The retail sector has undergone a major revolution in recent years, and online shopping has been the chief instigator.
In 2013, online retail sales occupied 5.8% of all retail sales in the US, according to Statista.com – it’s now at 12.4%. And in the UK, these numbers are equally as dramatic, with online retail sales jumping from approximately 10% of all retail sales to roughly one fifth over the same time period, according to the Office of National Statistics.
This means two things for modern retailers. One – the competition is fierce, and two – the expectations, preferences and behavioral patterns of consumers have evolved. Modern consumers are more demanding, fickle and vocal than ever before, and retailers are having to work significantly harder to stay relevant and front of mind.
And while we often hear stories of seemingly-impenetrable retailers closing down stores to focus on their e-commerce offering (or packing up shop altogether), in a weird twist of fate we’re also seeing digital native brands developing their first physical stores.
At face value, these stores look exactly the same as traditional stores, but where they differentiate is in their approach. Here’s how:
Why online retailers want to get physical
Previously digital-only brands such as Samsung, Warby Parker, Bonobos and Amazon are developing their first stores – a movement that is commonly referred to as “clicks-to-bricks” in retail circles.
A 2018 report from commercial real estate firm JLL estimated that 850 stores from US digital native brands will open up in the next five years – most notably from mattress retailer Casper, lingerie startup Adore Me, and athleisure footwear company Allbirds.
“’The clicks-to-bricks retailers’ expansion plans demonstrate the value these brands place on having a physical presence with which to engage shoppers,” JLL said.
A new 2020 study from rival commercial real estate firm CBRE found that the number of online retailers leasing retail space in Los Angeles and Orange County increased by 367% in the past four years.
And while online shopping is still very high in demand, digital first retailers have switched on to the fact that physical stores are great for generating revenues and building stronger customer relationships that convert across channels.
Research by CACI shows retailers see websales increase by an average of 106% within the catchment area of a physical store. In fact, a number of reports claim that physical stores are essential to building a long-term viable retail business. A report by Simon Property Group found unsustainable customer acquisition and shipping costs erode margins, which means scale is essential but hard to acquire.
Samsung has pioneered the clicks-to-bricks race
Samsung is perhaps one of the best examples of a digital brand that’s invested in a significant store portfolio. In 2012, the global electronics retailer began building physical stores as a way of strengthening its relationships with customers.
Nowadays Samsung has two store types: Samsung Experience Stores which create the opportunity for customers to engage with the brand’s products and receive advice from store associates through one-to-one appointments and group workshops, and Samsung Support Centers, which provide customers with phone repairs and technical advice.
The very definition of a store is changing. Instead of being a “place to buy goods or services”, as the dictionary currently defines it, we’re seeing the concept of stores transform into what Qudini refer to as “brand interaction hubs” – places where brands can encourage customers to interact with its products, people and community.
This is something that Samsung has epitomized by opening its Samsung KX “Not a Shop” concept space in London’s Coal Drops Yard, a digital playground where customers can play with Samsung products and interact with the Samsung community through a series of engaging events.
What traditional retailers can learn from digital native retailers
Digital native retailers entering the brick-and-mortar sphere have a lot to learn – creating powerful in-store experiences is by no means straight-forward in today’s ever-changing retail environment.
But, on the other hand, there are plenty of lessons traditional retailers can adopt from digital-first retailers, such as:
- Invest in omni-channel: To often traditional retailers treat online as a separate entity from their existing brick-and-mortar store portfolio, yet modern customers don’t differentiate between the two. Digital native retailers know that there’s great power in having a connected presence across online and physical channels, and they know how to utilize it.
- Leverage the halo effect: Online retailers know that physical stores are as much about branding as they are about selling, so they carefully place their stores in locations that put their brand front of mind.
- It’s all about experience: “Retail is not dead, but boring retail is” says Nike’s VP of Global Stores, Cathy Sparks. Digital native retailers know this all too well, and are investing in creative, exciting and engaging in-store experiences that resonate with modern consumers. They’re also investing in digitally-driven experiences that are powered by appointment booking apps and queuing systems.
- In-store personalization: Online retail is big on personalization, yet inside traditional stores there is often little to none. That’s why digital first retailers are investing in data-powered in-store experiences that are catered to the individual, not the masses.
- Showroom your products: Online retailers want to make in-store sales – but they also know that stores are places where people can get to know your brand, test out your products and get inspired.
- Think outside the box: Don’t limit yourself to what has been done before, but focus on new approaches. For instance, a large number of digital first retailers are investing in popup stores that get people to engage with their brands in all new ways.
Find out how to increase profitability and brand relevance in-store by creating superior customer experiences, advanced store operations and utilizing game-changing data insights with the Retail Choreography framework.