To win in retail, more online retailers are realizing that only having a popular e-commerce website will no longer suffice. Leading online retailers understand they now need a ‘phygital’ presence – physical stores to complement their digital offerings – to meet shoppers’ omnichannel expectations.

Amid today’s relentless retail disruption, savvy retailers are investing in delivering a superior customer experience across all channels. In this first article of a two-part series on the phygital trend in retail, we will look at pure play (i.e. online-only) e-commerce retailers that have recently opened or expanded their fleet of brick and mortar stores.

E-tailers evolve from clicks to bricks
In one of this year’s biggest retail bombshells, e-commerce powerhouse Amazon acquired Whole Foods Market and gained 460 physical stores in urban, upscale neighborhoods across the US, Canada and the UK.1Byers, Dylan. What Amazon knows: ‘The war for retail will be won in groceries.’ CNN Tech. August 25, 2017. The acquisition catapulted Amazon into the top 10 grocers overnight and forced global grocery competitors to rethink their own phygital grocery strategy.

Amazon already has 13 bookstores and two more set to open in 2018.2Duffer, Ellen. Amazon Is Opening More Bookstores. Forbes. September 26, 2017. Meanwhile, Amazon Go stores featuring checkout-free shopping are on track to open to soon.3Zaleski, Olivia and Spencer Soper. Amazon’s Cashierless Store Is Almost Ready for Prime Time. Bloomberg. November 15, 2017.

But Amazon isn’t the only one building–literally–their way up the retail ladder. Just this month, online apparel retailer Everlane opened its first store after six years of exclusive online service.4Hartmans, Avery. Everlane has a huge cult following as a popular apparel website — here’s a look at its first-ever physical store in New York City. Business Insider. December 1, 2017. Popular for “radical transparency” across its supply chain, the retailer selected New York City as the site for its flagship store.

Additional online retailers that have recently invested in brick and mortar stores include mattress company Casper, cosmetics brand Birchbox and eyewear brand Warby Parker.5 Howland, Daphne. Report: Everlane to open first flagship store. Retail Dive. July 19, 2017.

Why e-tailers seek physical stores

To understand e-commerce retailers’ rationale for brick and mortar, there are several reasons why they are opening physical stores:

  1. Strategic, omnichannel growth:
  2. Opening physical stores allows online retailers to reach and attract new customers, particularly those who currently shop in competitors’ stores. As the Harvard Business Review declares, “the best retailers combine bricks and clicks.6Evans, David S. and Richard Schmalensee. The Best Retailers Combine Bricks and Clicks. Harvard Business Review. May 30, 3017.

  3. A friendly face:
  4. Physical stores provide a rich shopping experience, including face-to-face human contact, which can strengthen brand trust, sales and loyalty. In-store shoppers can ask more spontaneous questions and connect with charming salespeople who are trained to delight and cater to guests.

  5. Multisensory experiences:
  6. An in-store experience can appeal to consumers’ senses – an advantage e-commerce lacks. Shopping in stores allows customers to feel a soft cashmere sweater, smell Starbucks’ dreamy aromas and indulge in Costco’s free food samples. Engaging the senses can evoke more powerful emotions than an e-commerce transaction and even entice consumers to buy more.7Montaldo, Donna L. How Retailers Influence Buyer Behavior and Increase Impulse Buys. The Balance. November 30, 2016.

  7. Ease and convenience:
  8. Simplicity improves the customer experience. Adding physical stores allows consumers to buy online and pickup in store (BOPIS), so consumers receive their merchandise immediately and retailers reduce shipping costs. Physical stores also help e-commerce retailers deliver hassle-free returns by making it easier for shoppers to buy online and return in-store (BORIS). Allowing shoppers to try on items like clothing, glasses or cosmetics can also reduce the need for returns, as in-store shoppers can be confident that a product looks fantastic.

  9. Social, fun shopping:
  10. Today’s savviest retailers recognize that their relationship is now between the consumer as well as their network of other consumers. Consumers may shop together in stores, as the experience is more fun and social than ordering alone from a laptop or mobile phone. (Besides, most Gen Z consumers are too young to possess their own credit card to shop online.) Consumers of all ages increasingly extend their in-store experiences with online reviews and social media posts – especially if a store offers retailtainment like live gourmet cooking shows or an indoor hockey arena.

  11. Data-driven assortment:
  12. E-commerce companies have an important advantage over brick and mortar-only retailers because their online systems allow them to capture massive quantities of consumer and product data. This data helps retailers know exactly which products people buy, browse, return and review. As they expand to physical stores, online retailers can apply their deep, data-driven insights to ensure their in-store product assortment reflects exactly what shoppers want.

  13. Adapting to showrooming:
  14. By opening physical stores, e-commerce retailers address and even encourage showrooming. The term showrooming refers to a situation where a shopper visits a brick-and-mortar store to examine a product in person – then buys it online, likely after comparing prices across multiple e-commerce sites to get the best deal.

    To serve shoppers better, e-commerce retailers are embracing the phygital trend by expanding into brick and mortar stores. Capturing greater market share, making shopping more convenient and igniting shoppers’ senses to maximize sales help explain retailers’ rationale for opening new stores.

Stay tuned for part 2 of this series, where we will explore how brick and mortar retailers are investing in e-commerce capabilities to strengthen their omnichannel customer experience.

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