The covid-19 pandemic and resulting lockdowns led to a massive surge in online shopping and spending that led many to believe that it would finally and truly replace much of physical shopping, and traditional retail. While there was this surge in online shopping during the first months of the pandemic, it has become increasingly apparent that there is a serious need and interest in physical shopping for the majority of consumers.
This is certainly not the first time that we have discussed how the retail industry is evolving because of the changes and convenience brought by e-commerce. However, the current market conditions left in the wake of the pandemic, lockdowns, and geo-political unrest have cemented the pressing need for retailers to adopt omnichannel models.
Shopping has Returned to In-Person
Lockdown fatigue led many consumers to long for in-person shopping experiences, and as soon as it was possible for them to return to stores, they did. According to data published by the Commerce Department, 2021 showed a significant decline in e-commerce sales. E-commerce sales, which had peaked at a total of 16.1% of all retail sales in early 2020, were back down to 12.9% of all retail sales by the end of 2021.
These numbers are exacerbated by the fact that when the Commerce Department was evaluating e-commerce sales for the last few years, they defined e-commerce sales in the report linked above as “sales of goods and services where the buyer places an order, or the price and terms of the sale are negotiated over an internet, mobile device…or other comparable online system. Payment may or may not be made online.”
This overly-broad definition of e-commerce does not adequately differentiate click-and-collect online orders or to-go restaurant orders from the traditional e-commerce sales of products that many were speaking to when they forecasted the death of brick and mortar. These click-and-collect and to-go orders may have dominated the early months of the pandemic, but this was mostly because it was the safest grocery and food option for many Americans, and even downright required in some locations. Once it became possible for consumers to return to grocery stores, many did, helping to drive these numbers back down.
On top of this, those that were looking for more traditional retail options such as apparel, electronics, furniture, and home goods were finding that when they did utilize online shopping for these goods, there were certain qualities that were missing from the buying experience. This empty feeling drove them back to brick and mortars as soon as they became available.
This return to in-person shopping has led to problems for many online-only business models that expanded during the early stages of the pandemic, and are now dealing with a surplus of inventory and a dwindling customer base. An additional constraint these companies are facing is that customer acquisition costs continue to rise, which is drastically slowing online sales growth for all retailers.
What Online Shopping Couldn’t Provide
There is a range of elements that is integral to the experience of in-person shopping that was lost in translation in the shift to online shopping models. While online shopping does benefit from the convenience of the experience, as well cost savings, these benefits can only go so far. Consumer behavior has shown that the ability to hold and evaluate a product in person does a lot for convincing a shopper to purchase a product.
The multi-sensory experience of holding and examining a product allows a shopper to create a stronger emotional connection with the product that they are considering, a connection that leads to more consistent sales. This phenomenon, amplified by the fact that many shoppers had negative experiences with product duplicates and knock-offs during the height of the pandemic, has led to a consumer that will want to thoroughly consider a purchase before deciding, which is a difficulty for online models.
Additionally, online shoppers have lower commitment levels and attention spans compared to in-person customers, due to the range of options available to them, as well as the lack of investment on their part to view the products. Whereas with a physical store shoppers will spend the time driving to the store, looking at a product in person, online shoppers can pull up products at any moment, removing the urgency of the purchase.
Finally, the experience brought by the pandemic and lockdowns made in-person shopping a special experience again. In a scenario that could only have arisen organically, the experience of going to the store and taking the time to peruse options and interacting with store staff and other shoppers, became aspirational, something that reminded consumers of the times that came before. Prior to the pandemic, many consumers were excited about the prospect of shopping for products online, and the convenience of having everything delivered. Once they were forced to live that reality, they very quickly became nostalgic for the traditional retail experience.
The Merging of Online and Physical
While the recent shifts are favoring physical retail again, this is not to say that online retail is going away either. Obviously, there is a place for this retail option, and many retailers are making shifts to take better advantage of the strengths. This is resulting in many retailers capitalizing on a merge of the two avenues that has long been a dream of most businesses.
Because of this marriage, omnichannel retail is now becoming the new normal for retailers. Through the complete alignment of online and physical marketing, retailers are capable of securing more consistent sales conversions. They can also produce better and more enticing product offerings for their customers, better meeting their needs.
Adapting to true omnichannel efforts like this does require more effort on the part of retailers, mainly in understanding their customer’s behavior, in order to correctly cater to consumers. There are multiple factors that need to be researched and considered to do this correctly. This will require retailers to understand the elements that drive a customer to make a purchase, as well as the avenues utilized to make the purchase and how those avenues relate to their lifestyle, the amount of time committed to the buying process, and the distance to retail stores from their homes.
There are Multiple Physical Roads for Online Brands
While all direct-to-consumer brands would benefit from having their products in physical locations to capitalize on these strengths, not all have the capability to immediately invest in build to suits to bring their products to their customers. Obviously some brands, such as Tuft and Needle, have been successfully able to do just this, but many brands do not yet have the scale or customer support necessary to achieve this.
However, this does not mean that there are no options available for them, there is a range of opportunities that will allow them to get their products into consumers’ hands. Many retailers are now engaging in pop-up locations, or even floor-model-only stores. The fact that many of these stores are available for a limited time generates interest in shoppers, and allows them to experience the benefits of physical retail without requiring the full commitment and investment of a permanent location.
Another choice available is partnering with existing retailers to carry their products in stores. Many direct-to-consumer brands have done this with retailers like Target, which now carries Harrys, Function of Beauty, Native, quip, and Casper, just to name a few of the many partnerships they have secured. This partnership affords these brands the best opportunity to get their product in the hands of customers that would not likely be comfortable purchasing the product online.
JOSHUA SIMON >
Founder & CEO
As Founder and CEO of SimonCRE, Joshua Simon leads the company's growth strategy while directing daily operations. He carries the torch for a team committed to developing projects that benefit clients and the communities they serve. When Joshua is not in the office, you will find him advocating for the CRE community, serving on a number of committee boards and appearing as an industry expert at various conferences.