Business Trends

E-commerce Evolution: Considerations for Commercial Real Estate

File Type: Report, Free Content
Release Date: May 2015
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The Five Elements of E-commerce

Although businesses first began conducting electronic transactions via computer networks as early as the 1960s, e-commerce — defined as the buying and selling of goods and services over the Internet — truly began in the mid 1990s. Amazon.com, founded in 1994 as “Earth’s largest bookstore,” led the way, first by selling books online and shipping them directly to purchasers, before expanding into a company that now sells almost any product imaginable, almost anywhere in the world. Since then, Amazon, eBay and others have been shaping e-commerce into the fastest-growing retail network in the world. During the past three years, online retailing has been growing by an annual average of more than 18 percent globally, even as non-Internet sales have grown by only 1.3 percent annually.

Retailers and industry analysts have been focused on this phenomenon for much of the past two decades, as they watched Internet sales slowly but steadily cut into brick-and-mortar transactions. As they have adapted to this new sales venue, the introduction and widespread use of smartphones and tablets (mobile handheld devices) have dramatically accelerated the pace of change, requiring retailers to retool their merchandising and supply chain strategies multiple times.

The commercial real estate industry also has been watching this shift to Internet sales closely. Most industry professionals generally understood that growth in e-commerce would result in dwindling demand for retail space in malls and shopping centers, but few predicted that a new industrial facility called a fulfillment center would be created in order to ship an item directly to a consumer who had purchased that item on a touch-screen device that fit in the palm of her hand. Welcome to the 21st century.

The e-commerce concept and its impacts go well beyond retail and industrial space. Today, e-commerce appears to be a marriage between retail and industrial product types and industries, as well as Internet technology and devices, the transportation and logistics sectors, and inventory tracking and mechanical fulfillment systems. The complexities of e-commerce are just beginning to emerge, and professionals in all of these related industries are scrambling to adapt. By nature, e-commerce is a dynamic, highly integrated concept, so identifying its distinct elements can be challenging. The following five major categories are emerging as primary elements of e-commerce:

  1. The Internet and mobile devices;
  2. Multichannel and omnichannel retailing;
  3. Changing supply chains;
  4. Distribution and fulfillment centers; and
  5. Robotics and inventory systems.

This publication identifies and describes the foundational elements of this new way of shopping and shipping, and poses key questions for commercial real estate (CRE) professionals working in this realm. This site contains the full text of the publication and also provides additional resources on these evolving elements of e-commerce, including reports, articles and white papers. Visit this site frequently, as new material will be added regularly.

Editorial content prepared by NAIOP Vice President for Knowledge & Research Margarita Foster, NAIOP Managing Editor Julie D. Stern and Gregory McNamee, Sonora Wordworks, Tucson, Ariz.