Friend or foe?

Discussions about the effects of Internet retailing have become commonplace these days. Many observers state that e-commerce is the biggest challenge retail property owners have ever faced, primarily because it empowers the consumer to do what intermediaries have done before.

I am not sure that the retail world is reeling from the effects of e-commerce. If anything, my guess is we are still working our way through the impact of the 1990s, which left us with too much retail space and too many retailing concepts.

In order to understand what e-commerce means and what its potential effect on so-called "traditional" retail space could be, let's focus on the key characteristics of e-commerce "space" and how it compares with traditional retail space.

Both traditional stores and Internet storefronts offer the customer - as well as the retailer - specific benefits. For instance, Internet retailers can offer customers an infinite supply of goods, while traditional stores carry a limited number. Also, Internet retailers offer around-the-clock sales, while traditional stores cannot.

Will the Internet replace traditional stores, or will there be a complementary relationship between the two? Taking the differences into account, I think the effect will be complementary in the long run.

Something to fear? About a year ago, a successful high-end regional mall sent a letter to its tenants discouraging signs or advertising that promotes or encourages purchases via the Internet. Not surprisingly, most tenants ignored the letter, since they want their customers to be aware of the online option. Clearly, mall ownership feared the Internet.

However, why can't traditional retailers expand side-by-side with e-commerce retailers? It is tempting to assume that Internet retailers will capture more and more of the overall market within the next few years, but retailers using the new technologies creatively rather than competing against them will remain very successful.

Look at Wal-Mart and its new Website. Wal-Mart uses the advantages of the virtual store and offers many more items than its "brick and mortar" stores. Clearly, Wal-Mart "gets it." And yet, Wal-Mart is the one retailer believed most responsible for revolutionizing the use and pricing of physical space.

E-commerce is clearly a two-way development. There are not just "brick-and-mortar" retailers moving to the Internet, but also Internet retailers realizing the need for physical stores in order to stay in touch with differing customers. If we only look beyond today's situation to the future, we can see Internet retailers opening physical stores and traditional retailers starting to use the Internet.

With a little imagination, one can see that the long-term mutual support between Internet retailing and physical space far transcends any short-term cannibalization of "brick-and-mortar" sales by Internet retailers. First, the Internet is not only a competitor, but also a device that helps retailers build their brands and reach more potential customers. Second, there is often no substitute for the audio-visual effects as well as the social aspects of the shopping experience, and these cannot always be attained in "cyberspace."

Some retail experts go so far as to predict the emergence of the "post-Web retailer." This retailer will focus on anticipation of customer needs and distribution through multiple points of sales. These points of sales will not only be the Website and the store but also call centers, catalogs and interactive TV. This multifaceted retailer will sell a complete set of products targeted to specific customer segments. And while the fully grown version of this "post-Web retailer" may not yet exist, one could hypothesize there are already a few candidates in the offing, including Wal-Mart and Federated Department Stores.

And if we want to be really futuristic, we could conclude that while the revolution in everyday technology may have a negative impact on traditional retailing in the near future, it will eventually lead to the integration of "cyberspace" with physical space. This would result in a "metaspace" of sorts, a store that transcends the limitations of physical space. This store format would be a showroom with minimal inventory and highly mobile fixtures. These "metaspaces" would in turn be supported by Websites while also supporting Web sales.

So, while Web retailers may negatively affect traditional retailers in the short term, the two sales channels will eventually complement each other.

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