E-Commerce is slowly but surely picking-up momentum and despite initial skepticism about its ability to attract consumers, the numbers are strong and they are only getting better. Over 15 percent of all consumer retail purchases are expected to take place on-line by the year 2002. Certain product categories are going to feel the impact more than others will, and we’re already seeing some of the major retailers take steps to cope with this “new age” retail.
The growth of e-Commerce and the Internet in the global market have created new challenges to traditional retailing. Retailers are now striving to respond to this added layer of competition, and are developing strategies to compete both in cyberspace as well as physical locations. Nonetheless, the level of competition e-Commerce is introducing varies by product offered. Stores offering items which cannot be differentiated between retailers, do not spoil in transit, are easily packaged and shipped and are not needed urgently will likely become internet “hits.” Hence the early success of e-tailers such as Amazom.com and a handful of others that concentrate on books, videos, recorded music, and the like.
Wal-Mart, for example, is using the Internet to complement product offerings by providing an additional sales channel. The chain announced partnerships with major online players like America-On-Line (AOL), and Books-A-Million, and has revamped its own website. Furthermore, Wal-Mart announced a deal to spin off Wal-Mart.com to Accel Partners, a Silicon Valley venture capitalist firm. By adopting these strategic plans, Wal-Mart can concentrate on its mission of delivering “everyday low prices” and superior customer service, while the venture capitalists can exploit their Internet expertise.
The use of the Internet for non-grocery items is increasing enormously. Items such as books, music, videos, computers, white-ware, appliances, to mention a few, are without a doubt bound to become hot online purchases. Which means that major tenants such as Wal-Mart, Bed Bath & Beyond, Target, Blockbuster Video, Hollywood Video, are all developing “cyberspace” strategies in addition to increasing the level of service and ease of shopping at their physical locations in order to remain profitable and competitive. The net result of such an evolution would increase the demand for strategically situated warehouse space and flex office space. High-speed distribution and delivery systems are also going to be essential to the e-tailing business.
Mergers and acquisitions among drugstores and supermarkets will continue as a trend and a way survival, both locally and nationwide.
Maya Mouawad is Southern California Division Research Manager for Marcus & Millichap Real Estate Investment Brokerage.
