The growth of e-commerce has undoubtedly changed the role of the store, but has not diminished the relevance and value of maintaining a physical presence.
The store remains the cornerstone of omni-channel strategies for the majority of retailers, which is further cemented by the acceleration of ‘click-and-collect’ purchase models. In the U.K., one of the most developed online markets in the world, the research firm Verdict Retail (now known as GlobalData) forecasts that click-and-collect expenditures will grow 64% from 2016 to 2021, compared with online growth of 38% in the same period.
One of the key advantages to retailers is that click-and-collect seems to be helping to bolster in-store expenditure, with Verdict Retail reporting that nearly two-fifths of customers that collect an online order from a store make an additional purchase, generating on average just over £13 per consumer in additional purchases.
Brick-and-mortar stores also represent a key opportunity for customer engagement and building a brand image as the role of the store changes from driving sales in-store to driving revenue across all channels. In recent years, the industry has witnessed a large number of previously Internet-only retailers opening physical locations as stores are valuable marketing vehicles and not only generate sales in-store, but also create a halo effect by raising brand awareness and driving incremental traffic online, which also accelerates e-commerce sales. Indeed, research released in August 2017 by UK developer British Land shows that when a new store opens, traffic to the retailer’s website from the surrounding postal area increases by 52% on average within six weeks of opening and then remains around this level. This trend is shown to be particularly pertinent for brands with fewer than 30 stores, which saw uplifts in local traffic to their websites of 84% on average, showing that a physical store can make a critical contribution to the online success of expanding brands.
What is clear, therefore, is that in order to fully understand the value of physical stores, we must also consider the online contribution of retailers who have a physical store network. By challenging the top level e-commerce turnover data and extracting the sales that are generated by brick-and-mortar retailers via their online channels, Euromonitor data reveals that 45% of all EU Internet retail sales in 2016 were attributed to non-pure play retailers, equating to €92.4 billion. When added to the sales that take place in-store, this means that over 94% or €2.394 trillion of EU retail turnover in 2016 is owed all or in part to physical retail real estate compared with only 4.4% or €111.6 billion in pure play e-commerce sales.
Going forward, as physical retailers continue to invest in developing their omni-channel strategies, they will be a leading driver of e-commerce sales. Therefore, far from being a weakness, rising e-commerce sales testify to the strength of retail real estate and the enduring value of the store as an integral part of the consumer experience.