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It’s been hailed “The Amazon Effect” – a doomsday-esque description of the role online retail is playing in the eventual downfall of commercial property.

The predictions

Online shopping has been described as a game changer. It seems we can’t turn our heads without being confronted by an opinion on how retail will look in 10 years’ time. And it’s true. Retail is shifting. With the advances in technology, we’re a more connected society than ever before.

Along with the ability to communicate with virtual strangers, this has also enabled us to dabble in the world of online retail. As our lives get busier and more stressful, with an ever-increasing amount of hours being spent in traffic or answering emails, we’re always on the hunt for a more convenient solution to everyday problems.

But how real is the threat to commercial property, really?

The fear is that consumers will eventually abandon physical stores altogether. Insteady, they’ll order their food, toiletries, and furniture online. Before you know it, we’ll be a bunch of isolated hermits, interacting only with the delivery man. Or, better yet, with no one at all, if Amazon Key takes off.

 

Amazon Key

Grant access to the people you trust with the Amazon Key App and monitor who enters your house when you’re not home. Schedule permanent access for your family members or give temporary access to recurring visitors like dog walkers, house cleaners, or out-of-town guests. You’ll be notified any time your guest locks or unlocks your door or watch motion clips as they enter and exit.

Prime members in select cities and surrounding areas can opt-in to in-home delivery. To start using in-home delivery, enable it in the Amazon Key App, shop on Amazon using the address that you installed the Amazon Key Home Kit, and select “free in-home delivery” at checkout.

On delivery day, you’ll be notified in the morning and just before the delivery for you to block or watch in-home delivery. Amazon will authorize the delivery and unlock your door. No keypad code is shared with a driver. You can watch the delivery live in the Amazon Key App or see a video clip of it later. You’re notified once the delivery is complete and your door is relocked.

 

The reality

Last year, Amazon reignited these fears with its purchase of Whole Foods. Traditional retailers’ stocks dropped and we all gathered around to speculate about the next big fall. The irony, however, is that the move signified exactly the opposite.

While it’s impossible to predict the future (try as we may), the move to a purely online shopping world is nowhere near being a reality today. Amazon knows this – which is precisely why they decided to invest in a brick and mortar store. Having launched its own food delivery offering (AmazonFresh) back in 2008, the company was in need of a physical footprint. It’s estimated that the food distribution market is worth $800b, making it a definite focus for the online giant.

In a similar fashion, Amazon opened its first physical store, Amazon Go. Setting it apart from competitors is the ability for shoppers to walk out the store without having to wait in a queue. Each item is automatically added to the subscriber’s Amazon account. The first store was opened earlier this year, with Amazon planning on introducing 2 000 more.

Over on local soil, there are a few key factors to look out for.

The South African perspective

According to a 2017 report published by Visa, online retail accounted for only 1% of the overall retail share. This decidedly points to the fact that we still prefer physical stores. It’s important to keep in mind, however, that this is bound to change with added accessibility and ease-of-use of online retailers.

A trend that’s been seen locally and internationally, is the shift away from large malls in favour of convenience centers and local retailers. It may very well become more common for South African customers to purchase their monthly staples online, while visiting physical stores for daily essentials or top-ups.

Shopping malls are increasingly feeling the pinch, opting to fill untenanted space with concept stores or exhibitions. This adds to the oft-discussed experiential shopping experience. One where shoppers aren’t necessarily looking to buy a product, but rather to see and experiment with new offerings.

Opportunity

As more and more locals become familiar and comfortable with online retail, the need for distribution hubs and warehousing will continue to increase. According to Broll’s Anthon van Weers, they are seeing a severe shortage of industrial space: “The scarcity of industrial land within a tight radius of the CBD means that rentals for new A- Grade purpose-built facilities, with 13m eaves heights and high yard ratios have now reached R70 per square meter triple net.”

While Amazon is yet to establish a local distribution hub, local e-retailers like Takealot have shown the rapid growth in need for warehousing space. While it’s difficult to predict a precise time frame, it seems the appetite for this type of property won’t die off anytime soon.

The bottom line

With a young and mobile population, South Africa is primed for innovation and new ways of doing business. While now may not be the time to panic, we’d do well to keep the future in our sights when making investment decisions today.

 

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