The future of retail: Can brick-and-mortar stores coexist with digital commerce?

In 2022, retail eCommerce sales were expected to reach $5.7 trillion worldwide. With figures like this reflecting the proliferation of online shoppers, it becomes hard to imagine a world where digital commerce doesn’t dominate. 

But, while the convenience of buying anything you want from your couch is unparalleled, brick-and-mortar stores still play a large part in modern retail strategies. There will always be some need to see a bulky piece of furniture in person or try on clothes without worrying about sending them back if they don’t fit.

The digital realm has opened new possibilities, but could it shut down in-person shopping? Where does the future of the retail industry lie?

The data paints a fairly complex and mixed picture. According to Capgemini’s 2023 consumer behavior study, customer interaction with physical stores has returned to roughly the same level as before the COVID-19 pandemic. That said, in the face of recent economic uncertainty, customers are becoming more cost-conscious and cutting down on their shopping.

Determining whether brick-and-mortar stores are profitable in the digital era largely depends on the circumstances of a retail operation. Those circumstances include their industry, brand image, and customer demographics.

This article tackles the advantages and disadvantages of physical stores and offers several strategies for enhancing brick-and-mortar profitability. We’ll help you decide whether opening a shop or staying in the digital realm is right for your business.

Image sourced from prod.ucwe.capgemini.com

Advantages of brick-and-mortar stores

Tangible shopping experiences

There’s so much your customers can learn from physically touching, feeling, and trying out products. The truth is that it will bring them closer to making a purchase decision than an online description and pictures ever could. 

Take the shoe brand Kizik, for example. While originally an online-only brand, they have seen a boost in sales since they’ve branched out into brick-and-mortar stores. This is because, by visiting the store in person, customers have been able to try the shoes on and experience the comfort and convenience they provide. Ultimately, this makes the product’s offering more convincing. 

A tangible shopping experience can benefit you by:

• Making it easier to build a positive and memorable shopping experience compared to a list of items on a webpage.
• Providing customers with reassurance when it comes to luxury or high-value products that they will likely want to take a closer look at. 
• Increasing sales because shoppers spot items they didn’t even know they needed.  

The magic of in-person shopping lies in the idea that every second your customers spend in your store sells them on the superiority of your brand and the benefits of your products. 

Instant gratification

There’s something satisfying about walking out of a shop with the physical product in your hand. It’s the same principle for why vinyl records are still cool in our age of digital music platforms and streaming.

Even with same-day delivery on eCommerce sites, such as Amazon, you can still get an item quicker by visiting the store in person. Offering your customers this option allows them to carry out impulse purchases. This opens a new market and adds to the convenience of your shopping experience; they can get your items either in-person or online.

Personalized customer assistance

Ever walked into a store and been greeted by your name? I have. Okay, admittedly, it was at my local Chinese takeaway, and it didn’t make me feel good about my diet, but the point still stands. When you are made to feel appreciated, you are so much likelier to shop with a business again, and this is light-years easier when speaking face to face than it is over a customer service portal.

It’s a simple pleasure, but having a friendly interaction is worth the extra effort of traveling. That’s especially true for older folks who may not have family to keep them company and for whom a conversation could be the absolute highlight of their day.

Free to use image sourced from Unsplash

Challenges faced by traditional retailers

Digital competition

Perhaps the biggest drawback of brick-and-mortar stores is stiff competition from online alternatives. The practice of showrooming means that physical stores often lose out on sales because customers will google a product in their hand just to put it back on the shelf and conclude it’s cheaper elsewhere.

To avoid this, you must coax your in-person customers with one of three “pull factors:” convenience, lucrative sales offers, or quality customer service.

High overhead costs

Running a shop isn’t cheap. You have to cover the cost of rent, electricity, gas, wages, store equipment, property taxes, insurance, licensing permits, security, inventory “shrinkage” when your security doesn’t work as intended, etc. The list is endless, without even mentioning those maintenance issues that inevitably pop up. 

Compare that to the cost of setting up an eCommerce website, which could set you back significantly less in just your first year. It’s easy to see the winner in this category, and it’s why online stores can set more competitive prices. 

