As the retail recovery is still underway, the industry continues to evolve with omnichannel taking center stage to redefine how brick and mortar interacts with e-commerce.
That’s according to Ethan Chernofsky, chief marketing officer at Placer.ai, who recently presented recent data around retail foot traffic patterns. Placer.ai regularly publishes compliant location analysis data for the retail industry, revealing foot traffic and other retail patterns. Chernofsky also relayed which segments in the retail space are likely to see continued growth and how retailers are playing with new formats to ensure the recovery sticks.
The store as a platform
E-commerce sales were the top story in 2020, with consumers flocking to digital channels to make their purchases. Circumstances have changed since the early days of the pandemic, with states loosening restrictions and stores reopening, and many people have since returned to visit stores once again. Even with the current uncertainty around the pandemic as cases rise once more, retailers are viewing their brick-and-mortar stores in a new light.
That’s because the role of the physical store is changing, according to Chernofsky. The store should be viewed as its own platform.
For example, when customers buy online pick up in store (BOPIS), they still have to come to the store. For a lot of retailers, that represents an opportunity to get people back in the door and make purchases inside while also picking up their orders. In addition, people may start their shopping experience in the store, but they may carry over into the online space—if they try a shirt on in the store and then order more of the product in different colors from the e-commerce channel, for example.
“[Retailers need] the ability to think more expansively about what a store can drive, start recognizing it's not just about the sales within the four walls, it’s about the opportunity and experience they create to drive long-term revenue,” Chernofksy said.
And there are a lot more opportunities that lie untouched.
Stores may also be viewed as their own platforms that attract important brand recognition in physical locations. Many brands, such as Nike, have pulled back their online presence to ensure their model is direct to consumer—with an eye toward both online and in-store sales. Brands that have significant name recognition have an opportunity to create other store-within-a-store concepts at their locations, particularly for those brands that sell their products primarily online. That’s because attracting eyes online is harder than it might be in a mall.
“Brands are recognizing there is a lot to be done offline that goes beyond sales,” Chernofksy said. “The CEO of Everlane said in 2019 that the worst kept secret is online-only is not profitable at scale. [Retailers] need places to distribute, places to encourage cheaper returns and places to sell and drive brand recognition. The eyeballs [in store] are cheaper than trying to find them online. [Consumers] walking past [the store] in a mall can be more valuable to some brands.”
Taking the value a step further, it’s not off-base to think that a Warby Parker store could sell hats from an online DTC company or have a section of sunglasses from another brand, according to Chernofsky.
“The store is a platform,” he said. “It’s a place where having space and reach provides a huge advantage to those who don't have that access yet.”
Retail segments to watch
As brands continue to focus on how they can make the most of their brick-and-mortar presence, there are some retail segments poised for better growth than others.
After spending months in lockdown, consumers are more focused on their appearance, giving new life to the beauty segment. Target is one mass retailer taking advantage of the hot segment through its new partnership with Ulta, with the brand opening mini-stores within some Target locations.
This connection between retailers and middle-road brands also follows the evolution of the brick-and-mortar store as a platform, but with renewed focus on what consumers want and what type of value they seek. Similarly, Kohl’s also has introduced a partnership with beauty retailer Sephora for store-within-a-store concepts.
Instead of focusing on the luxury end of the retail scale—or the opposite on the discount end—the middle lane with a new mix of brands and curated product assortment is where the recovery will strengthen in the near future, according to Chernofsky.
“Every store can be different to provide the right goods to the right people in the right environment,” Chernofsky said. “The strength of brands like Target, or Kohl’s bringing in Sephora, is a clear middle move. If you're seeing players from the value lane push their way up, it's not because it is harder. It’s because they see a massive lane with an opportunity.”