Online retailers reverse a trend and move to brick-and-mortar
The idea that brick-and-mortar only retailers are a dying industry should not come as a surprise. Reports of dwindling sales over major holidays in the US, with major retailers continuing to lose profits at their physical locations seemingly grow in number year after year. Companies like Macy’s have been increasingly hiring fewer and fewer seasonal workers and large chains like Best Buy continue with their plans to increase store closures within the next few years.
Retail business and why many companies inevitably remove some or all of their physical locations is part of the complex way companies do business in this country. There’s an overabundance of retail space in this country as shopping real estate boomed a few decades ago when retailers rushed to open new locations to take advantage of once available abundance of money from lenders. With the economic crash in 2008 came many brick and mortar brands and stores shuttering their doors for good and the last decade saw a large percentage of companies that offered products and services by visiting a strip mall moving completely online and outsourcing or drop shipping.
But brick-and-mortar businesses aren’t completely done for. In fact, several e-commerce-only companies have very recently opened physical stores for the first time. Amazon, which opened its first permanent store in Seattle in November, and Target are two examples of companies that plan on increasing their offline presence and bringing a new, expanded presence into the real world of shopping.
Some online-only companies say customers still want to have a physical shopping experience. Online eyeglasses store, Warby Parker, recently opened physical stores in several states in the US. “There’s still something tangible that you can’t replace, when you’re walking into a store, engaging all five senses,” Warby Parker CEO Dave Gilboa told NPR’s Elise Hu. Another company, Imprint Logo, started out as a .com way back in 1999 and has become enormously successful, attracting business from big names like CNBC, Monster and the U.S. Marines and sells custom promotional products to companies including Nike and FedEx recently issued a press release indicating they too would be making the move to retail real estate, opening their own shop in Ottawa County in Canada.
- Other companies following the trend include
- Athleta
- Piperlime
- Boston Proper
- Bonobos
- Birchbox
Physical stores will likely always be around, but the uneasy relationship between brick-and-mortar and e-commerce is good for the rest of us. Consumers can only benefit in companies deciding to try out retail space. Many are already seeing great value from stores like Amazon’s new pop-up location where consumers can get Amazon devices like Alexa, Kindle Unlimited, Philips Hue accessories and Fire TV & Tablets.
The move of many online-only retailers to the physical space is gaining momentum.
According to JLL’s Screens to Stores recent report, online retailers across the country are spending the money to open at least one physical location. In the next five years retail locations are expected to explode with small and large companies that never before had a marketing or business presence outside of their ‘world-wide-web’ location.
“Some observers are surprised that online retailers would choose to take on the added cost of operating physical stores, but online retailers are slowly realizing that nothing packs the marketing punch like a physical store in a strategic location,” said James Cook, director of retail research, JLL. “Those that sell apparel and accessories find real stores especially attractive. What we have seen so far is just the beginning.”
Mr Cook went on to explain that online-only businesses have to ‘evolve’, migrating into the physical realm by first experimenting with pop-up locations in popular markets, committing to at least one permanent physical location, and working out a strategy to eventually see an entire fleet of brick and mortar stores, all within a reasonable amount of time and with a committed, dedication to the decision. Going in without a thorough strategy and contingency plan for every reasonable scenario is expansion suicide, never more apropos than when moving from online to the retail store market.
Companies in the retail real estate sector are moving towards the latest technology and advanced retail models in order to attract any online businesses who are thinking about dipping their toes into retail space or companies fully invested in the move from online to offline. Caruso Affiliated CEO Rick Caruso recently commented that businesses like Amazon are moving to a hybrid model of business; with brick and mortar stores that are compelling, relevant and authentic, filled with smart businesses that know their customers and are using retail space to give customers what they want, when they want it. Indoor malls are being re-imagined and will look completely different in the near future.
RECon is the global retail real estate convention and is hosted in Las Vegas on May 20 – May 23, 2018. For more information visit: https://www.icsc.org/attend-and-learn/events/details/recon-the-global-retail-real-estate-convention6
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