Why Physical Stores Are Still Vital for Retail

Editor's Note: On February 16, Aptos announced its acquisition of LS Retail, a world-leading provider of unified commerce solutions for retail, hospitality, food service and forecourt businesses of all sizes. Now operating as a stand-alone business unit within Aptos, we are pleased to share expert insights from the LS Retail blog, starting with the post below.

During the Covid-19 pandemic, online became a fundamental channel for retailers. Even as overall retail spend decreased, eCommerce sales grew over the previous year. The impressive results may overshadow that eCommerce still represents just a small percentage of total retail sales: in the U.S., the number is as low as 14.5%, according to eMarketer data.

This means that over 85% of retail still happens in physical stores, which makes a synergy between online and offline key to retail success in the near future.

Here are eight reasons why you should still invest in your brick-and-mortar store locations.

1. People are more likely to buy a product when they've seen it in person.

According to KPMG research, the top reason why consumers prefer to shop in physical stores is to see, experience and test products in person before buying them. Having a physical location where people can go and make sure that, yes, this paint is exactly the color I want, can dispel consumer doubts and help close a sale. Seeing things in person can, also, reduce the risk that a product will be returned because it's not the right size/color/material.

2. Customers who pick up items in store buy extra stuff.

Click and collect (also known as BOPIS, buying online and picking up in store) and curbside pickup are extremely popular both with customers and retailers. Compared to home delivery, pickup can be more convenient for customers, as it enables them to get their purchases when they want, without having to wait for a courier at home. For retailers, in-store pickup offers plenty of benefits: it's cheaper than delivery, it brings shoppers through the doors, and it can lead to bigger baskets. According to Forrester research, 30% to 40% of consumers using click and collect buy additional items when they get into the store.

3. Physical stores can reduce the cost of returns.

Items bought in physical stores are less likely to be returned than products bought online. According to David Sobie, co-founder and CEO of Happy Returns, "shoppers return 5-10% of what they purchase in store but 15-40% of what they buy online."

Letting shoppers exchange or return in-store the items they bought online can also help reduce the cost of returns by removing shipping and transportation fees for the retailers. Consumers like it, too: according to NRF data, 80% of shoppers say they prefer to return products to a store than send it back.

4. High-quality, one-on-one customer service increases sales.

Despite the popularity of online shopping, the human touch is still an important part of the retail experience. According to research for RetailEXPO, almost two out of three (64%) of shoppers say that knowledgeable sales associates make them more likely to visit a physical store, and three out of four (75%) of shoppers are likely to spend more after receiving high quality service from staff in-store.

5. The brand experience is still inherently physical.

Retail is a highly competitive industry. While it can be hard to stand out online, a physical store gives you the chance to create an engaging brand experience. Showrooms and concept stores, for example, can enable retailers to immerse customers in their brand culture, creating lasting impressions. Designing an experience that has the right balance of safety, excitement and convenience is key – and can help differentiate your brand from the competition.

6. You can use stores as part of your supply chain.

In omni-channel retail, logistic costs can spiral out of control, and erode margins significantly. Some retailers are realizing savings by using some or all of their physical stores as warehouses and fulfillment centers, to support and strengthen their supply chain. Transforming a store location in a so-called "dark store" can help reduce costs of inventory management and expand the reach across larger geographies by enabling faster, more effective distribution.

7. You get free market research on your customers' preferences and habits.

Fashion retailer ModCloth opened its first brick-and-mortar store after 13 years of selling online only. "We discovered small things, the details our customers love," Matt Kaness, president and CEO at ModCloth, told USA Today. "They loved linings in dresses and skirts, and they loved pockets." Although data collected from the online store can helps see trends, retailers can learn much about their customers just by watching them shop, interacting with the space and products. "From a market research standpoint, [a store] pays for itself. The amount of market research you gain just by observing people, it's the equivalent of 100 focus groups," said Sucharita Mulpuru, senior analyst with Forrester Research.

8. Physical stores bring greater traffic to your online store.

Research from the International Council of Shopping Centers shows that when a retailer opens a new physical store location, traffic to their website increases by 37% the following quarter. According to L2's report "Death of Pureplay Retail," when retailers open new brick-and-mortar locations, the number of online mentions of the brand and online searches increase dramatically. This online buzz is accompanied by increased financial returns, L2 adds, making physical stores a good investment both in terms of popularity and profitability.

According to a survey from Harvard Business Review, shoppers who buy both online and in physical stores tend to spend more on average compared to those who interact with a business on only one channel. For retailers, this means that physical retail still has a central role to play in their business strategy.

If you need help figuring out what tools you need to deliver fantastic omni-channel customer experiences, the experts at LS Retail and Aptos can help.  Our unified commerce solutions are world-renowned for connecting online with offline, and retailers with consumers.