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Tuesday, 09 January 2018

E-Commerce: From Zero to 35 Percent of Retail Sales in 30 Years

Companies like Amazon.com helped usher in an era where traditional retailers have invested more time and money into their online sales strategies.

Commercial Real Estate Direct Staff Report

When Amazon.com launched in 1995, the company focused on selling books online, a tiny niche that barely caught the attention of the retail industry. Today, the online retailer has become the largest e-commerce company in the world and has helped usher in an era where traditional retailers have invested more time and money into their online sales strategies.

During the first three quarters of 2017, e-commerce retail sales increased 15.6 percent from a year earlier to $333.1 billion, according to U.S. Census Bureau data. Total retail sales, meanwhile, increased 4.5 percent to $3.77 trillion during that period.

Although e-commerce accounted for only 8.8 percent of sales in those three quarters, the percentage has steadily grown. For instance, it accounted for 8 percent of sales last year, 7.2 percent in 2015 and 4.8 percent in 2011.

But the Census Bureau data underestimates the impact of e-commerce because it includes in total sales categories such as food, alcohol, automobiles and gasoline that are not usually or can't be sold online.

MetLife Investment Management estimates that if those categories are excluded, e-commerce accounts for 14 percent of sales. The company projects that e-commerce could grow to 30 to 35 percent of sales within the next decade.

                              U.S. E-Commerce Sales

ECommerceChart

                                                         Source: U.S. Census Bureau

E-Commerce's Origins

Online retail began taking off in the late 1990s, when investors poured money into Internet companies that sold goods such as books, clothing, toys, electronics, groceries and even pet food. Although e-commerce only accounted for 0.9 percent of retail sales in 2000, many investors were bullish on the prospect of online services becoming legitimate competitors to traditional brick-and-mortar stores. But by the early 2000s, many online retailers had filed for bankruptcy.

Still, e-commerce continued to grow each year, reaching 4 percent of retail sales in 2009. At the same time, traditional retailers weren't investing in their online platforms and, as such, faced challenges attracting computer engineers and developers who were more inclined to work for Internet-only retailers, such as Amazon.

"I don't think anyone predicted the wave of online acceptance to the level it is now and is becoming," said Byron Carlock, the head of PwC's real estate practice and former chief executive and president of CNL Lifestyle Properties Inc. "The obsolescence in retail has sped up in the last several years. Retailers are having to work hard to catch up to keep their customer, know their customer and serve their customer."

Department stores, in particular, have faced the challenging retail environment by cutting costs and reducing their workforces. In 2016, there were 25 percent fewer department store employees than in 2001, according to the Bureau of Labor Statistics.

"I don't think they fully understood the nature of the threat that they were facing," explained Adam Ruggiero, head of real estate research at MetLife Investment. The cuts "led to a deteriorating customer experience, which was actually their primary mode of defense against online retail - creating a strong, in-person customer experience."

Top U.S. E-Commerce Companies
Company Sales ($bln) % of Retail Revenue
Amazon.com 79.27 100
Apple 24.37 46.5
Walmart 13.7 2.8
Liberty Interactive 5.15 51.5
Macy’s 4.85 17.9
The Home Depot 4.69 5.3
Best Buy 4 10.1
Costco 3.5 3
Nordstrom 2.83 20.1
Kohl’s 2.8 14.6

    Source: National Retail Federation

Retailers Start Taking E-Commerce More Seriously

The approach has changed in recent years, as retailers have adopted so-called omnichannel strategies, where they offer goods to customers in stores, online...





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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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