are looking to “right-size” their existing store portfolios, including fewer stores of more varied store sizes. Retailers will continue to invest heavily in their top-performing locations, while consolidating others. Shopping centre managers should assess whether their properties have the characteristics that define one of these “top” locations for retailers.
  • Retailers are applying a more flexible and market specific strategy to their retail expansion—permanent stores are not the only way to “test” or expand into a market given the growth of online shopping. Pop-up stores and other temporary retail concepts are becoming more common, impacting traditional retail lease structures.
  • Shopping centres are changing layouts with on-site product “pick-up” locations for online orders. This is being supported by retailers themselves offering in-store pick-up options.
  • Leasing risk exists within several retail sectors/products. Digital and media products, clothing, electronics and fashion accessories are notable sectors. Products or retailers that have poor branding or lack market uniqueness also face the most risk, regardless of retail category or tenant size.

Drivers of Omni-Channel

As for what is driving the growth of omni-channel retail, we list the following three trends:

Demographics: According to Statistics Canada1 and Ipsos2, those aged 16-24 are the highest online shoppers, particularly for clothing and accessories and media. A 2016 global survey from PwC3 further highlights that 84% of shoppers 18-24 years of age state that social/digital media has a direct influence on their shopping choices.

Increased omni-channel and technology investment from retailers: Recently, retailers have started to shift their expansion plans away from physical stores and towards omni-channel integration and technology. Some of Canada’s largest retailers over the last few years have expanded their online offerings, upgraded websites and invested in technologies and logistics/distribution infrastructure to better manage product inventories.

Proliferation of mobile technology and digital shopping platforms: Mobile technology has been a key driver for the growth of omni-channel retail from both a purchase and product research perspective. A notable Ipsos4 internet use survey reveals that while desktop computers and laptops are still the most dominant method of online purchases (80% of respondents) in Canada, purchases through smartphones and tablets continue to rise annually.

For more information on omni-channel retailing and how it impacts retail property, please contact us or read our recent research report titled, “Omni-Channel Retailing and the Rise of the Digital Consumer”.

[1] Statistics Canada. (2013). Canadian Internet use survey, electronic commerce, electronic orders by age group and type of good and service, occasional (percent). CANSIM (database). Canada: Statistics Canada.

[2] Ipsos. (2014). Ipsos Canadian Inter@ctive Reid Report. Vancouver: Ipsos .

[3] PwC (2016), Total Retail 2016. Toronto. PwC

[4] Ipsos. (2014). Ipsos Canadian Inter@ctive Reid Report. Vancouver: Ipsos.

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.