That said, brick-and-mortar stores shouldn’t just resign themselves to high overheads. In premium rental markets, such as the U.S. or the UK, you can mitigate against those costs. 

Image sourced from statista.com

Restricted geographic reach

You unfortunately can’t open a store within walking distance of every one of your potential customers. On the other hand, it’s not always economically feasible to open a store far from major population centers. So, you either make your product so good that people are willing to travel to buy it or you offer an online delivery service.

Strategies for enhancing brick-and-mortar profitability

Putting customers first

The best way to attract more customers to your store is to make them feel valued and rewarded. A simple solution, such as a mobile loyalty program, could generate repeat business. Make sure to offer the feature to sync their account with your eCommerce store so that they can also earn loyalty points from online shopping.

Crafting memorable in-store experiences

Your stores should be exciting places that offer shopping experiences that form great memories for your customers. That drives natural growth via word-of-mouth marketing, which is crucial for the brick-and-mortar retail model.

Ensure your storefront is clean and you always have a friendly face to answer customer’s questions. You’d be surprised how many businesses fail to nail down these basics, but it makes a huge difference to customer perception.

A great example of this is M&M World stores in the UK and the U.S. They combine holographic displays with fun props to create photo opportunities and an immersive experience. They've created such a memorable shopping experience that they've even become tourist attractions in their own right.

Image sourced from hypervsn.com

By investing in interactive technologies and showing off what’s special about your brand, you can create a “wow factor” when it comes to your store. This will help you to stand out and cement your image as a premium brand. 

Smarter inventory management

Technology can also help your brick-and-mortar store from behind the scenes. You can streamline warehouse operations with RFID tags or barcode scanning systems. Make sure to integrate these with an inventory management system to easily keep track of available stock.

Using tech for convenience

Technology cannot yet fully bridge the gap between in-store and online experiences, but it does offer fresh opportunities to brick-and-mortar retailers. A prime example of this in recent years is the QR code, which helps customers read product info from the convenience of their smartphone browser.

Another prominent trend is the increased usage of smartphones; everything from mobile payment options to text message marketing is now commonplace. Some stores even offer geo-fencing offers, where their mobile app pings customers a special deal when they come within close physical range of the shop.

Turning our gaze inwards, accounting tools such as an accounts payable automation solution could do wonders for your business’s productivity. Constantly filling out forms is a lengthy task, so look at cloud accounting software to remove the burden of data entry and digitize records to save you time and money. 

Screenshot taken from Sage.com

Adopting an omnichannel approach

An omnichannel approach guarantees that your customers have the same experience no matter how they interact with your brand. Whether they prefer to shop in-store, on your website, or app, the messaging should always be consistent. For example, you should offer your in-person shoppers the same sales deals they can find on your eCommerce store to show they’re getting the best deal no matter how they shop.

Taking your business online is about more than just creating a website and offering the same deals. It’s about considering the entire omnichannel user experience and making your customer’s journey as easy and convenient as possible.

Image Sourced from divante.com

Evaluating profitability in the digital age

As you continue down the route of brick-and-mortar retailing, always reflect on your company’s financial health and areas where you could improve. Although you’re likely to have different goals and aims for your online and in-person stores, this is still crucial to helping you evaluate and compare the success of your efforts. 

You should start by setting SMART KPIs, which are specific, measurable, achievable, relevant, and time-bound. This will make sure you set achievable and realistic goals that can be monitored over time. 

When it comes to measuring your in-store success, you should be tracking metrics such as foot traffic in-store and inventory turnover. These figures should then be taken into account alongside your overall ROI to give you the best idea of how your store is performing. 

Consider syncing your sales data, such as number of orders, conversion rates, etc., with a data analytics platform so that you can readily observe your company’s real-time performance and identify weak spots. Technology can be a huge help here, such as a bookkeeping app or accounting software. Tools like this will give you easily accessible insights and help to manage cash flow, improve efficiencies, and save time and money. 

Verdict: brick and mortar stores are here to stay

This conclusion comes with a pretty hefty asterisk. With pressure on everyone during an inflation and cost-of-living crisis, retailers need to think of new ways to engage with their customers. They are the bedrock of your business, and nurturing repeat business is crucial to remain competitive and rapidly scale your brick-and-mortar presence.