Brick-and-Mortar Retail is Still Relevant

Signs of Life

Not Dead Yet

Just as Sam Clemens refuted reports of his death, the brick-and-mortar retail industry’s sales figures are showing it is not dead, either. The National Retail Federation reports that July retail sales hit 4.9%, a mark so high that it caused the NRF to adjust upward its annual growth projection. The federation also cited a study by IHL Group that shows for every company that closes its stores, two more are opening.

Source: IHL Group

The most telling statistics from the study show that 16 companies are responsible for 66% of store closures, so the characterization of industry-wide depression is inaccurate.

Retail’s growth is actually outpacing the economy at large thanks to low unemployment and high consumer confidence.

Some of the blame for the rumored downsizing of American retail can be placed on commercial developers as much as the retail merchants themselves. According to Credit Suisse, the United States has more retail space than any other country in the world with more than 21,500 square feet per 1,000 people. That’s more than double what Norway, the second most, has with 9,967 sq. ft.

China (942 sq. ft.) and India (42 sq. ft.), two rapidly developing markets have minuscule brick-and-mortar retail footprints, comparatively.

“A brand that has 500 stores no longer makes sense in today’s world,” Everlane CEO Michael Preysman said in an interview with Adweek. “But having 20 to 50 key locations that help bring an expression of the brand to life is very relevant for the customer.”

Everlane is a San Francisco-based online clothing retailer that is among those e-commerce companies that began opening brick-and-mortar retail stores in 2017.

Changing Marketplace

Lessons learned from the evolution of retail are valuable to both brick-and-mortar retailers looking to remain relevant in the marketplace and e-commerce merchants seeking to open physical storefronts.

Probably the most obvious takeaway from how the industry has changed for traditional brick-and-mortar retailers is the need to utilize technology to keep their current customers and attract new shoppers. And millennials are going to be many of those new shoppers. Now the largest adult generation, millennials are expected to spend $1.4 trillion by 2020, which will be about a third of total U.S. retail expenditure.

Millennials have been unfairly blamed for many of the behavioral changes in shopping that led to the restructuring of the U.S. retail landscape. The generation grew up with computers and online shopping, and they have kickstarted the e-commerce revolution.

However, research by behavioral marketing firm SmarterHQ  says an incredible 50% of millennials not only go to physical stores, they prefer them as a primary means of shopping. Desktop computers (27%) and mobile devices (22%) combined don’t reach the numbers that prefer brick-and-mortar retail stores. Additionally, 30% are hunting for bargains, 18% have a specific purchase in mind, 17% are researching, and 14% are simply window shopping.

“The retail industry has been operating on the outdated assumption that boomers are shopping for deals primarily in-store and millennials are searching for deals mostly online,” says Greg Petro, CEO of First Insight. “The behavior between these generations is evolving, and to benefit, retailers must recalibrate their approach to marketing, inventory and pricing to attract deal-seekers who may have been overlooked based on outdated perceptions.”

How to Remain Relevant

Millennials and the following generations that have grown up with the internet, look for the same dynamic interaction and personalization they get on the internet from brick-and-mortar retailers.

E-commerce sites use the obvious technology of the internet to pander to their customers by collecting data on their past purchases. Brick-and-mortar retail stores can do the same thing by utilizing their point of sale data and digital business platform. Instead of website message box suggestions, brick-and-mortar retailers can text, email or snail mail special offers on products their customers buy most.

Physical stores can also use technology inside their buildings to entertain and inform customers. Video displays of new product demonstrations or DIY projects can help sell new products and increase customer loyalty. Active and dynamic customer incentive programs also inspire customer loyalty and attract new shoppers.

Properly utilizing retail technology means aligning online and in-store messaging and functions. Geofencing and in-store informational beacons use targeted text messaging to reach out to potential shoppers near your store and provide product information to customers inside your building.

Offering free shipping or click-and-collect options put physical stores on par with any e-tailer. Click-and-collect also lets brick-and-mortar store owners make additional sales when customers visit to pick up their online purchases. A study by OrderDynamics says 51% of people who click-and-collect make unplanned purchases when they pick up their orders, spending, on average, an extra $40 per trip.

Advantages of Brick-and-Mortar Retail

No matter how convenient online shopping has become, brick-and-mortar retail has an obvious advantage when it comes to fit, feel and sizing. Online shoppers can’t try on clothing and don’t know how a new phone or tool feels in their hands.

Instant gratification is another way brick-and-mortar retail surpasses e-commerce. According to Google, even though a shopper may spend weeks researching the purchase of a product, more than a third look to buy the item locally. Buying at local brick-and-mortar retailers also gives customers access to local customer service for those products.

Expert advice and recommendations are other areas that set brick-and-mortar store apart from e-tailers. Shoppers are pelted with so much information today, many are slow to accept recommendations from websites or even so-called on-line industry experts. Store owners and their sales associates have the advantage of in-person interaction to build understanding, trust and long-term relationships with customers.

E-commerce Gets Physical

Most of the reasons listed above, especially the human interaction, are why major online retailers are moving into brick-and-mortar stores.

“When you take the data that you collect from that customer in a retail location, you can get to know your members and guests much differently than you could online only,” Ron Harries, retail vice president of Fabletics, an online sportswear company, said in a recent interview.

Harries adds that his company not only gleans more and different customer information than it does online, the physical stores allow shoppers to try on merchandise which makes it easier for them to order online the next time they decide to buy.

Physical stores also give customers another touchpoint with their e-commerce retailer. It provides a location for returns, a place to receive additional orders, and to showcase new items. Amazon, which laid its foundation selling books online, has been opening brick-and-mortar bookstores for over a year. Those stores display Amazon’s consumer electronics such as Kindle tablets and Echo, an Alexa-enabled smart speaker, along with their books. These e-tailers are also taking the lessons they learned online and using them in their brick-and-mortar stores.

Lessons Learned

The way the retail marketplace has changed over the past few years has claimed many victims. Large, lumbering companies that couldn’t adapt have disappeared much like retail dinosaurs. Technology alone, though, isn’t the key to the future. Using the latest retail technology, keeping up with trends, and focusing on quality person-to-person service is proving brick-and-mortar stores are still the center of the shopping universe.