Holiday Sales Demonstrate Critical Nature of Omnichannel Presence
While much uncertainty surrounded the 2020 holiday shopping season, retailers who that had comprehensive omnichannel capabilities (brick-and-mortar, mobile and online) again outperformed. Recent holiday shopping data demonstrates that consumers engaged with both physical store fronts and digital shopping accelerated by the pandemic.
Data from the National Retail Federation showed that holiday sales rose 8.3% in 2020 from the previous year. Leading retailers including: Tractor Supply (NASDASQ: TSCO), Best Buy (NYSE: BBY), and Dollar General (NYSE: DG), among others demonstrated tremendous same store sales growth. Retailer performance continued to demonstrate a "K" like pattern, separating the "haves" from the "have nots".
Physical stores allow customers several purchasing options including traditional in-store shopping, buy online pick up in store (BOPIS), click and collect, and micro-fulfillment via same day delivery. Additionally, they continue to serve as the most cost-efficient way to return prior purchases.
Since 2010, Agree has invested over $4 billion to transform our portfolio to focus on retailers adapting into the new omnichannel world. As of December 31st, 2020, our portfolio was comprised of 1,129 properties with our largest tenants including: Walmart (NYSE: WMT), Home Depot (NYSE: HD), Lowe's (NYSE: LOW), Target (NYSE: TGT), AutoZone (NYSE: AZO), O'Reilly (NYSE: ORLY), and Best Buy (NYSE: BBY). These brands have the balance sheet and foresight to invest significantly into both their digital and brick-and-mortar presences, hence transitioning to true omni-channel operations.
Target is a prime example of a top-tier retailer that has continued to invest and adapt their model. Target reported a 17.2% increase in December sales year-over-year. Over the past several years, Target has invested more than $7 billion to refresh how it interacts with customers both in-store and digitally including the acquisition of Shipt in December of 2017 for approximately $550 million. Today, Target offers same day delivery via Shipt, employs a "drive up" app for curbside pickup while also offering buy online pickup in store (BOPIS).
Target, and its contemporaries, think of their stores not only as a place for consumers to purchase goods, but also as showrooms for product discovery and locations for same day pick-up and drive-up fulfillment. They fulfill many of its digital purchases from their brick-and-mortar retail stores. Omnichannel is all about – being on-demand for all customers.
On the other end of the spectrum, retailers which heavily rely on just an in-store experience fared worse this holiday season. Nordstrom reported a 22% decline in December sales. Signet Jewelers reported a flat December on a year-over-year basis. The pandemic served to accelerate the conversion to omnichannel experiences. Retailers that were not positioned to fulfill customer's demands were left holding the bag. As the world transitions back to a post-pandemic state, our expectation is that retailers who invest in omnichannel will continue to gain mind share, market share and wallet share; while those whose focus remains solely on either just brick-and-mortar or just digital will fall behind.
Look no farther than eCommerce giant Amazon (NASDAQ: AMZN) embracing the omnichannel approach through multiple modalities including: Whole Foods Market, Amazon GO stores, Kohl's return partnership, Amazon Lockers and now their most recent roll-out of Amazon Fresh.
We will look back in ten years and have difficulty remembering----"Did Target start as a store or a website??"
See the recent interview with Agree CEO, Joey Agree, here:
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