Tag Archives: online shopping

The symbiotic relationship between online shopping and brick and mortar stores

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Can online shopping and brick and mortar stores benefit each other?

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“There was a narrative that as online grew, stores would become less relevant. But it hasn’t worked out that way,” said Neil Saunders, managing director at GlobalData. “In many ways, the store is still the heart or hub of retail.”

It is another example of how online-only retail has its limits, and why physical stores are making a comeback. After years of overbuilding that lead to a sharp contraction, retailers are on track to open more stores than they close in 2024 for the third consecutive year, according to advisory and research firm Coresight Research.

Many retailers have found that it is too expensive and difficult to attract and retain customers without physical stores. And using stores as pickup and drop-off points helps lower the labor, packaging and shipping costs involved in online orders…

Kohl’s now fulfills more than a third of its online orders in stores, Walmart more than half, and Target nearly all its sales from its network of roughly 2,000 locations, according to the companies.

Americans like shopping. This story makes me think that shopping can even be more pervasive. You can be shopping online and in person. You can shop from anywhere and everywhere. It can happen in the online and offline worlds. It is a self-reinforcing system.

Oh yeah, there is still that pesky problem of people not feeling financially comfortable. Is the all-encompassing shopping realm able to overcome this? Is it just a matter of finding good deals or working with some credit or debt to make purchases?

And if shopping is everywhere, there will likely be more need for companies to differentiate their products and services. What will make someone click on that email or that Instagram ad? What will drive people to that location as opposed to making the purchase online?

More warehouses coming to the Chicago region

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Chicagoland will be adding a lot more warehouse space in the near term:

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Molto plans to break ground this month on a 1.1-million-square-foot distribution facility, the first phase of its 110-acre Minooka Ridge Business Park in Minooka, a village near I-80 and southwest of Joliet. The company is also developing Weber55 Logistics Park, a two-building complex on 60 acres at the northeast corner of Weber and Taylor roads in Romeoville, another Joliet suburb. That site will include distribution facilities of 627,840 square feet and 270,000 square feet…

Other developers are just as active. At the end of March, 44 buildings of more than 200,000 square feet, a record-breaking 23.7 million square feet in total, were underway across the Chicago metropolitan area, according to Colliers International.

And tenants are plentiful. In the second quarter alone, Amazon leased a 1-million-square-foot warehouse in Joliet, and another in Kenosha, while other companies, including NFI, SC Johnson and RJW Logistics, signed deals for more than 500,000 square feet.

The amount of big-box industrial space that is vacant in the Chicago area tanked during the first quarter of 2022 because so much space was leased or occupied. The industrial vacancy rate fell ”by more than a full percentage point to 2.61%, a record low by a wide margin,” Colliers reported.

As shopping malls and downtown brick and mortar sales struggle, warehouse space is booming. This helps service online shopping as well as big box stores.

Elsewhere in the article, the increase in warehouse space is tied to jobs and possibly cheaper prices for consumers. But, adding such space may not always work out so well in comparison to how else land could be used. And the locations cited in the article suggest Will County is a warehouse center as are other locations more on the edges of the Chicago region.

“Dark stores” arrive on the urban landscape

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The brick and mortar retail establishment has a new member popping up across communities: “dark stores.”

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These ghost storefronts—often called “dark stores”—are warehouses in all but name, yet they look markedly different from the gargantuan spaces where older online grocery companies like FreshDirect store their goods. Traditional warehouses are zoned to regions outside of commercial districts, meaning they will be set apart from areas with lots of walking traffic. Dark stores are located in retail storefronts on main streets, near the heart of busy neighborhoods, but they serve only ecommerce customers. And they’ve gone from a niche phenomenon discussed largely in retail industry circles to a feature of major American cities.

The rise of dark stores directly parallels the acceleration of ecommerce as a whole, especially in the grocery industry. Online sales represented 13 percent of all grocery spending in 2021, a new high, and dark stores are designed to make the delivery process smoother…

Dark stores—sprouting up in former butcher shops, convenience stores, gyms, and mattress retailers—are taking up spaces once designed to be open to the public. That shift from far-flung warehouses to accessible retail storefronts has city planners on edge. Because dark stores sit at the confusing intersection of being technically occupied, but functionally empty, they risk entrenching the worst impacts that vacant real estate can have on a community.

The fear is that dark stores, like vacant storefronts, could puncture a hole in the social landscape of a neighborhood. Vacant storefronts are bad for cities. When there are a lot of them in a tight vicinity, they mean that fewer people will walk down the street, and fewer connections between neighbors will happen. “Having people out on the street increases public safety, because more people see things that are happening,” said Noel Hidalgo, executive director of BetaNYC. “That level of social engagement makes cities safer and makes places safer.” Accordingly, neighborhoods with high numbers of vacant storefronts see increased crime rates, fire risks, and rodent activity.

I wonder how municipalities will respond to this because of the revenues such dark stores might generate. It is one thing if other retailers or businesses want to use these spaces. But, if dark stores are occupying commercial space and generating money through paying property taxes and sales taxes plus adding jobs, will they be as concerned about the social fabric? It can be difficult to fill vacant commercial properties, particularly spaces like grocery stores.

So out of the concerns expressed above, I could imagine cities limiting the number or density of dark stores within different kinds of zoning. Or, what if there was a whole block of dark stores and then none for a decent distance from there? If e-commerce is here to stay and needs to be close to those who order, perhaps warehouse districts need to be spread throughout communities at regular intervals or near transportation hubs.

Societal goals: avoiding society through online shopping

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The comic Take It From the Tinkersons recently had a strip hinting at a major consequence of online shopping:

While this might be a bit of hyperbole, there is some truth to this. Is one of the appeals of online shopping the ability to avoid society and social interactions? Even shopping at your local big box store requires rubbing shoulders with other shoppers and a brief interaction with a cashier (even with self-checkout, you still have an overseer).

