Has ecommerce put a nail in the coffin of traditional retail?
That’s a question that’s on everybody’s mind these days. And it is clear why. Over the past decade or so, nearly every person’s shopping behavior has changed exponentially. The ease by which people can research and purchase products online has been a challenge to the time-honored brick-and-mortar storefront. Disruptors—whether in the form of online retail giants like Amazon or emerging direct-to-consumer brands like Warby Parker, Dollar Shave Club or Casper—have capitalized by creating new shopping experiences. And some tried-and-true names—Sears, ToysRUs—have contracted or closed entirely.
But here’s the thing: Talk of the demise of traditional retail has been greatly exaggerated.
That’s not to say that ecommerce hasn’t changed things. But brick-and-mortar locations and in-store shopping still matter. In fact, they matter a lot. By various estimates, about 90 percent of purchases still occur in a store. And while that figure could drop to the 80 percent range in the coming decade, that still means that the in-person shopping experience is crucial. Ad dollars, especially during the important shopping seasons like the holidays and back-to-school, need to follow.
A retail rebirth?
Two important trends are changing the in-store experience.
First, a number of established retail brands are doing a good job of creating a customer experience that cuts across physical and digital channels. While their same-store sales might be flat, their ecommerce businesses are strong. Take department store icon Nordstrom, for example. In last year’s fourth quarter, its same-store sales growth was a solid 2.6 percent, but its same-store ecommerce growth was 12.4 percent.
The second trend is related to the growth of direct-to-consumer brands, companies that have disrupted established segments like mattresses (Casper), beauty (Glossier), apparel (Everlane, Allbirds), eyewear (Warby Parker) or travel (Away) by creating strong, data-driven marketing and powerful ecommerce platforms.
But while these brands rely on digital storefronts, they are also now embracing brick-and-mortar. Glossier, Everlane and Allbirds have all recently opened up showroom-style flagships in New York City to give consumers a more tactile and personal way to interact with their products. Casper, which made its reputation by delivering a mattress in a box, announced plans to open more than 200 physical retail stores over the next year as a way to educate new consumers and make them aware of its broader iine of sleep-related products. Even Amazon has been opening physical bookstores. These brands may have an ecommerce pedigree, but they see the value of actual storefronts.
Understanding the actual path to purchase
Clearly, people are still going shopping. But the journey they take to discover new products, learn about them and make actual purchases now passes through a wide range of digital and real-world channels. So ad targeting and ad dollars need to account for this changing behavior. But the goal remains the same: drive shoppers to the store.
According to eMarketer, the U.S. retail industry continues to dominate the digital ad business and it forecasts that retailers will spend $23.5 billion on digital ads this year, up over 18 percent from last year. That represents nearly 22 percent of all U.S. digital ad spending. Much of that spend will occur on mobile, which is uniquely suited to driving real-world behavior.
A study we commissioned to 451 Research earlier this year found that retail stores are at the forefront of using location data to understand the offline customer journey. Some 86 percent of retail marketers are currently using location data, and 92 percent plan to increase their use over the next two years.
With location data and point-of-sale data, physical shopping locations can become rich sources of consumer behavior data. By seeing how and when customers engage the shopping experience, retailers can better plan their social media and digital ad strategies, measure the impact of specific promotion at the cash register and garner other insights on behavior, intent and brand affinity.
Retail brands are also using location data to inform their TV buys, allowing them to see the impact of different patterns and understand how specific campaigns affect physical store traffic.
No doubt the digital world has transformed the shopping journey. Still, most consumers still enjoy the experience of going to the brick-and-mortar store. And that can give retail marketers the kind of intelligence that will keep the cash registers ringing.
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Antonio Tomarchio (@tonytom82) is the founder and CEO of Cuebiq.
