Brick and Mortar is Far From Doomed
Much has been made recently of the eclipse of brick-and-mortar retail by ecommerce and the latest monthly sales figures appear to bear that out.
But a recent report from Alix Partners contradicts that notion. While ecommerce’s share of retail will continue to grow, there is still plenty of room for brick-and-mortar stores especially for retailers taking an omnichannel approach.
Last month’s retail results were generally weak, with sales reported as flat after an April which saw a 0.6 percent increase. Electronics and appliance store sales fell 2.8 percent, the largest decline in over seven years, while sales at sporting goods and hobby stores fell 0.6 percent and department store sales declined one percent in May. Core retail sales rose 3.8 percent in May year over year but sales at department stores were 3.7 percent lower last month than they were in 2016. Retailers have announced 3,600 store closings in 2017.
Ecommerce, on the other hand, grew to 12.1 percent of retail sales, almost double its 6.5-percent share in 2010.
Nevertheless, Alix Partners contends that “those who assume brick-and-mortar retail is doomed are missing the bigger picture.”
Online sales will grow by as much as 12 percent in 2017, but store-based sales will grow at 2.4 percent to 2.8 percent in the same time. “Even at peak penetration,” the report notes, “ecommerce is only expected to reach about 25 percent of adjusted retail sales by 2025.” Brick-and-mortar retail in the US is expected to grow by $1.1 trillion over the next eight years.
Even millennials say they prefer shopping in stores. A recent study found that 82 percent of this tech-savvy demographic expressing that sentiment.
Amazon’s plans to acquire Whole Foods for $13.7 billion demonstrates, according to Alix, “that even the #1 online retailer recognizes that a strong brick-and-mortar base can be a key component for success. Retailers that tailor their stores and experiences to provide the best of both worlds will position themselves to weather current challenges and gain market share.”
Omnichannel shoppers spend 3.4 times more than a single-channel shopper, according to the report, and retailers in-store “can simulate the suggestion-based shopping experience customers have come to expect online” using in-store beacon technology. Over 30 percent of shoppers who received a push ad from an in-store beacon used that offer to buy something, according to a survey of retailers.
Stores can be used to meet customers’ need for immediacy, and can also offer retailers a way to provide experiences that cannot be achieved online. Retailers now often offer classes, repairs, and installations, while some feature services like hair styling, pharmacy, and health services. “These value-add services nudge customers to make visiting stores part of their regular routines,” noted the report.
“Retailers who treat their online businesses like one of their brick-and-mortar stores may discover they are simply trading sales between the two,” the report concluded. “Those who embrace a strategy that blends both channels will find that brick-and-mortar can be a critical part of their success this summer and beyond.”
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