What is the true value of the physical store?

E-commerce penetrations in the UK have almost tripled in the last decade. In the years preceding the pandemic this metric had seen steady growth, but as shops were forced to close to help reduce the spread of Covid-19, this growth dramatically accelerated. Since the pandemic, we have seen E-commerce penetrations moderate and expect future growth to be at a reduced pace. However, given the dominance of this sales channel in the news headlines, many have questioned the future of physical retail. If sales can be generated online, what is the value of the physical store? 

CBRE’s recent EMEA Retail Occupier Survey has demonstrated that occupiers still see clear value in the physical store. When asked about a range of key performance indicators, occupiers rated bricks and mortar retail as more effective than online for all, particularly cross-selling products and consumer engagement. It is clear the value of a store can no longer be measured by its profit and loss when it brings other benefits to retailers, such as boosting brand awareness and customer acquisition. Given these results, it is unsurprising that 57% of the occupiers surveyed plan to expand their store network in 2022.

At CBRE, we understand the range of key performance indicators a store can have. Utilising this knowledge, we have advised many occupiers on their future portfolio strategy, treating the store as part of a wider network supporting e-commerce, marketing and operations. Recently, we were asked by a major global coffee retailer what the value of their store portfolio was, given the increase of online penetrations. Harnessing the power of CBRE real estate market insights, we analysed their existing retail business using a number of metrics, including consumer demographics, mobile data, online and in-store sales, together with competitor analysis. We established the online ‘halo’ of the occupier’s physical stores and strategically reviewed their footprint to reduce costs. Despite a reduction in floorspace, the retailer maintained their store revenue and grew their online revenue through more focused multi-channel marketing and portfolio investment. Looking ahead, the retailer is now equipped to rationalise stores that do not meet the performance scorecard criteria and invest in the rest of their portfolio. Importantly, the retailer can now assess the whole shape of their network and not just individual stores.

With 64% of occupiers either agreeing or strongly agreeing that the presence of bricks and mortar stores increase online sales within the local catchment, we can no longer consider the two as mutually exclusive income streams. At CBRE, we’re continuing to monitor the changing dynamic between these two channels. If you’re looking to better understand the relationship between online and offline for your brand, and what this means for your store portfolio - please get in touch with one of the team to find out more about how we can help you.