Mall Operator Predicts Online Shopping Ceiling Of 20 Percent Of Retail Sales

Unibail-Rodamco CEO Christophe Cuvillier said on Thursday (Dec. 14) that he believes brick-and-mortar retail will never go away and that eCommerce has its limitations.

On a conference call covered by Reuters, the CEO of a company — that is spending $16 billion to buy Westfield to create a global shopping mall company — said online shopping will likely peak at around 20 percent of retail sales around the globe. That is up from the 8 percent to 10 percent that eCommerce accounts for currently.

The “internet will grow, but the internet cannot do everything. It’s very difficult to be profitable on the internet, particularly pure-play online retailers,” he said on the call, adding that “retailers need physical presence.” The executive pointed to the fact that Apple, Nespresso, Tesla and Amazon have been opening physical stores.

The deal to acquire Westfield malls is aimed at competing better against Simon Property Group, which is the world’s largest commercial property owner, counting 104 centers under its portfolio. The acquisition is also part of the company’s strategy to focus on malls that are in destination-type locations, which could mean shopping centers will pop up in large cities, including London, New York and San Francisco.

The comments from the CEO about online shopping limitations come as the industry is having a strong holiday season this year. According to a news report in Recode, citing Adobe Analytics — the research firm that tracks 80 percent of online transactions from 100 of the leading retailers in the U.S. — online spending on Thanksgiving was up 18 percent compared to last year.

What’s more, 46 percent of visits to online retailers came from users on mobile devices, accounting for 29 percent of sales on the holiday, which is up from 27 percent in 2016. According to Reuters last month, strong sales during the deeply discounted sales weekend are a good early indicator that spending is on track to rise this year. According to Adobe Analytics, consumers spent $5.03 billion on the internet by the end of Black Friday, up 17 percent year over year.