With people confined to their homes as a result of the COVID-19 pandemic, more and more households and individuals have been forced to turn online for their daily shopping needs. Unexpected in many respects, the pandemic and corresponding stay-at-home orders have accelerated the shift online, a trend that was already being witnessed at a global level, with the push of online giants, such as Amazon, responding to consumers’ growing appetite for the convenience and instantaneousness of online shopping. Beyond the impact on consumer behavior, this shift online has also had reverberations in the real estate world, shaping most notably the retail sector.

With one of the highest internet, smartphone and social media penetration rates globally, the GCC has been ripe for the growth of e-commerce. Across the region, the UAE is one of the most advanced e-commerce markets, with a penetration rate of around 4%. Supported by these underlying fundamentals, recent months have witnessed a boom in online transactions with key retail players across the market experiencing spikes of 200 to 500% in online sales during the pandemic. However, with more and more people turning online for their purchases, what impact has this had on brick-and-mortar (B&M) retail?

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It should come as no surprise that along with movement restrictions and a greater expansion of online shopping, retail malls have witnessed reduced footfall in the past few months. Retailers are responding quickly to this trend, and in a recent CBRE survey, 78% of retailers expressed plans to increase investment in online retailing and delivery apps. Moving forward, however, and particularly so in this region, physical retail destinations are expected to maintain their place in the wider real estate landscape, with a few key shifts along the way.

With people increasingly shopping online, it will be key for B&M destinations to focus even more on experience, with a greater emphasis on entertainment, leisure and dining elements to attract visitors. Gen Z will also rapidly become a powerful new source of retail spending, placing a greater attention on brand values, personalization and sustainability. Studies suggest that this Gen Z consumer will still have a desire to shop in B&M stores, with the online space allowing them to browse and research products, while the physical shop will create opportunities to try, test and experience the product and what the brand stands for in real life.

E-commerce also presents a range of other opportunities for B&M retailers if capitalized on effectively. The online world provides retailers more touch points and ways to quickly access new clients through both online store presence but also through social media, which has also been growing as a point of sale. With less space required for physical inventory, retail space can be reimagined and repositioned, with a greater emphasis on the customer experience. Finally, digital platforms create a wealth of opportunities in terms of data gathering and analysis, allowing retailers to better understand and target their customers.

Despite the challenges that online shopping presents for the traditional retail marketplace, retailers which are able to quickly respond to growing shift and seamlessly weave together their physical and digital platforms are well-poised to thrive in the marketplace of the future.

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