John Zikos: Will Online Sales be the Death of the Shopping Center?

Apr 5, 2013

D Real Estate Daily - April 5, 2013

The recently announced merger of Office Depot and OfficeMax is a reminder of how the office supplies category has lost ground in the traditional bricks and mortar format to online sales. The Chapter 7 filings of Circuit City and Borders Books, as well as the struggles Best Buy and Barnes & Noble have faced, also serve to remind us of the growing threat faced by retailers of certain categories.

Online retail sales, or e-commerce, increased 15.2 percent in 2012 when compared with 2011, while total retail sales increased 5 percent. In 2012, e-commerce accounted for 5.2 percent of total retail sales, up from 4.7 percent in 2011. During the past decade, e-commerce has gone from 1.6 percent of total retail sales to 5.2 percent, and the increase has been a very steady upward trend.

It appears obvious that this trend will continue. Does this mean that, over time, we will no longer need shopping centers and will buy everything online? Although you can purchase just about everything—including groceries—online, some products are better purchased in a setting where you can see and touch the merchandise.

Restaurants and services will continue to be an even larger part of the shopping centers of today and tomorrow. In addition, fitness will continue to occupy a larger footprint, along with medical. Creating a sense of place where a community can gather and municipal services are offered is an important ingredient in today’s shopping centers.

We will always have shopping centers, but to be successful, they need to evolve. This is really nothing new. The shopping centers of the recent past were very different from the centers of 50 years ago, and the shopping centers of tomorrow will be different than today’s– or at least the successful ones will be.

- John Zikos is a partner at Venture Commercial Real Estate.