At the least, online shopping provides evidence of the significant shift that happened in Western societies in the last few hundred years. The earliest sociologists were very interested in the switch from tight-knit village or agrarian life to the less connected and varied urban life. Marx saw tremendous consequences for labor and the individual within an economic system rooted in burgeoning cities. Durkheim compared mechanical and organic solidarity, a shift toward a complex division of labor where individuals now depended on others to do essential tasks for their lives. Tonnies contrasted gemeinschaft and gesellschaft, more direct social interactions versus indirect social interactions.

Online shopping of the sorts we have today may only be possible in a highly complex and individualized society such as our own. The process of moving a product from its production point to a warehouse to your home or business through online clicks is quite complicated and amazing. Yet, it really does limit social interactions on the shopping end. As private individuals, we can now make choices and receive our products away from scrutiny. It would be an error to think that this private purchase is now removed from social influence – with the spread of media and influence of social media, we may be influenced by generalized social pressures more than ever – but the direct social experience is gone.

This could have big implications for social life. Will buying habits significantly change now that immediate social interactions and social pressure is removed? Will we become used to such social transactions not involving people that we will be willing to remove social interactions from other areas? There will certainly be consequences of increasing online shopping and public life – even if it is related to individuals consuming products in a capitalistic system – may just suffer for it.

 

Adaptations to Walmart leaving communities

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Joel Kotkin considers the fate of smaller communities where Walmart has decided to close stores:

None of this suggests that the retreat of big boxes from smaller towns and some urban areas will be painless. Yet those who see this trend as the harbinger of the end of malls or Main Streets may be in for a surprise. Rather than die off, bricks-and-mortar shopping will change, adding new elements and moving from ever greater uniformity to more variety and differentiation, which are critical to independent business’s survival. Much of this change will take place in small towns, but also in suburban areas, which have long been the happy hunting ground of big boxes.

Why not in the big cities? One of the chief ironies of our times is that chains and their attendant sameness now define much of our most sophisticated urban core—Starbucks on every corner, global brands and restaurants serving the same trendy cuisine. The recovery of large cities, suggests New York researcher Sharon Zukin, has also made them more alike by “bringing in the same development ideas—and the same conspicuous textual allusions and iconic corporate logos inevitably affixed to downtown architectural trophies—to cities across the globe.” Efforts to make the city “safer and less strange to outsiders’ eyes”—tourists, expatriates, media producers, and affluent consumers—are making one global city barely indistinguishable from another…

Some small towns—and suburbs even more so—will be transformed by immigrants and millennials, who may want to set up their own unique shops along the very Main Streets once targeted by firms like Walmart. In wealthier communities, this may mean more boutiques and high-end restaurants. But among less affluent areas, other institutions, such as cooperatives—300 already nationwide and another 250 on the way, as well as farmers markets—could provide some of the products that many once found at Walmart…

As the retail world become more digitally focused, and less big-box-dominated, there is a golden opportunity to restore the geographic and local diversity that has seemed doomed for nearly a half-century, but now may enjoy a new burst of life.

There is little doubt that the retail industry will continue to change. Walmart and other large corporations may seem inevitable today but they didn’t exist decades ago and may not have much presence in the future. Yet, Kotkin seems pretty optimistic about online retail which requires its own set of adjustments as well as infrastructure that could be threatened in the future.

For small towns and many suburbs, do these future changes leave much space for residents themselves to create and experience local differences? On one hand, online retail offers customization yet relies on large companies located elsewhere and on the other hand, local diversity in things like restaurants and small stores draws upon local entrepreneurs. Is the secret to promote an experienced based consumption – local culture and food – as opposed to decades of goods based consumption?

Observed in Manhattan: online shopping leads to more traffic

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A graduate student in Manhattan argues that more online shopping leads to more traffic issues on the dense island:

Consider it this way: people around the world seem to have a travel time budget of a little over an hour each day. Before the rise of e-commerce, part of that time would have been spent in the service of purchasing goods. But if that budget remains fixed, then people today may simply buy something online, then hop in a car and go visit a friend across town. In that scenario, personal travel stays constant while commercial travel increases — a net gain of people and goods on the road…

Woodard’s case studies of the Gehry and three other residential apartments in Manhattan found the answer to those questions may very well be yes. Surveying the buildings for several hours at a time in the middle of the day, Woodard found that, on average, delivery trucks stayed parked for 21 minutes at a time, and two-thirds of them were double-parked. Extrapolating the data over a full day, in the case of the Gehry, that means delivery trucks alone occupy road space that’s not a true parking space for seven full hours…

Though Woodard’s case studies were never supposed to paint an exhaustive portrait of the urban e-commerce problem, they do underscore how little is known about it. One study from way back in 2004 estimated that delivery trucks cause nearly a million hours of vehicle delay each year, but the stunning grown in online shopping since then (and the fact that companies like Amazon are reluctant to release their data) makes any precise estimate difficult. Many experts consider this process of moving freight that final mile to be one of the biggest forgotten problems facing modern cities.

At the core of the problem is street parking. In a dense urban area like Manhattan, where few buildings have the luxury of freight docks or loading zones, delivery trucks have little choice but to park at the curb. That leaves passenger vehicles and delivery trucks to duke it out for precious street-parking space, which in turn leads to double-parking, which in turn leads to general congestion.

Interesting question and findings. How much do they apply beyond Manhattan, a dense place?

One issue not addressed here: how much do commerce companies bear responsibility for this congestion? Shopping online is often viewed as cheaper and more convenient but this analysis suggests there are some hidden costs that someone has to pay for. Roads are public goods paid for with tax dollars. If they are causing more congestion, could they bear some of this cost?