How US Brick & Mortar Stores Can Survive in the Digital Age

Brick and mortar in the digital age: learn how Nike, Recreational Equipment Inc and other leading retailers thrive despite the ongoing retail shakeout in the United States.

Numerous articles over the past few years have discussed the retail apocalypse occurring across the United States. Already this year, almost 8,000 stores have announced that they will be closing their doors with projections to reach 12,000 doors by year end. This will amount to the single largest net loss of retail stores over the past eight years.

brick & mortar digital age
(Source: CoreSight)

Despite many prognosticators promoting the end of the brick and mortar store, there are multiple examples of brands who are leveraging their physical and digital footprints to establish deeper, more meaningful relationships with their customers.  However, before we dive into the future, it’s important to examine the key lessons from the past.

Oversupply + Little Differentiation = ‘Sea of Sameness’

Moving back to the United States after living in Europe for a few years, I was struck by how similar each shopping center looked, no matter what part of the country I was in. The sheer size of the US, access to cheap capital, and a heavy reliance on the automobile fueled a massive expansion of retail stores. Retailers could largely drive annual revenue increases by simply opening up more and more doors. As of 2015, there was five times more total retail space per capita than in France or the UK but only 50% higher sales per capita.

brick and mortar in the digital age
(Chart: Chilton Capital Management)

The rise of e-commerce, which has reached 35% of all US apparel sales last year, has only accelerated the inevitable demise of many venerable retailers such as Kmart, Toys’R’Us and Payless Shoe Source. An increasing number of doors were competing for the same customers with nearly the same product offering and in-store experience. This resulted in a ‘sea of sameness’.

The Future of Brick and Mortar in the Digital Age

Rather than viewing their stores as a dinosaur, successful retailers are transforming their physical locations to create a deeper, more tactile experience than online-only shopping can. Since omnichannel customers purchase twice as often and spend more than single-channel customers, retailers will need to adopt three basics principles to ultimately survive in the US marketplace.

Create Digitally Connected Journeys

US retailers are investing millions of dollars annually to enable greater omnichannel integration, yet there remains a long way to go. According to L2’s recent omnichannel report, just over 25% of US retailers offer BOPIS (Buy online, pick up in store) and just over one-third provide ship from store capability.

Nike’s new Innovation House in Shanghai and New York, for example, has heavily embedded digital in-store technology to provide consumers greater choice and ease in their shopping journey. Using the Nike app, consumers are able to ‘Shop the Look’, which places a mannequin’s entire outfit in a virtual shopping cart. ‘Scan to Try’ allows the consumer to send items to a fitting room of the their choice.  ‘Instant Checkout’ speeds up the payment process by allowing consumers to skip the line and buy their items through the Nike app.

brick and mortar digital age
(Photo: Nike)

Evolve from Selling Products to Selling Experiences

It’s not just millennials who are placing greater emphasis on experiences. Research shows that almost 75% of all Americans surveyed prioritise experience over products or things. While this might threaten many traditional retailers, some brands are expanding their offering to meet consumers where they are and, ultimately, create a deeper relationship.

Recreational Equipment Inc (REI), the largest outdoor retailer and cooperative in the US, is aggressively expanding its rental offering and used gear options. Knowing that consumers may feel intimidated about venturing into the outdoors, REI “sees the expanded rental and used gear program as keeping us moving towards a sustainable and accessible outdoor future by offering a new model of access to great outdoor gear and apparel,” says Ben Steele, Chief Customer Officer at REI.

Each rental occasion also offers REI two additional consumer touchpoints, one upon pick-up and another when returning the gear. And each touchpoint gives REI the opportunity to not only sell additional products but also share its knowledge and passion for the outdoors.

brick and mortar in the digital age
(Source: REI)

Evolve the Sales Associate to a Service Partner

In an age where consumers have so many choices to spend their hard-earned money, the days of the inattentive or pushy salesperson are coming to an end. Despite consumers’ reliance on smartphones through their shopping journey, there remains a need and a potential source of differentiation for stores to provide the compelling service.

In Nike’s Innovation House, the new Expert Studio is Nike’s first dedicated floor to provide member-only experiences such as one-to-one appointments, access to exclusive products and the option to create personalised products in the Nike By You Studio. Most luxury brands already offer an elevated level of service due to their high price points. Nike is providing a similar high-touch consumer experience, and with the Nike app a segmented product strategy and in-store experience to keep the most valuable customers in the Nike DTC ecosystem.

Not all brands in the crowded and competitive US marketplace will be able to make this transition and ultimately not all will survive. While some past market leaders, like Sears and Toys’R’Us, have not been able to pivot their business model, this does not mean that brick and mortar retail is dead in the US. Strengthening omnichannel integration and creating experiences that are meaningful to their most valuable customers are critical steps for all retailers to consider as they try to thrive in a very competitive and tumultuous marketplace in the United States.

About the Author:

With 25+ years in the sports and fashion industry across the United States, Europe and Asia, John Ensminger, has worked with leading brands including Nike, The North Face, K2 Sports and Carhartt to develop breakthrough, actionable strategies that strengthen their brand position and drive growth and profitability. Read his posts here or connect with him on LinkedIn to further discuss brick and mortar in the digital age.

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