A couple of weeks ago, my colleague Andy Cates penned an article regarding the impact of e-commerce on distribution and industrial real estate. If you think about it, regardless of the channel you use to buy, the item you purchase still has to get from seller to buyer in some manner. From a distribution perspective, as more people order online rather than shop in retail stores, more distribution is moving to direct-to-consumer and that will have an impact on distribution strategy. So what about the impact from the retail perspective? What is the future of the physical retail store?
The Internet sales tax debate has been raging for well over a decade. For the most part, online retailers do not have to charge sales tax in any state in which they have no physical presence. Some online retailers, like heavyweight Amazon.com, have found ways around that – at least temporarily – negotiating tax amnesty deals in return for providing the job growth that comes with the addition of a distribution center.
States looking to increase revenues and brick-and-mortar retailers desiring to level the playing field with their online competitors may very well get their way soon, given that there are currently four bills under consideration by Congress to enact an Internet sales tax. Some argue that it is too little too late for several reasons. First, 75 percent of online sales come from multi-channel retailers already paying sales tax. Second, generally speaking, operational efficiencies gained by online retailers more than offsets sales tax, sometimes significantly. Of course it isn’t just price that’s driving people to shop on the Internet, though rising gas prices provide another savings opportunity to the online shopper. Convenience is a powerful motivator for which many of us will actually pay a premium.
A February article on Economist.com titled “Clicks and Bricks” uses the following quote from Roy Amara, American futurologist, to make the point that retailers need to get on board the eTrain: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Folks – we’re well past the short run!
So is the retail store as we know it going away? I don’t think so. There are many products that still lend themselves to being seen, touched, tried on, or otherwise tested in person and certain people who still prefer the physical rather than the virtual experience of shopping. After all, you can order Starbucks coffee online but it’s still hard to find a place to park at most any Starbucks location. There’s a social aspect to shopping or sipping coffee that can’t be replaced by a point and a click. But smart retailers are integrating technology into a multi-channel strategy instead of running away from it, and are finding ways to provide in-person shopping experiences worth driving for.
Ed Thomas is vice president of retail services for Colliers International | Memphis.