Why the Booming Ecommerce Business is Going Brick and Mortar in 2022
As a retail professional, when someone asks you about the state of the industry the first thing that might pop into your mind is how the pandemic accelerated ecommerce growth. We’ve all seen the headlines, read the studies, and experienced it firsthand in our companies.
But underneath the surface, brick and mortar stores have grown more relevant than ever. 90% of retail sales were expected to be generated through local stores in 2021. Then, as retailers planned their 2022, they set out “to open more stores than they close for the first time since 2017,” reports the Wall Street Journal. Ecommerce-only online shops are joining the party, and opening brick and mortar stores, so they don’t stay behind.
Let’s explore the reasons behind this turn of events.
Customers Want Deeper Experiences
Don’t get us wrong – the love of convenience, access and possibility that shopping online provides is pretty great. More customers experimented with it during lockdowns and learned the benefits are worth the habit change. But many crave to combine this convenience with more immersive experiences at a physical storefront.
The Desire for Human Connection is Greater than Ever
For some, the pandemic locked them in their homes with a lot of people, and alone time is all they crave now. But for many others, whether they live alone or not, it locked them away from family members, friends, colleagues, and other day to day interactions out in the world, which they used to take for granted.
Over one in three survey respondents said they felt lonely almost all the time, or at least frequently, reports the Harvard Gazette, adding that 61% of Gen Zers “reported high levels” of loneliness.
Customers have longed to return to brick and mortar locations, to feel the physical presence of what life used to be like, to communicate with sales associates and fellow customers, and add lightheartedness back into their life.
Yet as they do that, they’re not really seeking to go back to what used to be. Their need is stronger than ever for immersive experiences at a physical store that sweep them off their feet.
Customers Want Customized Omnichannel Experiences
Customers’ desire for an omnichannel experience isn’t new, but it’s growing more essential as the years go by. Like we said, they want the convenience of ecommerce sales, but they also want the shopping experience of touching the products themselves, trying them on, seeing colors in person, and taking the products home instantly.
As they enter the brick and mortar store to do that today, being an anonymized entity that no one on the team recognizes feels outdated. Customers want the contemporary brick and mortar experience, partially because smart retailers have implemented technology that recognizes them, their preferences and their history with the brand the moment they enter the store. They get the convenience of ecommerce with the human connection and immersive experiences, as sales associates know exactly which products to recommend to them, smart mirrors add their “maybe” products to their online wish lists, and mobile POS systems enable them to check out seamlessly, without waiting in lines.
The Cost Effectiveness of Ecommerce isn’t So Obvious Anymore
One of the biggest arguments for an ecommerce-only business is its cost effectiveness – no need to pay rent and store maintenance fees, no need to train sales associates over and over again as industry turnover rates remain high… you name it.
But when retailers look at the numbers more thoroughly, they realize it’s not necessarily the most cost effective choice anymore.
The Costs of Ecommerce Customer Acquisition Have Skyrocketed
Often, the argument is that you need a brick and mortar store at a prime location – say, a high traffic mall – to simplify your reach. Even customers who never intended to enter your store, or never even heard of your brand, might do so when they see something in your window as they head to get ice cream at the mall. But prime locations cost a lot of money. It’s much cheaper to set up a website, run some ads, operate some digital marketing and social media profiles and… magic.
And maybe it used to be like this, but as more and more brands have gone online, ecommerce-first companies started seeing ad rates spike up big time. Social media management costs have gone up, too, as it became an actual profession – not to mention the costs of influencer marketing. Some ecommerce-first companies realized it might just be cheaper, and generate a higher ROI, to add an offline channel.
The Costs of Processing Returned Products are So High, Retailers Prefer to Refund Customers Without Getting Products Back
The convenience of ecommerce shopping has also made it easy to return products, especially as retailers compete on high standards of free and fast shipping, alongside free and easy returns.
When customers buy products online, they can’t know for sure what these products will end up being like. Maybe the color ends up being off, maybe the product doesn’t do what they hoped it would do. Sometimes, customers like to plan ahead for mishaps. They order the same product in multiple sizes, then send back what doesn’t fit, for example.
Whatever the reason might be, retailers lose $1 trillion a year from returned products – $90 billion of which are likely to reach landfills instead of getting back on websites or shelves. Processing returned items is so expensive, that some retailers provide refunds without requiring products get sent back. And yes, the majority of the problem is created online. “Shoppers return, on average, 15-30% of online purchases. That’s compared with a return rate of about 13% for shoppers at bricks and mortar stores,” reports CNBC.
Pounds of waste generated by retail returns in 2020.
Source: Oporto via CBRE
The New Golden Age of Brick and Mortar Stores
Turns out the pandemic has accelerated the need for digital experiences, but as integrated parts of the human to human “in real life” experiences. Retailers who are savvy enough to offer holistic, omnichannel shopping that immerses customers in technology-advanced, personalized journeys will be the ones to enjoy this new golden age of brick and mortar stores.
Check out this article on immersive in-store experiences to get inspired, and start strategizing what’s possible for your brand.
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