eProblems
A recent study has found that 30% of e-Commerce initiatives will deliver no value to retailers. The study by Greenlight Commerce shines a spotlight not on the failure of the digital channel itself, but on the ability of those wishing to deliver through this route to implement their initiatives. Typically, in response to the perceived market threat / opportunity, projects were rushed (48%), and success metrics were not properly assessed and measured (87%). Both Amazon and e-Bay launched in 1995. As Warren Buffet once said, ‘You don’t want to give Jeff Bezos a 7-year head start’. However, many retailers have given him a 24-year head start, allowing the likes of Amazon to accrue incredible economies of learning during this period. With the only real retail strategy now being omni-channel (in varying mixes), a failure to implement a successful online channel affects overall business performance and creates a competitive disadvantage. Another study showed that 90% of UK customers now use Amazon, and 25% have an Amazon Prime subscription (not bad for a book seller). In the States, Amazon’s market share of online sales exceeds 50%; whereas for the rest of the world it is just 6%. The question maybe should not be about online vs offline, but more about the increasing prospect for dominance of a couple of global players in this space.
Takin’ it to the Streets
Carrying out pretty much any commercial activity has historically required having a real estate base from which to do so; whether that is an office, a shop or another structure. Real estate value (/cost) is most significantly influenced by the location of the asset. This is turn influences the likelihood of achieving greater massing and higher value uses; but the primary driver is being at high footfall node; typically greatest at the centre of a city. However, as the world shifts to decentralised / distributed activities old paradigms about location may start to break. This increases the importance of seeking out customers rather than being reliant on them coming to you. An example of this is found in the fast food industry where, with a consumer shift to online and mobile ordering, less footfall is arriving at restaurants. Burger King has developed a customer centric response to this. In cities suffering significant traffic congestion (e.g. Mexico City and LA), it will offer a new service delivering meals directly to your car. This is facilitated by big data and location analytics technologies that didn’t exist 10 years ago; now making it possible to predict areas of congestion and arrange resources accordingly. Fast food is an industry where one-hour delivery slots don’t cut it. Distributed customer demand makes having a network that can satisfy dispersed delivery more important than having a single central node; with corresponding impacts for real estate.
The above article is written by Richard Pickering, Cushman & Wakefield’s Head of Futures Strategy, and originally appeared on Cushman & Wakefield UK’s Futures blog.
