Jim Tompkins at NAIOP I.CON: Impact Projects James A. Tompkins delivers the keynote at NAIOP I.CON: Impact Projects

DALLAS—When was the last time you walked into a store and bought something without having researched it beforehand? Traditional brick-and-mortar stores continue to host scores of customers walking in their doors and out with purchases, but e-commerce plays an increasingly important role in the retail industry – and by extension, to industrial real estate.

Granted, online commerce still takes a minuscule percentage of total US sales, but the overwhelming majority of consumers research those sales online, said James A. Tompkins, Ph.D., chairman and CEO of Tompkins International, during a keynote address at the NAIOP conference, I.CON ’16: Impact Projects, held here last week. Then they go to the brick-and-mortar stores to try out the item they have decided they want. If they decide they want to buy it, they want to buy it on the spot.

Or perhaps, after they tried out the item in person, they decide to order online because it is cheaper (a practice that retailers understandably loathe). Still, the consumer expects to have the product the next day even if the order was placed the previous afternoon.

Consumers Demand Immediate Delivery

As recently as 2013, delivery of an item purchased online within 4 days was considered exceptionally fast, Tompkins noted. Customer expectations have steadily increased to next-day delivery being expected in 2016, and same-day predicted as the new normal for 2017.

Retailers by and large have kept up with these trends but it took some realignment of their distribution, warehousing and delivery strategies. And while there are a variety of ways in which retailers are getting their products to the customer in that much-dissected “last mile,” these companies are all dependent on the US’ extensive ecosystem of industrial warehouses and distribution centers. They certainly are dependent on that ecosystem’s continued growth.

But e-commerce and its impact on industrial real estate is more than just a story about online research, eager US consumers, same-day delivery and last-mile providers.

The Arrival of Cross-border Commerce

Indeed, cross-border commerce has always been part of the mix for companies as they source products and inputs, according to Tompkins.

Cross-border commerce, as the name suggests, refers to international trade or the buying and selling of goods across borders. But Tompkins highlighted a crucial element of cross-border commerce: these products are sourced either by traditional means or via a B2B or B2C website. For the last few years, global trade by traditional means has stagnated to almost an alarming degree. B2B and B2C online purchasing, though, is primed for explosive growth.

See where this is going for industrial CRE?

According to Tompkins’ figures, some 48 percent of online cross-border commerce purchases, or $245 billion, will originate in the Asia-Pacific region, driven by China’s consumers by 2020.

Europe will be second in global online cross-border commerce, with $180 billion in purchases by 2020, and North America will be third at $140 billion, according to Tompkins.

More E-Commerce Fulfillment Centers Around Airports

In notable news for industrial CRE: Because most cross-border commerce export and import orders travel by air, this growth will require a substantial increase in e-commerce fulfillment centers (FCs) around major international airports, Tompkins said. Right now, the industry has just scratched the surface in terms of product developed for this particular use.

Getting the Omnichannel Right

Another larger trend will affect industrial property owners is retailers’ attempts to get the omnichannel right. Omnichannel retail refers to the ability to serve a customer through any channel  –  online, mobile, physical store  –  seamlessly and, more importantly, interchangeably.

The typical example is a customer who buys a product online from her desktop, doesn’t like it and returns it to the nearby physical store. She is offered store credit or reimbursement and decides to choose store credit – which she has sent to her mobile device.  Later, she makes a replacement purchase through her mobile device.

Some retailers are getting this concept right – Walmart is a key example, according to Tompkins –  but very few companies outside of the major stores have mastered it.

In fact, only 5 percent of companies have a fully executed omnichannel strategy, Tompkins said.

What’s more, they know they need one. A full 88 percent of all retailers say they can no longer rely on traditional sales channels to drive growth, according to Tompkins. Meanwhile, 71 percent of shoppers see in-store stock level information as critical to their purchase decisions. Unfortunately, Tompkins went on to note, “less than a third of the retailers are able to provide such information.”

Getting to that holy grail of a supply chain fully optimize to service and support the omnichannel will not be easy. Certainly it will not be easy for the retailers, many of which need to make additional IT investments to get that end-to-end visibility they need.  Also, retailers need to stop thinking in terms of logistics and merchandising and start thinking in terms of omnichannel logistics and omnichannel merchandising, Tompkins said.

Industrial property owners, as well, need to start thinking in terms of omnichannel logistics as they plot their future investments.

Omnichannel logistics will have a major impact on real estate, Tompkins said. More third-party logistics space will be needed going forward, he said and more distribution centers will need to be located in highly populated areas.

In general, he said, “less square footage of retail space and more square footage of logistics space will be required going forward.”