February 3, 2020
By Dennis Kaiser
Despite the challenges some brick-and-mortar retailers have been facing, the number of online retailers (or “e-tailers”) occupying physical store space increased 367% in Southern California over the last four years. Researchers at CBRE found this quasi-trend reversal has been driven by supply-chain limitations, rising online advertising costs and an increasingly crowded digital marketplace.
Given the region’s impact and role pioneering trends that often spread across the country, there’s savvy precedent for paying attention to the ways retail is shaped and moves in L.A.
CBRE retail expert and Senior Vice President Andrew Turf said, “We have seen this trend starting to pick up across the U.S. Instead of being exclusively ‘virtual’ but actually providing a brick-and-mortar location can serve as vital advertising and branding tool. And, it provides a different channel for consumers to see, feel, buy and potentially return an item. We talk about omnichannel ad invitum. Usually emphasizing the importance for brick-and-mortar retailers to employ different avenues for customers to see, buy and return items. But the same goes for e-tailers.”
Scott Grossfeld, partner at Cox, Castle & Nicholson LLP, echoed that observation, saying, “A retail trend that has been developing recently has been predominantly online retailers trying to maximize their presence and coverage in the retail industry. For example, it has largely been reported that various Amazon concepts have been opening in brick and mortar locations. These include Amazon bookstores and other concepts.”
The regional expansion of e-tailers reflects the broader trend of retailers across the spectrum adopting an omnichannel approach to stay competitive. As time goes on and this strategy is further adopted, CBRE predicts the distinction between retailer and e-tailer is likely to continue to blur.
“As more and more online retailers come into the market, these so-called e-tailers have found it increasingly important as well as challenging to establish a level of trust with consumers, as well as to set themselves apart from their competition,” Turf said. “Having a physical store will address those issues with an increasingly discerning consumer base. Offering a brick-and-mortar location in a high-visibility area can support a retailer’s branding, name recognition and product awareness, among other things.”
Turf notes there are a number of drivers and strategies involved in these moves. For example, these e-tailers have taken the form of familiar retail storefronts (known as “click and mortar”) and temporary pop-ups in partnership with established retailers.
“Southern California is a very important consumer market. Many retail trends start here and then spread nationwide,” Turf said. “Given that fact, it also means this region is quite, quite crowded. So, to stand out from the masses, providing an actual physical location can be key for finding success in today’s evolving and increasingly busy retail space.”
As of 2020, there are roughly 120 click-and-mortar stores and 76 e-tailer pop-ups in the L.A. region. A majority of them have taken residence in submarkets with strong retail activity, namely West L.A. and Orange County.
Cox, Castle & Nicholson’s Grossfeld points out, “With the abundance of retail space available and withering competition in some categories, the introduction of strong new online retailers in physical locations may well result in a further boon to these businesses.”
Consumers often prefer to see and touch products before purchasing, and leading retailers have found that physical stores generate better brand awareness while cultivating a loyal customer base. The presence of a physical store also reduces strains on the supply-chain by having products readily available in-store for online order fulfillment and pickup.
“Plus,” Turf said, “the presence of a physical store can reduce strains on the supply-chain by having products readily available in-store for online order fulfillment and pickup.”
Turf predicts, “What we are seeing here in Southern California is likely to continue and expand across the nation and likely world. It is simply a reflection of a larger trend that continues to demand from retailers that they embrace an omnichannel approach in order to stay competitive and relevant. As our report states, as the competition increases and the retail landscape continues to get more crowded, the distinction between retailer and e-tailer is going to continue to blur.”
This trend will be one of the hot topics at Connect Retail West coming to Newport Coast, CA on Feb. 13. For more information, or to register, click here.
For comments, questions or concerns, please contact Dennis Kaiser