Ecommerce doesn’t suit all brands

The overall growth trend of ecommerce does not account for the huge disparity between the internet offer and performance of different brands, different retail subsectors and different kinds of shopping centre. There is clear difference in the relationship that community shopping centres have with ecommerce through the brands represented within them, compared with prime retail destinations.

While many retailers have embraced omnichannel, the need for an online strategy is not universal and there remain those that do not see it as essential to meeting the needs of their customers, or have only implemented it at the margins. Compare Primark, who’s confidence in providing a great in-store experience and affordable clothing offer has so far meant avoiding ecommerce, while New Look’s online business is estimated to be 18% of UK sales.

Our analysis indicates that ecommerce plays a smaller role in the total revenues for brands in community schemes than in prime regional centres. Around 50% of ‘Top100’ brands in community schemes are value, convenience, F&B or service orientated, and ecommerce tends to represent a smaller proportion of these brands’ sales.

As such, almost 1/3 of Top100 brands in community schemes have no internet offer at all. Could it be that online competition is of less significance to retailers in community shopping centres?

The online offer of brands in community schemes

For brands with an online channel, the contribution this makes to total brand sales varies significantly. This is of course partly due to varying degrees of success in growing an ecommerce strategy, but it also indicates that for some brands online does not sufficiently replicate the in-store offer.

Of the Top100 brands in community shopping centres, 68% have an online channel, accounting for an average of 12% of their UK sales. In regional malls, 80% of the Top100 have an online offer, with an average 20% of all sales for those brands from online.

Across different goods sectors, such as variety stores, footwear, ladieswear and menswear, average online sales for key brands in community schemes are typically half that of brands in regional schemes. Furthermore, the proportion of internet sales by sector in community schemes are all well below the national average for ecommerce.

Fashion brands, which account for 20% of community mall and over 50% of regional Top100 brands, tend to have the most advanced online businesses and as such have the highest online contribution to their UK sales. The top 10 fashion brands in community schemes have an average of 12% sales online, while in regional schemes the average is 24%. This difference is predominantly a reflection of the type of fashion brands present; in community schemes 9/10 fashion brands are Value, while in regional schemes 6/10 are Aspirational and 4/10 Mass.

Comparison goods account for 33% of top brands in community schemes (17% in regional). While 20% of these do not have ecommerce, those with internet revenues account for 11% of total sales. Value Comparison online sales are 7% of total brand sales in community schemes; almost half of the average for brands in regional malls.

Retail service sectors have always been an important feature of local high street locations, but this does not mean they are immune to ecommerce competition. Banks and travel agents have been moving their businesses online and with the news of RBS closing 1/3 of high street banks, future store requirements in retail banks remains unclear.

Ten of the Top100 community scheme brands are banks or travel agents, (around 5% of units). So far these service retailers have retained presence due to the customer interface and service they can offer from a direct interface with their customers.

Other service sectors, such as health & beauty, are on a growth curve and physical space remains essential. Many other traders that are more familiar occupiers of community than regional schemes (e.g. bakers, pharmacy, charity shops, post offices etc), as well as F&B, continue to provide an offer that is best found instore and they therefore have a minimal online presence.

Mobile phone stores are both service and Comparison goods retailers, with customers switching between channels. Five of the Top100 brands in community schemes are in the telecomms sector with both online and instore service channels proving not only complementary, but essential to the overall customer experience.

Local retail places provide an important role in online fulfilment

Ecommerce may not prove to be the major threat anticipated for retailers in local and community schemes because many of these brands offer a distinct point of difference, with instore service, experience and convenience being paramount.

However, ecommerce and local retail are by no means wholly separate entities. For many brands in community schemes a comprehensive omnichannel offer plays a vital role in satisfying their customer’s needs. There are often strong synergies between online and offline retailing and these opportunities need to be embraced by retailers. GlobalData predict that 29% of online sales have ‘touched’ a store, either through showrooming, point of m-commerce sale, or Click & Collect (C&C).

C&C supports local physical store presence, plays an increasingly important role in ecommerce and is a key attractor for costumers visiting a store. In the next three years, C&C is expected to account for 13% of online transactions and is already used for 1/4 of clothing & footwear online sales; 1/3 of New Look’s online sales are collected in store.

Savills has found that 61% stores of omnichannel retail brands located in community shopping centres offer C&C. For brands with on online offer that don’t, it is typically because their online sales are too small (<5% total sales) to justify the infrastructure challenges. However, this will almost certainly have to be implemented in some way in the near future.

Furthermore, 66% omnichannel brands in community schemes have recorded returns to store, which is often more convenient or affordable for customers than by post. This can be a costly logistical headache for retailers, but it does provide their customers with what they need while also bringing them in store.

However, while the store continues to play a key role in the supply chain, few retailers are yet to perfect the most efficient operational model for managing stock movement. Some reports have questioned whether ecommerce is actually profitable given the cost of last mile logistics and supply chain challenges. Many pureplay retailers provide free returns services, but it is clear that this is in a drive to increase market share rather than profitability.

C&C has the potential to reach online shoppers while minimising costly delivery charges that shoppers are reluctant to pay. Such is the importance of retail places in the supply chain that pureplay retailers and delivery providers are increasingly focussing on reaching them; Amazon Lockers are now in 2/3 of community shopping centres we analysed.

The significance of both the uptake of C&C and returns to stores provides a powerful demonstration of how consumers still interact with brands in the real world as well as online. C&C fits well with the role of local, community and convenience driven shopping centres and there is a key synergy between C&C/online fulfilment, local retail spaces and non-retail town centre functions.