“The reports of my death are greatly exaggerated.” That quote which was said to be from Mark Twain, could also apply to the current state of retail. From headlines the past couple of years you might assume that sales in brick-and-mortar stores are in negative territory and on the brink of extinction (a full retail apocalypse!).
You’d be wrong.
Physical retail isn’t just alive and well, it’s thriving — and we’ve got the numbers to prove there is no retail apocalypse.
Brick and mortar sales are up
Let’s start with sales. Today’s shoppers continue to flock to retail stores, and the proof is in the data:
- According to the U.S. Department of Commerce Statistics, total retail sales rose from $337.5 billion in 2016 to $349.6 billion in 2017 — an increase of 3.6%. In addition, brick-and-mortar sales rose from $298.5 billion in 2016 to $304.3 billion in 2017 — an increase of 2%.
- The forecast is that retail sales during 2019 will increase between 3.8% and 4.4% to more than $3.8 trillion.
To be fair, e-commerce is growing at a faster rate than in physical stores. But physical stores still have positive revenue — about 1%-2% growth depending on the source. Even with the dramatic shift to online retail, e-commerce still represents just a little over 10% of total retail sales in the first quarter of 2019.
Growth in store numbers
Retail is a game of numbers, and the numbers are telling us that brick-and-mortar retail is anything but going extinct. According to the National Retail Federation:
- There are more than 1 million retail establishments across the United States. Retail sales have grown almost 4% annually since 2010.
- For every store that closes its doors, two more brick-and-mortar locations are opening.
So while the constant media references to a “retail apocalypse” may make the headlines and get people to click, the reality is physical retailers are doing just fine.
E-commerce is opening brick-and-mortar locations — and seeing tremendous results
Being an online-only retailer may seem like a good idea on the surface. Online merchants supposedly enjoy lower overheads thanks to the fact that they don’t have to maintain physical locations.
But this simply isn’t the case. Online customer acquisition costs have risen to the point of being unsustainable. Additionally, the growing expectations for free shipping and constant promotions are eating into e-commerce profits.
And because of its low barrier to entry, the e-commerce space has become overcrowded and competitive. Online-only brands simply don’t carry the same weight and credibility as those that have a brick and mortar presence.
For these reasons, formerly online pure-plays are opening physical locations. Meanwhile, retailers that are already established online and offline are continuously investing in brick and mortar.
- 9 of the 10 most successful online retailers — from Amazon and Apple to Costco — also operate physical stores. Other retailers are continuing to open brick-and-mortar locations as their online-only plans prove limited and unprofitable.
- It’s estimated that formerly online-only retailers will open as many 850 physical locations because physical locations are key for driving web sales.
- The data also shows that opening physical stores can pay off for e-commerce. Retailers see an average increase of 37% in web traffic after a new physical location is opened.
Pure-plays opening physical locations
One of the notable examples of a formerly eCommerce-only retailer that set up shop offline comes from the men’s clothing store Bonobos. The company launched in 2007 with the goal, ironically enough, to keep men out of stores. It began as an online-only operation and soared to the top of the retail landscape with $10 million in revenue in the first three years.
But when customers told them that they wanted the opportunity to try clothes on before they purchased them, the seed for physical retail was planted. Bonobos opened their first offline store (known as a Guideshop) in the lobby of its NYC headquarters in 2011. Customers were given the chance to feel and try on the shirts to encourage buying.
It was a huge success. In fact, they opened 60 stores and brought in $70 million in revenue in 2013 before being bought by Walmart.
Then there’s prescription eyewear retailer Warby Parker, founded online in 2010 and initially run out of an apartment. Co-founder Neil Blumenthal started inviting people to his Philadelphia apartment to try on new direct-to-consumer glasses when the company started struggling with increased demand. The tactile, physical experience went over so well, they realized brick-and-mortar was the most logical step in their expansion plan.
They launched their first location in 2013 in New York City. Close to 2,000 people showed up on the first day, eager to try on their glasses. Since that time 90 additional stores have been opened. The business continues to grow.
“We think the presentation by retail experts of ’either [online] or [offline]’ is a false choice,” CEO Neil Blumenthal told CNBC. “It really is the intersection of the two. … And we are trying to approach retail expansion in a very deliberate manner, where we are testing and learning.”
Consumers value physical retail stores
As tech-savvy as modern consumers are, most people still prefer to shop in brick-and-mortar stores.
- While online shopping is quickly becoming the go-to for many consumers, according to Google, 61% of shoppers would rather buy from brands that have a physical location than with brands that are only online.
- Not only that, but according to the International Council of Shopping Centers, around 78% of consumers prefer to shop in-store. Physical stores still generate 94% of total retail sales.
- Brick and mortar’s edge is even more pronounced among Gen Z consumers. Research by the NRF and IBM found that 98% of Gen Z consumers said that they make purchases in offline stores some or most of the time.
- Local searches are also surging. Google found that queries with local intent (e.g., “shoe stores near me”) have increased more than 6 times over the past few years.
