After years of headlines warning about decline in brick-and-mortar retail, here’s one you probably wouldn’t expect: more and more brands are breaking into—not leaving—the physical space.
The Westfield Valley Fair Mall in San Jose is set to open its new “Digital District” concept this month. As reported by Digital Commerce 360, this newly-renovated section of the mall features eight storefronts earmarked for popular web-only brands. The initial roster of stores for the Digital District includes eyewear seller Felix Gray, skin care brand Ghost Democracy, housewares retailer Goodies, and more.
This isn’t the first time we’ve seen web-native brands expand into physical retail outlets. For instance, Amazon opened their first frictionless Amazon Go store to the public back in 2018, with more Amazon Books and Amazon 4-Star stores also popping up around the country. Smaller brands like Warby Parker have operated popup locations inside other stores. Clothing retailer Bonobos has “Guideshops” around the country, allowing customers to try on the goods, then conduct orders online.
What sets the Digital District apart is that it’s a segment of a high-traffic shopping mall set aside specifically for online brands who, by concept, don’t have physical retail stores. So, while this could be the next step for omnichannel integration, the process of transcending retail channels isn’t as simple as opening a few storefronts here and there.
If this move is going to be worthwhile, what will make it so?
Delivering the Experience Customers Want
Online retailers don’t eliminate the concerns they had as eCommerce merchants by expanding into physical retail. Instead, they take on all the problems facing brick-and-mortar sellers in addition to the challenges unique to eCommerce. Neither channel is short on obstacles.
Common wisdom suggests online competition is responsible for the downfall of major retailers like Kmart, Payless, Dress Barn, and others. After all, customers can buy goods quickly and easily—and often at lower prices—by going online. However, eCommerce will represent only 12% of total retail sales in the US in 2020.
The rise of brands with greater reach and lower overhead costs was certainly part of the problem, but there must be other factors at play. So, what’s to stop digital brands from following in the same direction as they expand into broader brick-and-mortar retail?
The key is to develop a unique experience that customers can’t get from existing digital offerings. This means using the brick-and-mortar channel to offer a level of interaction and interactivity that the online experience can’t.
I spoke before about the importance of experiential commerce in the new decade, and how merchants must embrace this approach to keep customers coming through the doors. That seems more obvious with each passing month. Retailers need to embrace experience to fully leverage the physical space of the store.
Hate the Experience, Not the Channel
The “retailpocalypse” is not inevitable for physical retailers. Many of the businesses who succumbed to the phenomenon didn’t die because of their sales channel, but because they failed to offer a better customer experience.
In the case of Sears, for instance, customers complained about bleak, outdated stores with poor quality merchandise. Even if you wanted to buy something, it could be an ordeal just finding an employee to help you. With this kind of experience on offer, it’s hard to justify the drive to the mall when you could just as easily make your purchases from home.
Other suffering retail brands have similar issues. This presents the core question: if there’s nothing the in-store experience offers as a value-add, then why not just buy goods online? What’s there to differentiate brick-and-mortar commerce and make visiting the store worth the added effort?
We live in an era of same-day shipping, when Amazon can get many products to consumers’ doors in just two hours. The in-store customer experience is the only significant competitive advantage that brick-and-mortar retailers have over digital competitors. Physical retailers need to provide an experience that will justify the drive to the mall in the buyer’s mind. For those in the Digital District, offering something the buyer can’t get through their website is essential.
Leveraging Experience is the Best Hope for Retail
One tool in the brick-and-mortar kit that’s become a major asset in recent years is the “buy online, pick up in store” (or “BOPUS”) sales model. Walmart, for example, leveraged this approach to provide a new experience for customers with curbside grocery pickup. Consumers love this new sales channel, with the company’s digital sales up 37% YoY by summer 2019. Other verticals like food and beverage are seeing similar success with the BOPUS approach.
BOPUS approaches that omnichannel ideal at an angle different from that of the Digital District retailers. The aim of the strategies, however, is the same: we’re melding eCommerce and brick-and-mortar. In the process, retailers provide a unique experience that conventional eCommerce can’t deliver.
The same logic applies to other in-store experiences. For instance, deploying augmented reality or interactive elements can make the in-store experience more dynamic, and make the customer want to keep coming back to shop and be entertained. Even something as simple and as recognizing regular customers and their preferences plays a part in this larger strategy.
Brick-and-mortar sellers need to acknowledge their vulnerabilities, while also leveraging their strengths. Functionality might have been the primary focus for attracting customers in previous decades, but they’ll struggle in vain to beat eCommerce on that ground. Leveraging positive experience, though, can keep customers engaged time and again.