Sydney, 05 June 2018 – Australia’s retail sector is in the midst of an omni-channel revolution, with intensifying demand for same day delivery and a seamless end-to-end user experience challenging the traditional retail model and increasing competition for the consumer wallet.
A new research report released by CBRE, ‘Australia’s Omni-Channel Revolution’, highlights the ongoing transformation of retail markets both globally and in Australia, underpinned by our shift to 24-7 shopping across interconnected channels.
The report highlights that while bricks and mortar will maintain an important aspect of retail, multi-channel retail – involving minimal interaction between a website and physical store – will be replaced entirely by omni-channel retail – defined as one seamless shopping, advertising, delivery and payment process that provides a unified buying experience.
CBRE Associate Director of Research, Kate Bailey said the next few years would bring major changes for the Australian retail landscape as consumers evolved to match those in more advanced markets worldwide.
“The retail goal posts are shifting, and as a result, businesses need to transform entirely – not just update their website. The evolution of the omni-channel retailer requires the involvement and transformation of the entire business, from advertising and merchandising to payment, fulfillment and delivery,” Ms Bailey said.
The report highlights that by 2019, 90% of the world’s population will have fast internet access on a mobile device – a figure driven by the popularity and affordability of smartphones and relatively low cost of data. This has supported not only the growth of purchasing online, but also the ability to browse and compare prices at any time.
Online spending in Australia currently accounts for approximately 9% of all retail trade, with this figure expected to rise to 12% by 2022 – representing an 80% spike in annual volume from AU$24.4 billion to AU$43.1 billion. By contrast, traditional retail will grow at a much slower rate, however, it is estimated that by 2020, 34% of in-store retail sales will be in some way influenced by the web.
CBRE Senior Managing Director, Advisory & Transaction Services, Matt Haddon commented: “The traditional retail store is not becoming obsolete, but its purpose is changing significantly. Stores will become display spaces, showrooms or experience destinations that represent a brand’s story or objective.”
CBRE’s Asia Pacific Millennial Survey revealed that while online shopping was the most frequent method for purchasing goods, millennials frequent bricks and mortar stores more than other generations, underpinned by a personal preference for feeling and experiencing goods physically.
“The future success of retail will hinge on interconnection between both online and bricks and mortar – it is unlikely that one will survive without the other,” Mr Haddon said.
The report also highlights changing expectations around service delivery – and the impact this is having around the convergence of retail and logistics markets.
CBRE’s Head of Supply Chain for Pacific Christine Miller said: “Compared to the rest of the world, Australians have relatively low expectations around delivery times, with most customers generally waiting between three and 10 business days for products to arrive. These expectations are changing and service providers are now being challenged to adjust.”
As fast delivery becomes a crucial element for a seamless omni-channel strategy, warehouse and distribution locations in close proximity to customer bases will be vital to minimise costs and honour delivery timelines.
“With transport accounting for at least 50% of total supply chain cost – compared to 5% for occupancy – the right location for both distribution and last mile delivery is imperative. In the US, the rise of omni-channel retail has driven the development of last mile distribution nearby major populations,” Ms Miller said.
“Compared to traditional distribution centres, which are typically located in the urban fringe – allowing larger footprints on cheaper land – last mile distribution centres need to be located in urban areas and require little internal infrastructure. These centres have minimal racking given goods arrive and are dispatched within a very short timeframe, often several times a day.”
In Australia, growth in e-commerce sales will generate demand for an additional 350,000sqm of distribution space annually.
As land availability in key markets begins to tighten – the interest in multi-storey warehousing, which is already quite common in some overseas markets will increase.
“In anticipation of escalating demand for faster delivery times, products will need to be stored in closer proximity to customer bases – typically locations of limited land supply and of higher land value,” Mr Haddon explained.
“In markets such as South Sydney and Port Melbourne, we expect this will drive Australia’s first wave of multi-storey warehouses, which are already commonplace in many land-constrained Asian and other offshore markets.”
View and download full research here.
For Australian/international news or global stories, follow CBRE on Twitter: @cbreAustralia