Skip to main content

The Future of Retail Stores

In 2019, Amazon was worth about $920 billion; today the company is valued at more than $1.6 trillion, or $680 billion more than when the pandemic began. This reflects the explosive growth of e-commerce in 2020. 
 
COVID created millions of new online shoppers and expanded the range of products people buy online -- out of necessity. Now, as the pandemic eases and stores return to normal operation, analysts and retailers are actively contemplating the future of brick-and-mortar locations and asking what roles stores should play in retail strategy going forward. 
 
Reevaluating brick-and-mortar locations
During the height of the pandemic and stay-at-home orders, foot traffic was down nearly 30% in the US and 54% in the U.K. However, many retailers were able to partly compensate with online sales. Those with no e-commerce capabilities suffered. For example, U.K. retailer Primark lost as much as $1 billion because it had no e-commerce. 
 
It’s safe to say that everyone in retail is now focused on e-commerce, causing some retailers to reevaluate the importance of stores. Many global brands such as Zara, H&M, Victoria's Secret, L'Occitane, Gap, Nike and Disney are shrinking their physical footprints, closing hundreds of locations in some cases. UK retailers Debenhams and Topshop will become online-only brands. 
 
Some Wall Street analysts think half of US indoor malls could close within a few years. And UBS projected that more than 80,000 more US retail locations could disappear by 2026. But store closings were happening well before COVID-19. Indeed, the pandemic only accelerated existing consumer trends. 
 
Openings outpace closures in 2021
Despite e-commerce growth and retail financial woes, not all brands are closing stores. Costco, Target, Walmart, Sephora, Dick’s Sporting Goods and Dollar Tree, among others, are investing in new locations. Even Amazon, the biggest beneficiary of pandemic-online shopping, has contemplated opening new physical stores to sell discounted merchandise. Currently, the company has nearly 600 locations, most of which are Whole Foods Markets. 
 
Tracking data from Coresight Research shows more stores have opened so far this year than have closed. COVID made leases more flexible and rents cheaper, so many retailers are taking advantage and opening new locations. This is also true of digitally native direct-to-consumer (DTC) companies that have moved offline to reduce customer acquisition costs and support their brands with a real-world presence. 
 
Returning to pre-pandemic patterns
Later this year we’ll get more insight into how retail stores are likely to perform going forward. Will people remain cautious or flock back to stores? Have consumers permanently shifted a larger portion of their spending online? 
 
Multiple surveys show that people are eager to return to stores. In-store shopping has also seen 30% growth so far this year (vs. 2020). But consumers have also embraced online shopping and are likely to maintain their newly developed e-commerce habits. 
 
Whether someone buys an item online or in store may now depend on a range of factors: convenience, price and inventory availability among them. But regardless of where a transaction is completed, online is typically the starting point. Last year Google searches for “in-stock,” “where to buy [product category/name] near me,” and “what’s open near me” grew dramatically. Reviews also factor heavily into consumer purchase journeys.
 
Online and offline integration 
Given these trends, it’s critical for retailers to integrate online and offline assets to better meet the needs and expectations of a growing audience of agnostic, omnichannel shoppers. One expression of that is buy-online-pick-up-in-store. Stores support e-commerce. Being able to pick up a product the same day or return it to a local store gives people confidence to buy online. 
 
An Uberall consumer survey late last year found that 71% of US adults said they were more likely to buy a product online, that they hadn’t seen in person, if they could return it to a local store. When people don’t have to worry about returns, they’re more likely to take a risk. 
 
One of the biggest retail trends of 2020 is curbside pickup. Shopify reports that around 100,000 retailers globally began offering some version of curbside pickup last year. Many retailers will continue the practice after COVID because of favorable customer response. 
 
A number of high-profile retailers have also begun fulfilling online transactions through local stores, which saves on shipping costs and speeds up delivery time. Target was one of the most prominent examples; it fulfilled 95% of online orders through stores in Q4 alone.
 
Digital discovery and the hybrid future  
Google’s data show, despite the massive success of Amazon, consumers want to support local businesses, but they must be discoverable online. This means better websites and more attention to major consumer sites (and apps) where people search for local information. These recommendations apply equally to larger retailers, which have often neglected basic things like local store profiles and responding to customer reviews online. 

Fundamentally, shoppers want retailers to make it easy for them to discover products and buy online or in stores. They don't think of a retailer's website and stores as “separate channels,” they're simply different ways to buy.
 
Analysts have framed the "future of stores" as a zero-sum clash between the physical and digital worlds -- with online winning. That’s simplistic; even with the COVID-fueled e-commerce boom, 80% of consumer spending in 2020 was still offline. 
 
Stores have to evolve to survive. But they remain an important part of meeting changing consumer expectations and, though it may seem counterintuitive, they’re also an essential component of retailers’ digital strategies. 

Greg Sterling is VP of Insights at Uberall.

More Blog Posts in This Series

X
This ad will auto-close in 10 seconds