United States (global market development, depth and penetration of retail), traditional trade or offline is expanding at rates of 3.5% annual real (2017), with an occupation of 93% e It will inaugurate 1,176 new stores next year (vs. an average of 1,400 in the past 10 years). Therefore, what referred to headlines as agonizing to the traditional retail industry and as Victor unchallenged to E-commerce?
First, only some shops operators experience the problem in traditional retail Department and not the industry in general. Some of them (Sears and Macy’s) are in decline for 30 years and although e-commerce is not responsible for, definitely not helped them. These operators are in bankruptcy because its value offerings are damaged and nobody wants to buy there. Decades ago they began to get rid of all categories and found refuge in fashion, business with the best margin, but that other intermediate operators such as group Zara, H & M and Uniqlo, handled more quickly and better. In addition, opened new stores excessively and developed key business for the retail credit without success.
Second, the market share of the online channel is so small that even if it grows at double-digit rates it is difficult that significantly damaged the traditional. In fact, online sales close 2018 with an expansion around 15% real (US 68,000 million on a market of 452.000 million US), while the offline retail will make it 4% real (US 180,000 million on a total market of US 4.5 trillion) i.e. an amount of almost 3 times greater than the channel online billing.
Third, as the digital market increase its size each time its marginal growth rate will be lower.
Fourth, most of the online players are companies that lose brutal amounts of cash, including Amazon that it generates losses with retail, but win membership Prime and cloud services. While the digital channel has captured market share, it has done so at a very high cost. It is sufficient that the capital market required returns in excess on its cost of capital so that these companies correct their valuations. In fact, part of the adjustments that we have shown in the last 60 days respond to this. A concrete example is Amazon that has lost about 25 percent of market capitalization.
Finally, retailers are opening stores in the strongest malls (PRIME) and closing premises on the properties of low yields and poor quality. In fact, the operational results (NOI or proxy EBITDA) of assets more PRIME (1st and 2nd quartile) are increased at rates of between 2.5% and 7% per year. Bank of America Merrill Lynch research indicate that companies with presence only online have an aggressive plan of opening stores in the coming years. Amazon, Warby Parker and Untuckit, making up to 2 years ago had some 200 stores, this year will end with 430 stores. Moreover, Amazon announced the opening of more than 400 libraries and Warby Parker between 800-1000 new locations, which are not considered within the new store openings.
In conclusion, the panorama of the traditional retail in the U.S. looks solid. It should not be forgotten that Amazon has acquired to Wholefoods to merge with the world of traditional retail and not to close their shops. Many wonder how the last mile retail will look, we believe that much of it will be done through traditional retail, since these stores are closer to end customers, minimizing logistics costs despite higher costs of lease.
And in Chile? Our market is different from the United States. Local retailers in the last decade strengthened its offer of value and competitive position to diversify its offer, had a moderate strategy of opening stores and successfully developed complementary businesses (credit). Regional brands in time understood the need to create an ecosystem where physically merged seamlessly with digital (multichannel). Today the customer is empowered and will be loyal only to brands with global presence and not to the different channels of purchase.
Poured in this op-ed content is the sole responsibility of the author and do not necessarily reflect the editorial line nor the counter position.
