GUEST COMMENT Another brick in the mall: why digital-native retailers are opening physical stores  

During the pandemic, ecommerce experienced a boom. However, that growth has since steadied. 

Although ecommerce has revolutionised the way we shop, companies are braced for a downbeat outlook, with a report by Mastercard showing ecommerce transactions dropped 1.8% year-on-year, while in-store sales have risen 10%. 

From Glossier and Amazon to Made and Peloton, there’s a growing trend for online-only retailers to open stores in our shopping centres and on our high streets.  

So why are digital-native retailers investing in bricks-and-mortar locations and how this is ushering in a new era of the ‘click-and-brick’ shopping experience? 

While it may seem counterintuitive that physical stores boost online traffic and sales, research shows that this is in fact commonly the case. One report found that online retailers who opened a physical store noticed a 52% increase in online traffic in the same areas.  

Not only do physical stores drive online searches, but consumers spend significantly more per visit in-store than online. Everything from bold ‘sale’ signs to the store layout can encourage customers to spend more money. Additional tricks, like stocking high-profit products at the checkout line, result in impulse spending too.  

Consumer ecommerce now accounts for 30% of the total retail market in the UK, a significant 20% increase from 2020. While the market continues to expand, so does the competition.  

As ecommerce stores find it increasingly difficult to stand out among a host of similar sites, brick-and-mortar retail stores can create a unique, branded shopping experience that promotes positive sentiment and loyalty.  

Social media influencer Mr Beast, who has been running a delivery-only burger restaurant since 2020, recently opened his first bricks-and-mortar restaurant to much fanfare. Similarly, ecommerce beauty brand Glossier opened its first permanent store in the UK toward the end of 2021.  

These stores are not only a means of selling a product but creating a social-media-worthy experience. In the first two-and-a-half months that Glossier opened its store, over 100,000 fans of the beauty brand walked through its doors. The opening of Mr Beast’s restaurant drew in a crowd of 10,000 people. These brands highlight how capitalising on a branded experience can drive brand recognition and popularity – both online and offline. 

While online shopping can offer convenience, physical stores present an opportunity for retailers to bring to life their brand through experience through clever application of behavioural science principles. 

Retailers can create a seamless customer experience between online and in-store, using the concept of Perceptual Fluency which can be defined as that what we are familiar with requires less effort to process, and is therefore valued more highly by the autopilot part of our brain. This subsequently influences judgements of the quality of the experience. 

Perceptual fluency is a driver to attract attention and provide value for customers. For example, a customer may see an online advert one day, and implicitly learn a certain piece of ‘brand code’ from that ad. When in store a few days later, seeing the same piece of brand code (logo, strapline, sound etc.) makes it easier to process the information, being already familiar with it. 

If you can create the perfect atmosphere and replicate it at scale, retailers can effectively constantly embed positive brand vibes with their customers and this can help build familiarity – which creates great cognitive ease for spending – and strong long-term brand perception. 

A physical store also offers customers a chance to touch, see, feel and experience products, helping to close a sale. Abandoned shopping carts online pose a huge problem for online retailers. This is often due to high shipping costs, too many steps to finalise the sale or even due to a short attention span. Captivating the customer’s attention in person and eliminating some of these steps can boost spend per visitor. 

One of the great threats that retailers face is reduced spending due to a cost-of-living crisis. Consumers are looking to cut costs at any opportunity – this includes delivery fees. One survey found that 77% of shoppers would avoid ecommerce stores which don’t have free shipping.  

Providing an in-store shopping experience eliminates the costs to the consumer and reduces the risk of cart abandonment in-store. 

Of course, one of the main drawcards for ecommerce retailers is the reduced costs compared to bricks and mortar stores. But many online retailers are having their profitability challenged by numerous costs including shipping, which are then passed on to the consumer.  

As consumer shopping habits change, many online shoppers over-order their clothing to find their preferred sizing or style and then return the items they don’t want. However, these free returns have cost ecommerce retailers billions of pounds, and some are passing this on to shoppers. In-store purchasing gives both customers and retailers the opportunity to eliminate these costs.  

Customers looking for instant gratification are deterred by shipping delays and extended delivery times. One report found that product shortages and long lead time significantly impacted brand loyalty.  

This desire to have something immediately is also applicable for returns. For cash-strapped consumers, returning an ecommerce purchase can result in lengthy delays to be refunded. Providing in-store returns for customers means refunds are processed immediately, which leads to increased customer satisfaction. 

Physical stores also represent an invaluable opportunity to carry out market research that can benefit online strategies, too. In-store shopping allows for a more detailed inspection of products, which can result in more informed decisions. In turn – customers are then able to provide a more rounded review of the shopping experience.  

‘Fly-on-the-wall’ observation is also a great way to observe the way people interact with products in a natural setting and can highlight how customers go about making their purchasing decisions. The insight from this can then be used in an online setting. 

The ‘in-person’ advantage

One example of how in-person market research can benefit ecommerce is beauty brands which have included shade matching artificial intelligence on their websites. Buying beauty products in person has long been preferable for customers who want to try on a range of shades to match their skin tone. Beauty brand Tarte leveraged the preference for trying products in person and created an AI to allow customers to shade match online. This resulted in a 200% increase in sales online.   

While brick-and-mortar and ecommerce stores face their own unique challenges, creating a combination of both can support a new hybrid “click and brick” shopping experience. Combining both shopping channels gives businesses the opportunity to offer more shopping options to customers. This can boost both their earnings and potential brand reach. 

Combining these sales models gives customers the convenience of online shopping while physical stores give customers the ability to browse online at their own leisure while also testing and picking up products in person.  

A bricks-and-clicks model also has an advantage when it comes to processing customer returns. Businesses that are strictly ecommerce or bricks and mortar – have limited return options for customers, but a bricks-and-clicks option provides more options. 

One report found that customers have increasing expectations for their shopping experience. While online provides convenience for consumers, it fails to include an immersive shopping experience that is enjoyable for customers. By catering to evolving customer needs brands can maintain an essential competitive advantage.  

 Adam Castleton is CEO of Startle