News Article

Omnichannel: The Real Estate Aspect

By Jan Hogewoning | Wed, 11/13/2019 - 17:11

Instead of being a threat, e-commerce can help reinvent the function of traditional stores, but first there are some complex hurdles to overcome, agreed the panelists discussing Omnichannel: The Real Estate Aspect at the Mexico Infrastructure & Sustainability Summit 2019 on Wednesday at the Hotel Marquis in Mexico City.

The expert panel included Enrique Villanueva, Development Director at Pulso Inmobiliario; Gaston Wainstein, Senior Vice President of Real Estate Development for Walmart Mexico and Central America; and Carlos Garcia, Senior Vice President Industrial and Logistics at Coldwell Banker Commercial.

Implementing e-commerce channels involves very complex processes, which many customers never get to see. First, a warehouse is needed in a variety of strategic locations. “In urban areas, it is not always easy to obtain the space for logistical warehouses,” Villanueva said. This has led to several creative solutions, including the remodeling of unused parking lot space in malls as small logistical operations for stores so they can also offer their products through online orders, Garcia added. In the case of Walmart, “we have been using our own stores as small distribution centers, which when connected, form a logistics chain. The advantage for Walmart is that eight out of 10 Walmart customers live within 10 minutes of a Walmart store,” offered Wainstein.

Villanueva is confident that the traditional mall will continue to exist if it can broaden its offer beyond shopping. These days, he said, malls are increasingly offering diverse experiences related to everything from eating to special cultural events. Adapting to the market also means collecting better intelligence on who is coming to the mall, where they live, and what their intentions are. The advantage is that malls are still very popular across Latin America. “One reason is the excitement of going shopping as a social activity. A second aspect is security. Malls are considered safe areas where days can be spent with friends and family,” Villanueva explained.

There are other significant barriers that prevent consumers from overwhelmingly switching to e-commerce. Going to the store instead of ordering it online does not just entail a social motivation, said Garcia, there is also a need to be certain about a product before purchasing it. Then there is the simple fact of payment. “Many people do not feel comfortable with providing their financial details online, not to mention that a large segment of the population in Mexico does not have access to a credit card or internet at all.”

Retailers also face logistical hurdles to reach rural demographics, according to Wainstein. Even though e-commerce could potentially increase the geographical reach of retailers, it would mean building significant logistical operations. In addition, internet consumers tend to have very high standards when it comes to how fast and in what state they want their product delivered. Given the large distances in less urbanized parts of the country, this can be very challenging, he said.

Despite the wobbles and obstacles that have stood in the way of e-commerce, the sector is accelerating fast. This means that traditional store locations need to be smart and integrate other elements into their offer. “It’s all about finding flexibility,” Gaston said. Given the advantages of both the physical store, as well as e-commerce, a combination of the two services seems to be the logical answer. Villanueva gave the example of Ikea, which allows customers to see the physical product in a store before they order it. Examples like these could offer the solution to fit the preferences of the Latin American consumer.

Jan Hogewoning Jan Hogewoning Journalist and Industry Analyst