by Dan Rafter
What’s behind the expansion of the U.S. retail sector? According to DTZ, the rise of e-commerce and a steadily strengthening U.S. economy has made all the difference.
These two factors should mean a strong second half of the year for the retail sector, according to DTZ’s summer retail report. And they should provide a boost to the sector in the years to come.
As DTZ says in its report, consumer confidence today is at its highest level since 2007. In April of 2015, the consumer confidence index stood at 95.2. The index’s 20-year average is 93.5, so consumers are especially confident today.
And confident consumers, of course, mean more retail sales.
But what about e-commerce? DTZ reports that e-commerce sales today account for just 8 percent of retail sales in the United States. However, e-commerce is becoming more of a force every year. DTZ says that e-commerce sales growth has been in the 15 percent to 20 percent range every year since 2010, while brick-and-mortar retail sales growth has ranged from 2 percent to 4 percent during this same period.
DTZ predicts that e-commerce sales will one day account for 20 percent to 25 percent of all retail sales.
E-commerce sales haven’t been the devastating force that many brick-and-mortar retailers feared. But they are having an impact. DTZ reported that 75 percent of all Millennials use the Internet to research their purchases before making them.
Only about 50 percent of Generation X consumers use the Internet to research their major purchases while only 35 percent of Baby Boomers do the same.
The message, then, is clear: Retailers if they want to capture the dollars of Millennials need to pay attention to their online marketing.
Life remains challenging for many major retailers despite an improving economy. DTZ reports that Macy’s is still the dominant department store player in the United States. But this company plans to close at least 100 stores in the coming year, DTZ said. At the same time, though, Macy’s will see net employment gains as it expands its e-commercial fulfillment capabilities, usually in the form of mega-distribution centers of 1 million square feet or more.
As far as vacancies go, San Francisco has the lowest retail vacancy rate at 2.4 percent. Reno had the highest retail vacancy rate, 14.2 percent in the first quarter of 2015. Detroit had the third-highest retail vacancy rate during the quarter, 11.7 percent.
There was good news in Louisville, though, which saw the second-biggest drop in retail vacancy rate from the first quarter of 2014 to the first quarter of 2015. Louisville’s retail vacancy rate fell from 8.1 percent in the first quarter of last year to 6.8 percent in the first quarter of 2015.