Optimism For Re-Imagined Brick-and-Mortar Rises From High-End Retail To Final Mile

To borrow from the old saying, reports of the demise of physical retail stores appear to be greatly exaggerated — at least, that’s what a growing number of prominent industry players have been saying lately.

As much as an undeniable, unprecedented and accelerating digital shift is underway, with consumers showing increased preferences for eCommerce purchases, the lowly retail location – which still accounts for roughly 85 percent of total sales – has been given a boost by some big-name backers.

“The client experience in a retail store cannot be matched easily online,” Jean Jacques Guiony, the CFO of French luxury goods giant LVMH, told CNBC on Tuesday (June 22), while outlining a vision of the future that doesn’t see demand for brick-and-mortar declining. The company recently spent $835 million refurbishing a department store in Paris to include over 215,000 square feet of retail space, 161,000 square feet of office space, a hotel, 12 restaurants and several other amenities.

Hours later, another jolt came by way of UPS CEO Carol Tomé, who told a National Retail Federation event that she still sees a need for physical locations — if retailers can define the purpose of their store. “If you want to invite customers into your store, you better have what they’re looking for when they come in,” Tomé said. “Or maybe that’s not what you want the store to be anymore. Maybe the store is all about experience, or maybe the store is all about help.”

Among other companies bullish on the in-store shopping experience is Apple, which reportedly is doubling down on its pre-pandemic strategy of hosting in-store events and experiences other than shopping. And Lego last week opened a new flagship store in New York City, which includes “retailtainment” elements that the company intends to export to 100 other stores around the world in the coming year.

Features of the new Lego store include an interactive Brick Lab, a Personalization Studio in which customers can create a memento of their visit, and a Storytelling Table where they can learn more about the Lego design process.

“For a number of years, we’ve seen the trend toward people visiting stores for high-quality, entertaining brand experiences,” said Colette Burke, Lego’s chief commercial officer, in a statement. “Over the past year. our fans have missed personal and tactile interactions with the brand, and we can’t wait to welcome them back.”

The optimism about in-person retail likely comes in part from greater adoption of making purchases online to pick up in-store, a practice that surged during COVID-19. Jordan Speer, research manager for IDC Retail Insights, said during an NRF panel on Wednesday that 58 percent of consumers say they’d choose a different retailer if they couldn’t buy online and pick up in-store.

To be sure, retail stores still face major hurdles, and Tomé said that despite a huge base of stores around the world, “eCommerce is not slowing down.” Last week, mall owner Washington Prime Group filed for Chapter 11 bankruptcy protection; it is the third mall operator to file for bankruptcy in eight months, following CBL & Associates Properties and Pennsylvania Real Estate Investment Trust in November.

And according to PYMNTS’ new Connected Economy research, nearly everyone is shopping online, with 83 percent of moderately connected consumers buying retail products online and 92 percent of all consumers saying that digital engagement enables improvements to shopping and eating.

Old Space, New Perspective

Still, 54 percent of even the most highly connected consumers said they recently purchased retail products in a physical store, according to PYMNTS data, potentially offering a glimmer of hope to retailers planning to open new locations.

Some retailers are also utilizing their retail spaces to speed up eCommerce deliveries. For example, Walmart recently strengthened its partnership with on-demand drone delivery startup DroneUp to provide customers with deliveries “in minutes instead of hours,” according to Walmart President and CEO John Furner. Walmart has over 4,700 stores across the U.S., and 90 percent of the population lives within 10 miles of a location.

Others, such as Canada-based Hudson’s Bay Co. (HBC), are reorganizing in order to boost the value of both in-store and online experiences. Last week, HBC said it will split the digital presence of off-price brand Saks OFF 5TH from the retail stores, led by a $200 million equity investment from Insight Partners that values the company at $1 billion. In March, HBC announced a similar move for the main Saks Fifth Avenue brand.

The focus of all these efforts, though, still begins with a consumer’s digital experience, pointing to an important shift in how retailers consider the relationship between their stores and their websites. Whereas the digital presence was once an extension of the physical, it is now the physical that is the extension of the digital.