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Boom in Physical Store Openings Linked to Modern Online Shopping Behavior
Tony DiPaolo
7 min read
With ecommerce forecasted to capture 41 percent of global retail sales by 2027 according to BCG, it is a wonder why retailers would open or invest in new physical stores. However, retailers like Macy’s, Nordstrom, Primark, Arc’teryx, Groupe Dynamite, Canada Goose and North Face are investing in and opening new store concepts to support modern shoppers and provide competitive differentiation.
As new stores open around exciting new concepts, especially in the luxury goods segment, far from killing stores, e-commerce is actually delivering a renaissance for the traditional physical store.
The answer to this apparent paradox lies in the buying behaviors and preferences of modern shoppers. Retailers realize that today’s consumers use many sales channels in their buying journeys, and many omnichannel shoppers actually prefer to visit stores as part of that journey, with 73 percent of people in a Harvard Business Review study tending to utilize multiple channels while shopping.
Digital (e-commerce) and offline (physical stores) are closely interconnected to provide modern shoppers with a rich, seamless shopping journey wherever that journey takes them. It is this rise of these blended experiences that is driving many retailers to consider repurposing their stores to meet the expectations of today’s consumers and the primary driver behind many new store openings.
Research shows that omnichannel shoppers are more valuable to retailers, suggesting that these shoppers spend 15 percent more per purchase than those who shop just on one channel, and analyst firm Forrester believes that 38 percent of offline retail sales are digitally influenced. With modern shopping journeys becoming more fluid and fluctuating, visiting multiple channels before purchasing online or in a store is just part of the shopping lexicon in 2024.
Beyond the challenge of effective omnichannel offerings, however, rising labor costs and shortages within the labor market itself are both macroeconomic challenges that all retailers are faced with. While doing more with less is a glaring opportunity for retailers, the right tools are a strategic imperative if retailers are to engage, empower and enable store associates who are increasingly transient in their retail careers.
So how can organizations leverage both online and physical retail estates to capitalize on this new behavior? And, what are the key building blocks these brands need to consider if they are to deliver that all-important seamless experience to the end customer, but also to engage and empower their store associates? Below are five key areas brands need to focus on when considering the modern consumer’s expectation for seamless in-store and online retail experiences.
Flexible payments
According to Manhattan’s Unified Commerce Benchmark, consumers are 63 percent more likely to shop with retailers that offer their preferred payment options, while 51 percent of millennials and 48 percent of Gen Z claimed they would abandon a shopping cart if their preferred payment method wasn’t available. Flexible payment solutions—allowing customers to pay using their preferred payment method, whether credit card, digital wallet, contactless payment, cash or even pay by link (irrespective of the channel they choose to shop in)—are a must in today’s omnichannel digital age.
Providing modern shoppers with flexible payment options enables physical stores to meet their flexibility and convenience expectations. Stores can increase the chance of attracting shoppers by offering popular alternative payment methods, and modern shoppers will likely return to stores offering their preferred payment method; and keeping them satisfied will encourage loyalty.
Omnichannel promotions
Retailers plan and execute promotions to increase sales, attract new customers and enhance brand awareness. However, retailers can experience adverse effects from promotions (especially their impact on already low margins), if the correct technology approach is not implemented effectively.
Retailers need to focus more on promotional effectiveness, with a critical look at whether they bring the desired results to the bottom line and customer satisfaction. As with other omnichannel retail customer engagement areas, like inventory visibility, ordering and fulfillment, retail promotions require unifying all sales channels at system, data and process levels. Promotions must be defined once and shared seamlessly across channels with consistent targeting, qualification and calculation logic.
If a customer is eligible online for a promotion, that promotion should be available in stores and the contact center unless it is an exclusive online offer, yet in-store promotion execution remains a significant challenge to consistency. The fast-paced, chaotic environment of stores makes it difficult for store associates to present promotions to customers clearly and consistently. An omnichannel promotions engine can unify promotion execution across sales channels by providing a single source of truth for promotions logic.
Retail promotions are a critical part of the omnichannel customer journey that can help retailers realize various goals: from clearing out old inventory and introducing new products, to lifting declining sales and building brand loyalty. Effective omnichannel promotions are well-planned, targeted to the right customers and executed consistently across sales channels as an important part of the modern retail brand experience.
Clienteling
Modern shoppers place value on personalized shopping experiences. They appreciate tailor-made experiences that consider their individual preferences. In some retail segments, like high-end luxury goods, customers more than appreciate personalization, they expect it. According to McKinsey, offering personalization pays dividends and companies that get personalization right have the potential to generate 40 percent more revenue.
Personalized one-on-one shopping experiences in physical retail stores provide a way for brick-and-mortar retailers to stand out from digital-only retailers. Adding clienteling capabilities in stores, such as mobile clienteling capabilities, seamlessly connects all store sales and service functions, equips store associates with rich customer information and provides advanced tools to personalize and enrich customer interactions anywhere in the store.
Virtual clienteling, on the other hand, is an up-and-coming area of clienteling, enabling store associates to continue interactions with customers once they leave the store, such as responding to customer questions on products via phone, text or email and sharing additional information to help a customer make an informed purchase decision.
Whether in the store or beyond the four walls of a store, the key to clienteling in 2024 is enabling store associates to quickly view and use customer purchase history, engagement history and preferences to personalize interactions and make recommendations.
Store order fulfillment
Modern shoppers like the convenience, immediacy and shipping cost avoidance of buying online and picking up in-store (BOPIS), driving increased demand for this fulfillment service. Simultaneously, retailers are increasingly using stores to ship orders to reduce shipping costs and provide fast delivery.
Modern stores must provide store fulfillment efficiency, scalability and accuracy that meets customer expectations while improving profitability. And, while BOPIS enables retailers to meet the modern shopper’s need for convenience, it also allows retailers to increase store foot traffic and sales. A survey by the International Council of Shopping Centers found that 67 percent of BOPIS users buy additional items from a retailer when picking up their original order.
Physical stores are now multifunctional nodes in the omnichannel retail ecosystem, providing retailers with an attractive means to meet rising shopper demands for speed and convenience. When operationalized to meet growing volume demands and increasing customer expectations, store fulfillment can help retailers improve sales and customer satisfaction.
Unified returns and exchanges
Returns cost retailers $817 billion in 2022, and 78 percent of shoppers say returns and exchanges are inconvenient, while 41 percent of shoppers find the retail returns and exchange process time consuming.
And beyond the fiscal impact, returns are a significant contributor to CO2 emissions and landfill waste. The British Fashion Council’s Institute of Positive Fashion “Solving Fashion’s Product Returns” report, published in March 2023, found that 3 percent of UK returns are not resold. Of this, 50 percent are sent to landfill, 25 percent to incineration and 25 percent are recycled, highlighting the environmental impact clearly.
Returns and exchanges are typically complicated for customers and costly for retailers. With the volume of returns and exchanges rising, retailers must find ways to create a frictionless return and exchange experience while protecting margins.
Unified returns and exchanges allow modern shoppers to return or exchange any item purchased from a retailer at a store regardless of the original sales channel, including online purchases. With unified returns and exchanges to stores for all purchases, retailers can provide customers with a convenient way to make a return or exchange with the instant gratification of an immediate refund or new item.
While meeting the needs of modern shoppers in this critical customer service area, unified returns and exchanges in stores help retailers reduce business and environmental costs by minimizing the shipping of returns, too.
Tony DiPaolo is the vice president of retail solutions at Manhattan Associates. He has spent his career analyzing, operating and building various commerce technologies for enterprise retailers around the world.
