Opinion

Retail Apocalypse or Retail Revolution?

Pointing to high-profile bankruptcies and empty store windows, some analysts say we are witnessing a “retail apocalypse.” But a deeper dive into the latest earnings reports and retail trends suggests we’re seeing something entirely different: a retail revolution.

The rise of e-commerce has upended the retail ecosystem, but the future is not e-commerce. Instead, traditional retailers and e-commerce firms are racing to meet evolving consumer expectations for seamless omnichannel retail experiences.

For many traditional retailers, 2017 was a big year for investment and experimentation, and the winners were those who merged physical and e-commerce platforms into a seamless consumer experience.

Target is a great example of how companies have blurred the lines between physical and digital shopping experiences. During an earnings call, Target Chief Executive Brian Cornell announced a 29 percent increase in e-commerce sales in 2017, but said that two-thirds of those online orders were fulfilled in its physical stores. It’s no surprise that Target also announced plans to expand its successful omnichannel delivery services — including curbside pickup in about 1,000 domestic stores and increased availability of two-day shipping.

One of the oldest grocery chains in America, Kroger, introduced a “seamless digital shopping experience” in 2017 to great success. Households that use this experience — which combines online ordering and in-store pickup with digital offerings like coupons, recipes and rewards — spend more per week than households that shop for groceries the old-fashioned way.

And in another particularly compelling example, fast fashion brand Gap reported a 30 percent uptick in online sales as a result of its new cross-platform and cross-brand approach to retail with sister brands Old Navy, Banana Republic and Athleta. Gap’s CEO credited their success to technical improvements — like investing in faster web services that brought page load times to under three seconds on mobile devices.

Finally, customers who use Ulta Beauty’s omnichannel options spend 2.7 times more than the retailer’s store-only shoppers. And consumers who shop at Fabletics.com and in its stores spend roughly three times more than those who shop only on the retailer’s website.

For those still fretting about the future of brick-and-mortar retail, the best evidence of our omnichannel future is the growing list of e-commerce retailers opening physical retail locations. By now, we are all familiar with Amazon’s rapid expansion into physical retail locations including bookstores, its purchase of Whole Foods, and its experiment with Amazon Go in downtown Seattle.

And Amazon isn’t alone in waking up to the importance of a physical retail presence. Other brands that started online have big plans for physical stores in 2018, including Allbirds, Casper, Everlane, UNTUCKit, and Warby Parker.

The online eyeglass retailer Warby Parker initially relied on a try-at-home option for customers but quickly realized there was a big appetite to see more options in a storefront setting. Now, it has plans to expand to 100 stores by the end of the year, and it closed a $75 million funding round to facilitate that expansion.

Best known for its podcast advertising, online mattress brand Casper offered free delivery and a 100-day, money-back guarantee to convince buyers to take a chance on its mattresses. Casper’s CEO recently admitted that mattresses are an “intimate purchase” that people “look for in-person,” which led the company to open its first physical store in New York, where customers can test out its mattresses. Plus, Casper has partnered with Target and West Elm to sell its products in stores across the country.

Even the most reluctant brands have seen the benefit of omnichannel retail. After swearing it would never open a storefront, online clothier Everlane opened two physical stores in San Francisco and New York last year.

Despite the hype, e-commerce isn’t wiping out traditional retail. E-commerce covered just 9.5 percent of retail sales in the United States in the first quarter of 2018, and the most successful online retailers are expanding into physical retail instead of doubling-down on e-commerce alone.

In 2018, smart retailers are investing big in evolving a seamless experience for customers across their physical and digital properties. Those who can’t — or won’t — evolve will be left behind.

 

Steve DelBianco is president and CEO of eCommerce trade association NetChoice.

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