Despite Explosive Growth in E-Commerce, Retail Still Needs Brick-and-Mortar Stores
For years, there has been speculation around the demise of brick-and-mortar retail. The culprit — needless to say — is none other than online shopping. Consumers enjoy the convenience of this digital retail experience, and e-commerce offers brands a lower cost of entry than investing in the space, inventory, upkeep and staff necessary to run a physical storefront.
Then, the coronavirus pandemic accelerated digital adoption, and brick-and-mortar retail seemed even closer to circling the drain. Some media outlets even began emphasizing the impending “retail apocalypse” — and for good reason. In 2021 alone, plans were in the works to shutter more than 1,000 brick-and-mortar stores, and the number is forecast to reach as many as 80,000 over the next five years.
But the retail apocalypse has yet to happen — and it might never occur. Now that pandemic regulations are looser, people are visiting physical stores again. They’re savoring a retail experience that only brick-and-mortar stores can offer; you simply cannot beat touching and trying a product firsthand.
Although e-commerce spending was up 39 percent year-over-year in Q1 2021, reaching $196.66 billion in sales, there has been new life in brick-and-mortar retail. So if you think the future of retail doesn’t include brick-and-mortar, you’d be sadly mistaken.
The Importance of Brick-and-Mortar Stores
The importance of brick-and-mortar stores to overall retail can’t be overstated. For one thing, building and maintaining brand identity and long-term shopper loyalty is greatly enhanced by physical touchpoints. Brick-and-mortar can’t be beat when it comes to building customer experiences.
E-commerce sales often experience a lift for a brand in any region with a physical store presence. And with over 85 percent of retail sales occurring in brick-and-mortar stores, you lose those in-person touchpoints that can turn the average consumer into a loyal and devoted advocate.
Second, e-commerce distribution can be operationally expensive. Just look at the margins for some of the biggest direct-to-consumer brands: Chewy.com might have seen its first-quarter sales grow 46 percent YoY in 2020, but its profit losses grew 62 percent. Casper experienced a similar phenomenon; first-quarter sales rose 26 percent, but with a growing profit loss of 98 percent.
Part of this is due to acquisition costs. Without physical stores, these brands must spend more on advertising each quarter to acquire new customers.
On top of that, consumers generally spend less per order when shopping online vs. in a brick-and-mortar store. This is why you see the likes of Warby Parker, Bonobos, Away, and Burrow taking omnichannel retail approaches by opening physical locations.
Without physical stores, returns often become costly — which is especially problematic for apparel brands that see shoppers buy different sizes of the same product in a single order. Consider the expense and logistics associated with managing returns sent to distribution centers that, in turn, must be sent back to inventory warehouses. It destroys margins.
Opening brick-and-mortar retail locations affords you the opportunity to optimize customer experience strategy. You can prompt greater customer delight. Then, of course, there’s the instant gratification for shoppers when they find a treasure and can bring it home immediately.
The Influence of the BOPIS Retail Trend
No discussion about online vs. brick-and-mortar would be complete without a mention of buy online, pick up in-store (BOPIS). BOPIS is the perfect merger of the two realms and now is almost a must-have in the retail space. In fact, 66 percent of retailers offered BOPIS by the end of 2019 (and that number increased to 76 percent after the pandemic).
Any multichannel retailing strategy shouldn’t just include BOPIS, but also initiatives around mastering the service. This year in particular, retailers must move beyond cobbled-together BOPIS solutions and create retail experiences that draw customers into their stores for pickup again and again.
The retail apocalypse might claim more than a few brick-and-mortar stores, but not for those retailers that offer a compelling shopping experience.
Therefore, rethink what brick-and-mortar can mean to the customer experience. Brick-and-mortar can enhance e-commerce sales and vice versa through a solid omnichannel retail strategy. Don’t give up on one or the other; brands will likely need both to continue connecting to customers and driving sales.
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Holly Draher is a national account director at Harbor Retail, a design + build firm. Holly designs, builds, and delivers fixtures and environments to activate Harmonic Retail™ shopping experiences. She has worked with global retailers and beauty brands, activating solutions in cities such as Los Angeles, New York, London, Paris, Shanghai, and Sydney. With her MaRC certification from Shop!, Holly is versed in retail fixture solutions and shopper behavior and is prepared to bring fresh, modern ideas to every market to help clients overcome individual challenges.