After being threatened constantly with the growth of online sales and the dangers of showrooming, landlords can breathe a sigh of relief—a new study by global consulting firm A.T. Kearney found that consumers appreciate the presence of physical stores regardless of whether they ultimately make their purchases in store or online. The stores provide an opportunity to discover and try out new products, as well as make returns without the hassle of shipping products back. That means that today’s retailers should be concentrating on both optimizing physical store portfolios and improving online presence, instead of putting all their focus on one channel or the other, A.T. Kearney researchers say.
The study, titled “On Solid Ground: Brick-and-Mortar is the Foundation of Omnichannel Retailing,” found that in 2013, 90 percent of retail sales took place inside brick-and-mortar stores and another five percent were classified as multi-channel. Only five percent of retail purchases were transacted entirely online. And even though retail consultants have long believed that the in-store experience is more important for certain categories, such as apparel, it turns out that the rule holds true across sectors, according to Andres Mendoza-Pena, a principal in A.T. Kearney’s Chicago office and a co-author of the study.
Mendoza-Pena brought up the example of computer equipment and electronics. When the study got underway, A.T. Kearney researchers expected that most people would prefer to shop for those items online, as there would be no need to try them on, as with clothes or shoes. But they found that up to 35 percent of survey respondents preferred to try out computer and electronics items in the store before purchasing them.
In the past few years, as online shopping exploded, many retailers have made the mistake of viewing the value of their physical stores purely in terms of the sales they bring in, Mendoza-Pena says. In reality, he points out, stores help consumer discover new products and try out which ones they prefer, regardless of where the actual transaction takes place.
“There is this notion of ‘value capture’ and ‘value creation,’” he notes. “The value of the stores to consumers and retailers is far greater than what the sales show. Today, consumers might start the discovery online, they may go and try [the product] in the store and then order online. Therefore, when you look at where retailers capture their value, having the consumer going to the store is huge. It’s very important to be mindful of that. We believe that the way in which retailers account for sales and value has not evolved in the way the consumer has.”
A multi-step process
The researchers divided the shopping experience into five core steps, including discovery, trial, purchase, pickup and return. They found that even when it came to retail sales completed online, physical stores played a key role in various steps of the process in 71 percent of transactions.
For instance, more than 85 percent of surveyed shoppers said they preferred to try out health and beauty products and pick furniture in physical stores. Roughly 78 percent of shoppers also prefer to purchase furniture in store, rather than online, and more than 80 percent like to be able to return health and beauty products in person to a physical store, where they can also immediately make a replacement purchase that suits them better, according to Mendoza-Pena.
The study found that “for high touch-and-feel categories, including apparel and accessories, health and beauty and furniture, respondent preference for in-store trial and testing is as high as 85 percent.”
“Immediacy, ease and accuracy of testing are all cited as reasons for preferring in-store trial.”
As proof that physical stores matter, the researchers also point out that a number of previously only-online brands—including Microsoft, men’s apparel retailer Bonobos and women’s fitness apparel seller Athleta—have launched brick-and-mortar divisions in recent years. The number of stores operated by those three retailers, plus Boston Proper and Warby Parker, grew from just two in 2009 to 141 in 2013.
While the right mix of brick-and-mortar and online presence comes down to individual retailers, Mendoza-Pena notes that “online retailers were extremely successful in opening [physical] stores.”
The study found that top multichannel retailers, including Nordstrom, J.C. Penney, Foot Locker, Neiman Marcus, Williams-Sonoma, Zales, Abercrombie & Fitch and Limited Brands, currently spend approximately 76 percent of their capex on store improvements, an increase of 6 percent from 2011.
Mendoza-Pena notes that high street brick-and-mortar locations work best for promoting a brand, while mall locations tend to drive a high amount of store traffic.
“On Solid Ground” was based on responses from 2,500 U.S.–based shoppers, ranging from seniors born before 1950 to teens born in 2001.
