Back to the Future: Brick and Mortar’s Role in eCommerce
5 Considerations for Winning In-Store
By Roberto Avila & Michael Marcus
The onset of the COVID-19 pandemic caused brick-and-mortar retail to hit a figurative wall. Shelter-in-place policies forced individuals inside and, therefore, online, causing a shockwave for the retail industry. While this dramatic pullback caused some to herald the demise of in-person shopping, recent data suggests the increase was only temporary. At the height of the pandemic, eCommerce peaked at 16% of total retail sales; numbers have dropped since then back in line with pre-pandemic trends to 13%. The takeaway: the pandemic didn’t permanently shift us online; rather, it forced us to rethink the role of everything offline. The future of retail, therefore, lies in a brand’s ability to successfully create a true omnichannel shopping experience for its consumers, with the in-store portion reimagined, creating an immersive experience for the consumer.
The Brick & Mortar Advantage
Retail stores are not only transactional; they are also centers for fulfillment, customer acquisition/engagement/upsell, and marketing opportunities. Ideas like BOPIS (“buy online and pick up in-store”), interactive signage, inviting showroom exhibits, and hosted community events are all examples of this forward thinking.
For example, Tractor Supply, the rural lifestyle retailer, has grown revenues from ~$8.4bn in 2019 to ~$14.2bn in 2022 on the back of a successful omnichannel strategy enabling buy online and pick-up in-store, which has fueled a majority of their digital sales. On the digitally native side, brands like Warby Parker have taken note and expanded their footprint with brick-and-mortar locations, resulting in their “CACs at the lowest level we’ve seen since early 2020” from the effectiveness of physical stores.
Establishing An Omnichannel Presence
Achieving the goldilocks of retail, i.e., an omnichannel presence, can be daunting, especially for digitally native brands; however, our research of the retail tech market has uncovered a few solutions that can help brands make the jump.
1. Getting the Right Real Estate
The first step for digitally native brands to achieve an omnichannel presence is securing a physical location, which can be challenging for businesses with limited real estate experience. Unsurprisingly, companies have emerged to address this issue. For instance, Leap, a “retail-as-a-service” platform, helps digitally native brands open physical stores, providing premium locations outfitted with operational and technological capabilities. Stores managed by Leap measure metrics like traffic, inventory, and customer expansion, supplementing the immense data that digitally native brands already possess. Whether a company leverages a provider like Leap or not, getting boots on the ground is the first step in boosting cost-effective customer acquisition.
2. Securing Employees to Manage Stores
The store is open…but who will work in it? Labor shortages have been a significant issue lately. Popularly referred to as “The Great Resignation,” more than 47 million workers quit their jobs in 2021, and industries like retail and hospitality were some of the hardest hit. Interestingly, nearly 30% of retail workers are part-time employees. On this note, solutions like Reflex help tackle labor issues by providing a marketplace of part-time workers who, through training and incentives, can fill various roles at any retail location near them. Reflex creates the opportunity for stores to keep a running list of “all-star” part-time workers, which tend to be far better and larger than the standard part-time pool a retailer manages on their own.
3. Equipping Employees to Ensure Customer Engagement
It is important to make sure all store employees, including managers and full-time and part-time frontline store associates are given the right tools to constantly stay informed and engaged. Sageview portfolio company, Theatro, provides a “heads up & hands-free” solution, facilitating communication between associates and back-end systems. Going back to our Tractor Supply example, Theatro-powered headsets enable BOPIS by notifying store employees when a customer is coming to pick up their order and share detailed information on the pick-up. Another great solution is Quorso, which packages relevant tasks, alerts, and performance opportunities for managers to better coordinate strategic initiatives across different store clusters.
4. Getting Customers in the Door
The store is stocked, staffed, and ready to go…how do we get people in the door and ensure they leave with a purchase? An ongoing challenge of brick-and-mortar is customer experience. Let’s not forget why eCommerce got hot – it’s captivating (thanks to excellent UX designs), saves time, and captures the shopper’s journey. Brick-and-mortar should be no different. Companies like Raydiant provide eye-popping, interactive displays to attract customers, and, once in, companies like Pensa, RadiusAI, or Focal Systems leverage camera vision and ML/AI to support better inventory management, shorten queue wait times, and optimize customer store journeys. Retail stores need to be as engaging, fast, and convenient as their eComm counterparts; customers don’t want to make the trip to a store only to find their favorite shirt is missing or face a lengthy checkout line.
5. Explore Additional Revenue Streams
If long-term monetization is a worry, there is a large opportunity with in-store retail media. Our portfolio company, Grocery TV, helps retailers generate passive revenue with beautiful digital signage. At no cost to a store, advertisers can freely showcase products/services to shoppers at key touchpoints in the shopper’s journey, like checkout. It’s an excellent solution to grow basket size without impacting a retailer’s spend.
Overall, digitally native brands host many advantages – they know exactly who their customers are, how customers journeyed to their brand, and what they may want to buy next. However, to fully realize their value, they need to be meeting their customers in person as well as online. Brick-and-mortar stores should not be viewed as a formality of the past, but rather an opportunity for more brand exposure, better logistics, and new customer acquisitions. Many companies have already caught on to this, with a recent study showing 72% of retailers are looking to increase in-store tech spend – and this is just the beginning of a fertile market we think is continually worth addressing. For the future winners of retail, the phrase “Let’s go shopping” should yield a unique set of answers around when, where, and how.