By Gary Faitler, Pitney Bowes

We’re all well familiar with the pressures that traditional brick-and-mortar chains are feeling from the “e-Tailing” behavioral transformation that is well underway. Where these changes will ultimately settle, and which firms will be left standing, remains to be seen. But one thing that is certain, for a variety of reasons, the continued existence of physical retail — something we once unquestioningly called a “store,” will continue to be a major component of success.
What is a store?
In its traditional plain sense, a store is a place for seeing, touching and buying merchandise. It is also a place for receiving service and obtaining guidance on a product in the fully disclosed context of “being sold” by a selling professional. Finally, a store is also a place for returning or exchanging an item in the event of dissatisfaction or simply a change of mind.
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In the evolving omnichannel world, this clear set of functions remains superimposed on the template of the store as:
1. A showroom;
2. A product-testing facility;
3. An information desk;
4. A mini warehouse;
5. A mini distribution center; or
6. A product pick-up venue.
While challenging to execute, these expanded roles will serve as a builder of the retail brand in ways that clicks alone cannot enable. Exclusively online retailers are recognizing that the e-Tailing experience can never match the emotional pay-off, instant gratification and sheer fun of physical shopping. Plus, serving the needs of multiple channels is simply good business. According to the International Council of Shopping Center’s (ICSC) estimates, customers who shop multiple channels spend more than three times as much as shoppers of any one channel.
These dynamics help to explain the increasing, and highly-publicized, trend of online retailers establishing brick-and-mortar channels. These ventures fall into two main categories: the embryonic and the deployed. The embryonic are those that, to date, can be characterized as an experimental “toe in the water.” For example, Amazon’s much-vaunted Manhattan flagship has yet to materialize. Further, Amazon’s “child brand,” Zappos, has recently opened a store in Las Vegas, but this is an experimental pop-up facility, not a permanent fixture. Other online brands often mentioned in this context are Bonobos, Warby Parker and Birchbox, but these also tend to be pop-ups, guide shops, boutiques and flagships aimed at servicing an exclusive customer in a limited number of exclusive locales.
A good example of a deployed venture is Athleta. This once pure-play, online brand acquired by Gap, Inc. has been effectively rolled-out on a national scale. Undoubtedly, Gap’s operational know-how and entrenched credibility within the real estate community have helped drive this truly omnichannel chain.
Of course, the poster children for the deployed concept of e-Tailers have been the computer giants Apple and Microsoft. With 264 and 102 units respectively, these companies have paved the way for leveraging brand identities that were built outside of the traditional retail sphere into a familiar phenomenon — a true national store network.
In sum, for retailers originating as digital-commerce entities, the key for achieving a true omnichannel network is commitment. To traverse the space from embryonic to deployed requires an exclusive web-based brand to make the conceptual transition to pursuing a fleet of stores. Experimenting with the novel physical iteration of the brand in a limited physical context is helpful, but it should be regarded as “market research” rather than establishment of a legitimate new channel.
Beyond this embryonic market research, retailers will need to embrace a new field of analysis: location intelligence. This field would move from questions about the brand interaction with a physical store to a new inquiry of the brand interaction with an actual market. As such, it will employ the full spectrum of geospatial customer behavior.
To cite a few of the critical considerations that would be addressed:
- Where are my current e-Commerce customers located?
- Where are my most productive customer prospects located?
- What is the distance prospects will travel to access my store?
- How will the placement of physical network impact my e-Commerce sales?
- Who are my key brick and mortar competitors, and how do they affect my planned placement?
As the technology-induced pace of evolution in retail accelerates, we likely won’t need to wait too long to observe some major adjustments to the current balance. We can anticipate, however, that a newly-defined physical store presence will continue to be a prominent part of the mix.
Gary Faitler directs a team of client managers in Pitney Bowes Applied Analytics group. He has more than 25 years of experience providing sales forecasting solutions and guidance on strategic channel planning to national retail chains. Most recently, Faitler has been advising firms on leveraging synergies between their brick-and-mortar networks and online channels.