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Real Estate Corner: How Brands Can Utilize Brick-and-Mortar Amid the E-Commerce Boom

Introducing FN’s new monthly column, “Real Estate Corner,” which will explore the changing landscape of brick-and-mortar and how retailers can thrive in this environment. As brands embrace a truly omnichannel approach, the physical store remains a critical revenue stream – but one that now looks a little bit different. This column will dig deeper into that new reality.

The growth of e-commerce has led the industry to concentrate on their online channels, but the physical store is as important as ever. Even while they enjoy the convenience of online shopping, consumers consistently report wanting to return to brick-and-mortar once it is open again; they just expect more from their favorite brands in terms of experience. The stores that will succeed in 2021 will be the ones that can adjust to these new consumer preferences.

“There is no contesting the importance of the growth rate of e-commerce, but a big story lies in the everlasting power of physical retail,” said Justin Abrams, co-founder and CEO of turnkey retail store platform FlagshipRTL. “Even during the 2020 pandemic, more than 80% of all retail sales happened in-store. Put another way, $4 out of every $5 spent was transacted in a brick-and-mortar shop.”

Not only are the sales numbers higher for physical sales channels, but experts suggest that it is a more economical choice overall due to the associated costs of e-commerce. Amish Tolia, co-founder and co-CEO of retail platform Leap, emphasized the increasing costs of online customer acquisition and fulfilment logistics, as well the higher return rates. Brands looking to avoid paying rent and store upkeep may find themselves still burning money by only operating direct-to-consumer.

When done right, physical stores can be a critical component of retail success – but it can be a challenge. 2020 saw record numbers of store closures and the landscape is more competitive than ever; launching or scaling a new brick-and-mortar channel is a significant investment that carries risk. Therefore, brands that are less experienced in this area may want to work with a third-party to help test the waters.

Inside the Bonpoint store in Southampton, in partnership with FlagshipRTL.
CREDIT: Courtesy of FlagshipRTL

“I like to apply the “rising tide floats all boats” adage: Both physical and digital presences are paramount, but they have to integrate seamlessly and without any friction,” said Abrams. “Customers have more power than ever to choose how they want to be connected with brands, and there’s no “right” path to purchase – you have to be able to meet your customers where they already are, on their terms.”

Through a service like Leap or FlagshipRTL, brands can identify the most relevant geographies for their market; secure shorter-term leases; and work with an experienced partner to get up and running quickly. Due to working with multiple brands, these services have access to a wider pool of data that can be used to refine store strategy and optimize efficiency and performance.

The use of digital tools is only expected to become more prominent in stores, as brands embrace a truly omnichannel approach. Through comprehensive data analysis and inventory management, brands can operate a hyper-local approach to merchandising and maximize their sales at each location. Synchronizing with e-commerce platforms also enables the company to use their stores as fulfillment centers as needed.

“There is a ton of opportunity in the marketplace right now as there is a large supply of vacant retail locations,” said Tolia. “This is enabling businesses and landlords to get more creative in how they work together and the tenant-landlord relationship is continuing to evolve. Across all our stores we are dedicating more of the space to service more omnichannel capabilities, such as offering virtual appointments with the store stylists over video chats.”

Each brand will require a different location, layout and aesthetic in order to resonate with their customer base. But for all brands, the store functions not just as a sales channel but as a “living billboard,” per FlagshipRTL’s Abrams. In order to bring a customer from the website to the store, there needs to be added value and an improved experience.

Both experts recommend that data from across the company’s channels be used to support the store strategy. Unlike with a pop-up, these short-term leases should be viewed as a way to test, improve and refine a brand’s approach for long-term success; in today’s fast-moving landscape, being able to adapt to new demands and behaviors is a requirement.

 

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