Online Retail Growth Hinges on Brick-and-Mortar Locations

The costs and effort involved in leasing and operating a storefront location aren’t cheap—but they’re worth it. A report from Moody’s Investor Services brings good news for online retailers with a physical store presence in the United States: Brick-and-mortar locations are key for Internet growth.

The study found that even though most groups in the retail industry have made significant strides in building an e-commerce presence recently, many still derive a small percent of their overall sales online—an average of 6 percent.

Other study findings uncovered the unlikelihood of mass store closings as retail tenants increase their online presence. There was no connection between online growth and physical store closures, even as a measure to save on storefront operation costs that may be perceived as unnecessary. Moody’s noted that stores give shoppers the option to see and touch the product that they may have researched online, which is one of the reasons stores will remain crucial.

Moody’s noted, however, that a viable online channel is becoming more critical for brick-and-mortar retailers to maintain and strengthen their competitive positions. So tenants that currently don’t have an online presence would be wise to consider the option. It touted online sales as a cost-effective way to maximize existing physical locations and to leverage distribution capability.


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