Physical retail has been in trouble for years as eCommerce became the preferred shopping method. As if retailers weren't already struggling, the pandemic's stay-at-home orders amplified the low foot traffic by an astronomical amount. Once iconic companies like Toys R' Us and Victoria's Secret were the main topic of discussion regarding physical retail failures. Still, after the pandemic, many brands were in the same boat.
However, physical retailers rejoice; there may be enough time for a comeback.
New data from the U.S. government shows an unlikely trend; physical stores surpassed online shopping in 2021.
The Commerce Department reports that Americans spent 18% more on food, cars, furniture, electronics, and other physical retail products last year compared with 2020. Meanwhile, online retail sales only increased by 14%. Physical retail numbers are slowly creeping by eCommerce.
Additionally, recent data from Shopify's Future of Retail Report shows that roughly half of consumers say that in the last year, having a physical retail space has had a "significant" or "very significant" influence on which brands they buy from, even at the height of the pandemic. The survey also found that 32% of brands plan to expand their pop-up or physical retail experiences throughout 2022, and 31% of brands say they will also amp up their physical footprint.
The National Retail Federation predicts that more than 72% of U.S. retail sales will still happen in-store in 2024. Contrary to the widely believed notion that Amazon would crush physical retail, the company is now investing in a portfolio of stores with 90 units currently operating under different Amazon banners. When Amazon does anything silently, it's evident that there's a growing trend that they are privy to on the horizon.
More people are opting for a more immersive in-store experience, and more bricks and mortar stores are popping up nationwide. U.S. retailers announced the opening of 8,100 store locations, double the amount that closed last year.
Research from The Daily on Retail indicates an increase in overall consumer spending and pandemic-related lease renegotiations and loopholes that helped keep store-closing numbers down.
More recently, a significant amount of new store openings were announced by discount stores, dollar stores, off-price stores and warehouse clubs, accounting for 47% of new stores, or 3,840-plus store locations.
Dollar General, Five Below, Off-Price, Citi Trends, and Costco were some of the most notable discount retailers that announced new store openings. Dollar General announced 2,160 new store openings in 2021, including 1,050 planned for FY21 and another 1,110 for FY22. Costco also has plans to open more than 60 new club locations by 2022 in addition to its existing footprint of 800.
The retailer plans to open second warehouse locations in new markets such as China, France, and New Zealand by August 2022.
Many brands with reputations for being in financial limbo will open physical locations in 2022. Wayfair executives have recently announced plans to open three new bricks-and-mortar locations in Massachusetts by the end of 2023.
Toys "R" Us even rose from the ashes (again) and launched its new flagship store at the American Dream mall. The iconic toy brand is also partnering up with Macy's to open 400 toy shops inside Macy's stores.
But the main factor driving an uptick in physical retail traffic is innovation. Large retailers understand that consumers' needs have shifted. Shoppers are so inundated with products and advertising that there is too much noise when shopping. Physical retailers are utilizing immersive shopping experiences to keep buyers hooked.
Internationally recognized names like Dick's Sporting Goods invested in interactive features like batting cages and even rock climbing walls to entice new customers and keep the loyal ones hooked. Target is now innovating its distribution. They adapted storefronts as micro-fulfillment centers, which met the demand for same-day pick-ups and reduced shipping costs by ~40%, an issue bolstered by the ongoing logistics crisis.
Finally, one of the more interesting predictions from Inc. infers that in-store associates could be the key that sets certain retailers apart from their competitors.
Store managers and corporate executives alike have always been aware of the powerful potential of retail associates to influence customers, and its an area of retail that can no longer fall to the wayside.
Best-selling author and retail veteran Ron Thurston said, "The beginning, middle, and end of building a successful retail strategy is putting people first." A breezy technological eCommerce experience is crucial today, but the most successful brands utilize the power of human connection in facilitating meaningful relationships and, most importantly, customer loyalty.
Inc. predicts that retailers that optimize experience and customer retention and adopt more customer-centric metrics around Net Promoter Score (NPS) will be better positioned to win markets, regardless of channel.
It's clear that physical retail's story is far from over. It seems like it's getting a new breath of life. After years of lockdown restrictions, consumers are antsy to have a more immersive experience when shopping. It is crucial for retailers to continue to innovate so that physical retail can fairly compete with eCommerce.
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