Digital Disruption and the Strategic Value of Stores

With growth in online retail, retailers with physical locations have had to reassess the true value and role of their stores. Physical stores come with a significant cost and therefore investments in experience need to ensure that they make sense from a brand perspective, add value to consumers, and deliver a commercial return.

So how can you get the most out of your stores?

Right-Size your customer experience

It remains true that despite the growth of ecommerce, physical stores remain the only real place shoppers can have physical and sensorial experiences with your brand. The new challenge in 2021 will be to make shopping even more convenient with new technology, but also offering shoppers a great brand experience.

To make it commercially viable, you need to keep these costs to a minimum and part of that is not pay for more space than you need. That being said, a money-making retail store isn’t always the goal.

Take Nike’s Time Square flagship store, for example, which has a basketball court with cameras to record shots and treadmills with screens mimicking famous running routes. It’s not its purpose to be a huge money-making store, but it has become an attraction that boosts brand engagement and awareness.

Another prime example is the first brick-and-mortar Amazon Fresh Grocery Store designed from the ground up to offer a seamless grocery shopping experience, whether customers are shopping in-store or online. This store was built as a proof of concept and to help with PR efforts rather than to cause a major dent in the UK grocery sector.

So many choices….

Customers have many choices available before they commit to a purchase. But even though a huge share of purchases are now made online, studies show that consumers prefer to buy things in person at brick-and-mortar shops. Deloitte reported that 56% of in-store retailers who involved a digital website had about 5x higher web-influenced physical store sales compared to online sales.

Reasons for deciding to buy offline can be to avoid delivery costs, desired interaction or the fact that most customers have had a bad experience in the past when buying online.

Your store is not just a physical location for sales

New studies show that customers are returning an average of three online ordered items per month and the cost of returns is skyrocketing. In the UK, returns are estimated to cost businesses in excess of £60bn each year, putting huge strain on retailers of all sizes.

With 51% of retailers saying their margins are being squeezed by the pressure of processing ‘free’ returns, and yet 85% of consumers expecting retailers to provide returns for free. Another challenge is with Amazon setting new trends on shipping speed, customers start to expect the same service from retailers everywhere.

Physical stores in different locations can help with those fulfilment requirements. They provide a network of shipping and pickup points as well as return points to offer fast turn-around on online orders. Same-day, store-fulfilled orders are seeing more traction from customers and brands alike.

Final thoughts

It is abundantly clear that an online business can benefit from offering an in-store experience, and conversely brick-and-mortar retailers can benefit from an online presence. The key is finding a balance and a structure that works for your business that eases the pressure on order fulfilment while offering shoppers the security of a physical experience.

Last year, real estate experts predicted that digitally native brands would open 850 brick-and-mortar stores in the US in the next 5 years. And while the COVID-19 pandemic has slowed the openings of new brick-and-mortar stores, we’re still seeing online-only brands like Bonobos, Glossier and Casper investing into offline experiences. This supports the fact that with the right offline experience you can offer a complementary shopping experience to consumers and be more flexible to shift focus as needed.

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