- Just 7% of consumers say that online is the only way they shop.
So, why do consumers prefer brick and mortar stores? Research by RetailDive found that 62% of shoppers want to touch and feel products for themselves and 49% want to take items home immediately.
To be fair, e-commerce merchants are making strides in bridging the “touch-feel gap” of online shopping through supply chain optimization. There are also investments in technologies like augmented reality and even 3D printing.
Such initiatives could certainly pay off in the future. But right now, e-commerce simply cannot match the instant gratification that brick and mortar stores provide.
How retailers can thrive in 2019 and beyond
So far we’ve offered proof points and retailer stories showing that physical retail is alive and well. Now let’s discuss the steps that retailers can take to survive the “apocalypse” in 2019.
Create a rich in-store experience
To make it through today’s retail environment, you simply cannot be boring or commonplace. You have to be memorable and offer shoppers something more than just a physical product.
There’s no one best way to do this, as each store is different. But here are some best practices and examples to keep in mind.
Make it a communal experience –
The need for human connection isn’t going away anytime soon. As a retailer, you can leverage this by giving your customers opportunities to interact with other people.
A good example of this in action comes from Book@One, a destination bookshop in Ireland. The store strives to give guests a personal touch and an atmosphere that can’t be duplicated on a phone or screen.
“Here, we don’t just sell you a book. We’re a place to visit and become immersed in, a place where you can participate in community events, find out what’s going on in the area and the world, or just relax and enjoy a coffee and a chat,” said owners Brid Conroy and Neil Paul. “We’re creating an atmosphere where people engage with books in a communal way again.”
Create treasure hunts –
Online shopping may be convenient, but it’s not exactly what you’d describe as “fun” or “exciting.” This is where brick and mortar stores have an edge. Having a physical space enables you to create “treasure hunts” that encourage product discovery. By always having something new in-store (i.e., merchandise or deals), you can create an exciting and addicting experience that keeps people coming back.
Stephen Rector, founder, and president of Bakertown Consulting, says, “Retailers that are thriving include TJMaxx, Ross Stores and Burlington who are offering their customer a hunt for a deal experience as their inventories change very quickly. Their loyal customer is coming in often to find new merchandise and great deals.”
Encourage shoppers to do it for the ‘gram –
Like it or not, social sites such as Instagram are an integral part of your customers’ retail journeys. As AdWeek puts it, “These days, if consumers can’t Instagram a store, it’s almost not even worth going.”
For this reason, creating an Instagram-worthy retail store is something that you should seriously consider, especially if you sell to younger customers.
The online apparel store Showpo understands this. When they opened their pop-up store in Los Angeles in 2019, they built a social media nook that gave shoppers opportunities to document and share their Showpo experience on sites like Instagram, Snapchat, and Facebook.
Doing so not only encouraged Showpo’s guests to stick around, but it also increased the brand’s presence on the ‘gram.
Know your customers — leverage analytics
In retail today, a large part of creating that connection is knowing your audience and tailoring your message to match their interests. There’s an overwhelming amount of information out there, but it’s critical to have a well thought out strategy in place to identify an addressable audience and figure out what motivates them — and how to get them into the store.
This can be done through analyzing the data retailers are given with every purchase, loyalty account, newsletter sign-up, and even browsing history. When the customer shares their personal information, accepts cookies, allows access to their location, etc. retailers are given information that helps them understand the customer’s buying behavior, along with permission to start personalizing the experience for them.
Use search data to stock the most requested styles to ensure that customers find the product available when they’re ready to buy or change the name of your product based on what searchers are looking for.
You should also find out how you’re doing compared to your peers. The point is to use all the data that’s out there to create a shopping experience that meets the demand.
Provide a consistent omnichannel shopping experience
Blumenthal’s quote above gets to the heart of the matter — it’s not only online or only brick-and-mortar that is the future of retail. It’s an intersection of the two and innovation on the part of the retailers to evolve with shifting customer preferences.
When done correctly, a retail brand’s strong digital presence drives brick and mortar sales and vice versa. The brand becomes more relevant when both transactional channels work in harmony. When there’s any friction between the two, the retailer — and sales — suffer.
Customers want to know that when they shop with you either online or in person, they can expect a consistent retail experience. That experience includes everything from employee training and the online checkout process to marketing on your website and in-store to your social media presence.
Whether customers are shopping in a brick-and-mortar store after checking things out on your website, or browsing in person and buying online, the retailers that will succeed will do so by providing them with all that they need — and that they’ve come to expect.
The bottom line
As the numbers prove, the reports of physical retail’s death are highly exaggerated. As long as retailers give consumers a compelling reason to shop in their stores, those consumers will continue to flock to brick and mortar locations. That reason could be a connection, a unique experience, unparalleled personalized service, or all of the above.
It’s up to each retailer to evolve with the changing landscape of retail because people are still spending money. Retailers who continue to innovate, will not only survive — they’ll thrive.
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