“Physical retail is dying” has been the common rhetoric ever since e-commerce arrived. Yet despite a stream of bricks-and-mortar retail apocalypse stories, coupled with the impact of Covid-19, it’s clear that physical retail isn’t dying – it’s evolving. 

Retailers such as David Jones, Kmart and Sanity are closing physical stores, while at the same time, online-first retailers such as Amazon, Luxury Escapes, and LSKD are opening them. Then there’s Toys R Us, which closed 44 stores in 2018 and is now planning a return to Australia with physical stores.

The reality is that the digitisation of commerce has completely transformed the role of the physical store. Now, retailers need to reevaluate physical retail opportunities in an omnichannel world and how they can position their stores for success. 

Physical and online stores: A marriage of convenience

With consumers shopping fluidly across channels, how does the physical store complement the e-commerce experience and vice versa? 

For all its advantages around convenience, e-commerce has one critical limitation: it falls short in physically engaging customers – a task that physical stores are well-equipped to do.

Consumers may educate themselves, price shop, watch videos, and check reviews online. But they still love going in-store to try on, touch and interact with physical products before making an informed purchase decision. The physical store provides customers with the tangible multi-sensory buying experience they crave. 

This may explain why some online retailers are venturing into the offline world by opening physical stores, often as showrooms or pop-up shops. 

Outdoor retailer Anaconda recently opened a new concept store in the western Sydney suburbs – dubbed the Anaconda Adventure HQ – where customers can get hands-on with the latest outdoor products and watch live demonstrations, including a 40ft casting tank for fishing equipment. 

Even if the final purchase is made online, the value of the memories, experiences, and emotions tied to a physical store like Anaconda Adventure HQ cannot be underestimated in how they contribute to a final sale.

However, for retailers to embrace this new purpose for physical stores, there are implications to all parts of the brand. From employee engagement to store layout, fulfilment and stock levels. 

Let’s delve into some of the implications.

Going beyond sales and customer service

Retail staff have always played an important role in stores by delivering customer service and driving sales. 

Many brands used to view customer service as reactive: store employees answered shoppers’ questions (or complaints) and helped them find the right sizes and models. 

Store employees must now take a proactive approach to customer service and focus on clienteling to build long-term, personalised relationships with customers – something they cannot get online. 

But this relies on retailers getting the employee experience right. Research reported by Inside Retail suggests that dissatisfied employees are more than 2.5 times more likely to say they do not provide excellent customer service, and 64% of workers say the employee experience directly impacts their ability to serve customers. In other words, if staff are too stressed, poorly managed or not working well with their colleagues, they will not provide the experience your customers expect. 

It’s never been more important to focus on the basics of good training and providing the right systems and processes to help store employees provide the best customer experience. 

For example, an in-store relationship management solution, like Clienteling by Omneo, means staff can view profiles of customers when they visit in store. Armed with personal details, size information, purchase history, and more, they can provide a personalised customer experience based on their unique style and preferences. 

Delivering on convenience

Physical stores serve as not just showrooms and service centres but also hubs for speedy fulfilment. 

Consumers now expect fast delivery and a variety of collection or delivery options. According to Australia Post’s 2023 Inside Australian Online Shopping Report, almost a third of consumers now expect deliveries to come faster than they did in 2019.  

This is an opportunity for physical retail to step up and give customers what they expect: maximum convenience. 

For instance, a customer might not have the time or desire to visit a physical store, but they also don’t want to pay for delivery, wait 3-5 days for the product to arrive, or risk missing an at-home delivery. With click-and-collect, online shoppers don't have to deal with these inconveniences. 

Using the store network to fulfil orders, in addition to warehouses, through ship-from-store and click-and-collect can help boost the customer experience and increase efficiencies. 

According to a recent report by McKinsey, for some retailers, two-thirds or more of e-commerce orders already touch physical stores. And ship-from-store could account for 30 to 50% of physical store volume in the next few years. 

In-store pickup offers benefits for retailers: not only is it cheaper to fulfil than delivery, but it also brings shoppers through the doors, which can lead to bigger baskets. According to a study reported by Inside Retailer, 58% of customers made additional purchases when collecting an online order in-store. 

Physical stores becoming mini-fulfilment centres also creates new responsibilities for store staff. They need to manage stock levels and be ready with orders when customers arrive. 

Therefore, successfully implementing these fulfilment methods requires an integrated, single view of inventory held across the network of stores. Stock records need to be updated in real time across online channels and physical stores.  

Owning the customer experience with pop-ups

The omnichannel world is not only turning stores into hubs for speedy fulfilment, it’s also prompting a surge of stores that carry low or no inventory, like pop-up stores. 

Pop-up stores can form a valuable part of an omnichannel strategy. Fashion brands have long harnessed the power of popups to generate excitement around product launches, collaborations or simply the brand itself. They can act as a showroom, while also building on the brand’s community to nurture loyal followers. 

Online-first brands, like Australian athleisure brand Crop Shop Boutique and luxury online reseller Luxe.It. Fwd, are opening retail pop-ups to complement their e-commerce presence and build on their brand experience. Luxe.It. Fwd reports this strategy has led to a significant revenue increase of AU$2 million year on year. 

Even retail giants like Myer have explored the benefits of pop-up locations in Southern Cross Station in Melbourne and Bondi Junction in Sydney. 

But the real value of pop-up stores, and physical retail in general, goes beyond revenue growth to the lasting connection and trust that consumers build with the brand. 

That leads us to ask:

How can you measure the success of new physical retail opportunities?

Historically, there were two metrics fundamental to evaluating retail store performance. 

The first was sales per square metre. This tells you how a store is performing regardless of its physical size and is a great measuring tool for comparing different stores. 

The second was sales volume. If you’re selling more, then you’re growing. 

Along with some other metrics – sales per staff member, sales per hour, footfall – these would give you a good measure on your store’s success. 

However, the evolution of the physical retail space means its value is no longer solely tied to direct financial profit – it is in less tangible elements, such as emotional and experiential engagement, brand trust and reputation. 

While these elements are fundamental to establishing long-term customer loyalty, and ultimately sales, they are harder to measure. 

Retailers need to use a new lens that aligns the measure of success with customer experiences and real feedback. By going beyond vanity metrics and transactional/financial measures, you can reflect the entire brand experience. 

Likewise, metrics for staff performance can be set beyond sales and financial measures to reward them for the right behaviours and outcomes, which drives a better customer experience. 

It’s time to create the perfect blend

The rise of e-commerce has not killed physical retail – that much is clear. In this omnichannel world, physical stores have a more crucial and complex role to play than ever. It’s time for retailers to re-evaluate what customers love about physical retail, recognise the unique opportunities it can offer in synergy with e-commerce, and find ways to capitalise on its value in the long term.