Physical retail has had to learn to roll with the blows in recent years. The COVID-19 pandemic was an unprecedented catastrophe for what we might now call ‘old school’ retail. And thanks to a long list of other geopolitical factors that have hampered economic recovery since, it hasn’t yet had a fair shot at bouncing back.
And then there is, of course, that elephant in the room called ecommerce. There’s no shortage of people happy to line up and gladly declare that bricks-and-mortar stores have had their day. And that it’s time to embrace the brave new digital future.
Well maybe someone should tell consumers that. Early in 2023, PwC’s regular Global Consumer Insights Pulse Surveyfound that 43% of consumers planned to increase their use of physical stores. Ecommerce consultancy Wunderman Thompson Commerce, meanwhile, found that 60% of consumers prefer to buy from retailers that offer both digital and physical options.
These tentative hints that the consumer love affair with the retail store is far from over have pushed some commentators to wonder out loud – could 2024 be the year when physical retail finally strikes back?
Online costs on the rise
The argument is based on an alignment of various factors. One is that the honeymoon period of free or extremely cheap delivery in online commerce is coming to an end. Shipping costs have soared worldwide over the past couple of years in line with high fuel inflation. Vendors have only been able to absorb those costs for so long.
This year saw Amazon offer to pay customers $10 a time to pick up purchases rather than have them delivered, because they could still save money that way. Delivery costs have become the top factor that people say influences their online purchasing decisions. And many, especially younger consumers feeling the cost of living pinch, are choosing to abandon deliveries to head back in store instead. Albeit buy online, pick up in store (BOPIS) options remain popular.
There’s a similar cost-related issue with returns. Again, as ecommerce underwent a second boom post-2008 financial crash, retailers started offering free returns to make up for the fact that digital shoppers cannot try before they buy. Consumers more than took full advantage. In sectors like fashion, buying multiple items with the clear intention of returning some became the norm. This resulted in a staggering 16.5% of online purchases in the US resulting in a return.
This is simply not sustainable, especially not with high shipping costs. So many vendors have started to impose return fees. With the good times over, and less inclined to take a risk on items they would have to pay to return, more consumers are heading into stores again to check things out in person before they buy.
Physical stores, digital experiences
Another factor making analysts wonder if physical retail is set for a bounce-back is the fact that the in-store experience is rapidly changing. After years of viewing digital retail as competition, store owners are now embracing the digital revolution and working to digitize the in-store experience.
This is only logical, as the vast majority of physical retailers are also digital retailers these days. There’s no competition, only synergies to explore for the benefit of your customers. For speed, convenience and simplicity, it’s hard for stores to compete with online commerce, which literally puts purchasing power at people’s fingertips.
But what stores can offer are experiences above and beyond what consumers get online. So whether it’s trying in items of clothing or flash cookery classes as you shop for groceries or unique in-person events, stores will always have something that digital struggles to replicate – direct, immersive, often collective experiences.
When you start to throw in technologies like AI, AR and VR into the mix, or harness the vast swathes of customer data now available to personalize in-store marketing and journeys, the opportunities to transform traditional retail stores from sales rooms to experience hubs only multiply.