Posted on BisNow.com | April 10, 2019

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There are three types of lies: lies, damn lies and, apparently, retail statistics.

A recent U.S. Department of Commerce retail report showed non-store sales eclipsed general merchandise sales by a narrow margin in February, a first in the history of the government agency tracking such data. News reports on the data said e-commerce had trumped brick-and-mortar retail for the first time.

 

But hold up, retail experts say. Most peg e-commerce to account for between 10% and 12% of all retail sales, with brick-and-mortar making up the rest. Experts Bisnow spoke to unanimously agreed on the recent wave of triumphant e-commerce headlines: fake (retail) news. 

 

“The best way to explain it is describing your car and only talking about the tires,” JLL Americas Retail President and CEO Greg Maloney said. “It’s a total misrepresentation of general retail sales and zeroing in on something insignificant that doesn’t tell the story in order to glorify a headline.”

 

The problematic reporting stems from how the Department of Commerce labels retail categories. Non-store sales include online sales, but the category also includes other retail sectors like vending machines and mail-order catalogs. General merchandise, despite the widespread-sounding term, is only a portion of brick-and-mortar sales and excludes automobile sales and food and beverage transactions. Comparing general merchandise to non-store sales as a proxy for brick-and-mortar retail to e-commerce transactions isn’t a fair fight.

 

“Non-store sales are not a true measure of pure e-commerce sales,” National Retail Federation Chief Economist Jack Kleinhenz said. “This just suggests more work needs to be done in better understanding data and what these terms mean.”

The Commerce Department also revises the numbers each month, and there is a good chance the razor thin margin (non-store sales were 11.813% of sales compared to general merchandise’s 11.807% of February retail sales) will change in favor of the brick-and-mortar subset, according to Kleinhanz. 

 

“The way it was reported is misleading, and it makes some people scared,” Bialow Real Estate CEO Corey Bialow said. “By no means are online sales surpassing brick-and-mortal retail sales.” 

 

Bialow, who is the exclusive broker for digitally native men’s suit brand Indochino across the U.S., still estimates about 12% of all retail sales are made online. But he and other retail experts expect the figure to grow in coming years as younger generations gain more purchasing power.  That doesn’t mean the growth will lead to the total demise of brick-and-mortar retail. Plenty of sales made on retailers like Best Buy or Lululemon’s websites were because customers tried the products out in stores first. It just means an omnichannel presence, both online and brick-and-mortar, will be key to courting customers.

 

“Brick-and-mortar is still an integral part of the online shopping experience,” Bialow said. “Amazon aside, most retail sales are being done by omnichannel retailers.”

 

The overlooked part of the Commerce Department report is how brick-and-mortar and online sales are converging, according to those Bisnow spoke with for this story. Digitally native brands are expanding into brick-and-mortar venues and vice versa. That movement fuels confusion in the retail industry in how sales get reported.

 

An omnichannel retailer like Target can easily categorize sales made online and delivered directly to customers separately from an in-store purchase. But experts aren’t as clear on the reporting of purchases made online but that are picked up in-store or when a customer goes to a brick-and-mortar showroom for a digitally native brand like Indochino or Bonobos for a fitting and makes a purchase but the delivery comes from the same last-mile warehouse used for e-commerce sales. 

 

“It’s so cloudy and convoluted that I wish we could get away from all this,” Maloney said. “In the end, it’s all retail sales.”