January 3, 2019
Once accused of unfair competition and of "destroying" physical stores, e-commerce sites are now merging with the retail world to give rise to "connected commerce." More than ever, digital and physical commerce are mutually beneficial. The end of the duality between commerce and e-commerce marks the advent of a new era, in which the need for commercial premises, according to Mata Capital, presents investment opportunities.
From a rapprochement to a convergence of retail formats
The consumer internet truly began in France in 1995. That year, the giant Amazon launched. Mail-order companies (such as La Redoute) saw an opportunity in the web, while Fnac became the first "click and mortar" retailer with Fnac Direct as early as 1998. That was a long time ago, because in just twenty years, what was once nascent and threatening e-commerce has today become vital for many players. This evolution occurred through two major movements: pure-players gained market share and experienced incredible growth thanks to e-commerce. After years of excellent financial performance, stagnation set in, making it necessary to find new levers. That's when the idea of having physical stores or partnering with traditional players emerged.
Conversely, some well-established retailers in our cities realized they needed to dive into this digital revolution. To find a new sales channel, to build brand awareness. This movement gave rise to e-commerce players combined with an offline experience (Sephora or Leroy Merlin are good examples).
These two movements, which contributed to a convergence, have today put an end to the distinction between commerce and e-commerce. So much so that the most active and ambitious retailers know that having commercial premises is and will remain essential. Just like having an online presence.
The transformed physical network, a vital cross-channel anchor
Having a physical network and a strong brand was once an undeniable asset. But in this era of converging retail formats that we've just discussed, that brand must also exist online. The products, the service, the history, and the values. All these elements that structure a brand over time are evolving. They must also be conveyed online. So, physical networks have begun their transformation, at varying speeds depending on the brands. Even brands that were most resistant to e-commerce are rethinking their technological agility, marketing, and logistics. On this last point, Mata Capital notably invests in last-mile logistics in Paris through its MCF Quality Street fund.
The role of physical stores and how it varies by location
The relationship with "brick-and-mortar" stores has evolved. In large cities, through well-designed small spaces, there's a demand for fast and precise services. People no longer go shopping in the traditional sense; instead, they pick up orders, collect parcels, or retrieve products from a store. Retail is becoming less and less a place for browsing (except for certain locations that capitalize on this promise). We are in the era of utilitarian local commerce in large cities. Pop-up stores and other temporary shops bring dynamism.
Conversely, there's strong enthusiasm for small and medium-sized stores in regional towns. Because travel constraints are different, and car use is still feasible, physical stores aren't just collection points for online orders. In regional towns, people shop online and use all digital services just like in big cities. But they also take the time to do their grocery shopping in food stores if these offer a promise of quality and/or price, and provide an experience.
At city entrances, highway exits, and along busy national roads: brands are setting up shop and performing excellently! From discount retailers offering "low-cost" products to major names in home decor, food, and sports, there's room for everyone. Demand for commercial premises in medium-sized towns is strong, with a modest but well-defined catchment area. The turnover of some brands located in these highly visible spots can sometimes be staggering.
This makes sense because these commercial zones cater to a new form of consumption that combines "shopping" with leisure. In a single zone, it's possible to buy fresh fruits and vegetables, wine, bread, sports equipment, and balloons for children's birthdays. What's more, parking is free. In these comprehensive zones, where gyms, amusement parks, and even pharmacies are setting up, e-commerce is not a competitor. It is there, present, for consumers who desire a connected experience.
It's paradoxical to see online retail, whose initial promise was always to slash prices, now becoming a driver of experience. Internet users have always cited "price" as the main advantage of online offers, but today, it's no longer the sole determining factor for placing an order. In a connected world, product quality, breadth of offering, services provided, location, customer experience, and finally, trust in the brand are also strong criteria... whether online or in-store. This explains why commercial properties are still highly sought after to create or develop a brand. Commercial properties withstand trends and changes, and their value remains strong and enduring.