Retail sales delivered to the consumer hit 26.5% of all deliverable retail sales in January 2013. The proportion of retail sales that are delivered rose from 18.3% nearly 5 years ago and 14% a decade ago. Current trends, which have been consistent for a number of years project that almost half of all retail sales that can be delivered will be delivered by the end of this decade.
Deliverable retail sales is defined a department store types of merchandise and are sold by retailers selling furniture & home furnishings (442), electronics & appliances (443), clothing & accessories (448), sporting goods, hobby, book, and music (451), general merchandise (452), and office supplies, stationery, and gif(4532) as well as electronic and catalog merchants (4541).
Parcel carriers are facing a rate in the growth of high-cost home deliveries at a rate faster than the rate of parcel deliveries overall. Carriers are going to need to find innovative means of handling this growth in order to keep transportation rates at levels that allow retailers to offer free shipping to their customers. The growth in delivered volumes will continue to increase the proportion of parcel shipping volumes that can be delivered one to two days after the order is made without the use of carrier Express services. The shift in the market toward next day delivery means that regional and same day carriers that generally have a lower cost structure than the national carriers U.S. Postal Service, United Parcel Service, and FedEx will compete for more of the home delivery business than ever before.
The shift toward lower cost-delivery options will focus largely on the last mile as delivery carriers lose home deliveries to self-service delivery lockers managed by Amazon and Google that cost retailers less than half of what a delivery to a consumer’s home costs. While the Postal Service’s goPost parcel lockers could compete in this market, its solution is less consumer friendly and has higher start-up barriers for potential consumers than what either Amazon or Google now offer.
Retailers will continue the trend of reducing both the number of retail stores and the size of retail stores. Retailers like Macy’s and Dick’s Sporting Goods that are starting to do direct shipping from local stores to customers as part of an Omnichannel strategy will expand this effort as a way to find a use for existing retail space. The rapid growth on delivered retail sales will also require significant investments in fulfillment operations as has been happening at retailers such as Nordstrom’s, Gap Inc. (Gap, Banana Republic, and Old Navy), Urban Outfitters, and Macy’s.
Retailers that compete with Amazon will increasingly look for more alternatives to home delivery. Those with a significant retail presence will offer ship to store and store-pickup. Others will look toward Google and ShopRunner to provide local secure pick-up points without requiring that they hand over their fulfillment and warehouse operations to Amazon.
Retail real estate developers and operators will increasingly find challenges in leasing less desirable properties and slower growing regions of the country. Retail developers will need to find alternative uses for retail spaces abandoned by retailers that find their customers prefer buying on-line. Given the pace that consumers are currently shifting their purchases away from brick and mortar outlets, commercial real estate developers need to plan now for a significantly reduced need for retail space a decade hence.