Global Retailers Expanding into Emerging Markets are Adapting Physical Footprints

In one of the most comprehensive analyses of global online retailing carried out to date, the inaugural Global Perspective on Retail report examines online retailing and looks at the technological infrastructure, regulatory environment and size of the retail and online market in more than 100 countries to compile a weighted index developed from 13 separate indicators.

The report from Cushman & Wakefield, which is at the centre of global retail and monitors and analyses the evolution of the industry and global retail trends to ensure its clients are best positioned to capitalize on future developments in the sector, is available at the following link: 

Global Perspectives on Retail

Online retailing globally has been growing at an average of 18% per year over the last three years – significantly higher than the 1.3% growth per annum seen through other retail channels. A rising number of retailers are capturing a share of this expanding online market by seeking global growth, says the report. As this occurs, multi – not single – channel retailing will increasingly be implemented in both established and developing markets. The new retail report complements Cushman & Wakefield’s recently released reports, The Changing World of Trade as well as Navigating Emerging Markets, which forecast global trade could reach $45 trillion by 2021 although corporations will also have to carefully consider their industrial and office location strategies:

Changing World of Trade

Navigating Emerging Markets

Cushman & Wakefield’s global head of retail, John Strachan, said: “The internet has changed the global retail landscape beyond recognition and is now transforming and impacting significantly upon the way we work, play and shop. Retailers and owners who can adapt quickly to this new world will not only grow sales across all channels but will continue to enhance the role of their ‘bricks and mortar’ alongside successful digital platforms.” James Hawkey, Cushman & Wakefield’s managing director for retail in Asia Pacific, said:

“Online trading has the potential to change the way global retail works. Brands who want to enter Asia now have the option of exploring the market with an online presence before opening stores. Asian countries with very young populations are often early adopters of new technology and potential for online retail is significant across the board.”

The UK is the world’s most developed online retail market, according to a global research reportpublished today by the world’s largest privately-owned real estate services firm, Cushman &Wakefield.

 The UK places just ahead of the US in the list primarily due to its high volume of online sales per capita, significant online market share (as a percentage of total retail sales), total retail sales and openness to new online business and social media. Its large overall retail market size also contributed notably to its ranking, along with the fact the country’s retail market share between 2007 and 2012 increased more than any other nation analyzed during this period. 

However, the US is the largest online retail market by some margin, with approximately $187 billion-worth of retail goods sold online in 2012 – this represents almost one third of all global sales.

The Marketplace Fairness Act of 2013, currently pending approval by the US Congress, will enable state governments to collect sales taxes from online retailers. Commenting on this proposed new piece of US legislation, Matt Winn, Cushman & Wakefield’s retail services leader in the Americas, said: “The Marketplace Fairness Act is a progressive and positive move by the US government – once enshrined in law, it should go some way to addressing the disparity in taxes retailers with physical stores and online-only outlets are liable for. As online retail grows and steals an ever-increasing share of the overall retail market, it is only fair to stabilize the tax system; physical retailers should not be at a disadvantage due to online competitors paying less tax.”

Although other highly-ranked positions in the index are dominated by mature markets from Europe, Asia and North America, the rise of mobile commerce (m-commerce) could significantly shift the balance of future retail power in favor of emerging markets, particularly those in Asian markets where mobile penetration is higher, the report concludes.

Countries with scope to become leading online markets in the future have also been identifiedby the report. China is by far the largest potential market but the publication also predicts that Malaysia (currently ranked 34th) could become a “future online star” thanks to the quality of its infrastructure as well as consumer potential. In Europe, Russia (26th) is recognized by the report as having the potential to establish itself as a key player in the future online market. But a preference for cash over credit – as well as long product delivery times due to rail reliance – will limit early growth to its major cities. Elsewhere, Brazil’s (21st) consumer lead over Mexico (35th) is reinforced by greater internet penetration and credit card usage.

The report also highlights the ongoing importance of physical stores, especially in the context of the growth in ‘click and collect’ retail services. The ever-increasing emphasis placed on logistics by retailers underlines how the value chain is evolving – and this will be ultimately reflected in property demand and pricing. The publication warns that main thoroughfares in many shopping centers and main streets may contract in the future but the importance of flagship stores will grow and the value of the best streets and units will continue to rise.

Cushman & Wakefield’s head of EMEA Research, David Hutchings, said: “The successful combination of online and offline will be a powerful source of competitive advantage to the best retailers and shopping centers in the future. Technology and the online world will provide increased customer intelligence and data to support personalization and customer service, while physical retail outlets will provide accessibility as usual but also brand profile and the ability to deliver a memorable customer experience; a factor which cannot be easily replicated online.” David Hutchings added: “While online retailing is having an uncertain impact on store needs, the impact on costs is clearly negative and this will feed down to property. In-demand locations will see rents rise but weaker locations will become more of a collection point and see rents fall.”

Inevitably, there will be negative implications for parts of the property market but large regional shopping centers and core in-town markets are mentioned in the report as having considerable potential for growth. These high-traffic areas, with a confluence of transport links and parking, are ideally positioned for customers to meet, enjoy experiences and access new services or entertainment facilities. There is also scope for malls to offer additional services,such as delivery and hence become a vital part of the e-tail infrastructure platform.