Prior to the pandemic, there was a clear and widely accepted narrative that the importance of the physical location for retail was declining. In large part, the story was reinforced by store closures of major retailers. And while many elements of the narrative rang true, a more exact analysis of events says that physical retail wasn’t in decline at all. It was just evolving.
While some retailers fell by the wayside, many were able to adapt, and rising players appeared looking to fill the gaps. According to Placer.ai, the advanced location analytics platform, this retail evolution was driven by an omnichannel shift that is changing the way retail operates online and offline. Placer.ai is the first platform that fully empowers professionals in retail, commercial real estate, hospitality, economic development and more to truly understand and maximize their offline activities. The platform’s reporting capabilities include visit trends, True Trade Areas, cannibalization/void analysis, demographics, cross-shopping, and favorite places.
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“When we talk about omnichannel, the role of brick-and-mortar locations is generally taken as a given and new digital channels are lauded, and rightly so, for the myriad of benefits they provide,” said Ethan Chernofsky, Vice President of Marketing at Placer.ai. “Instagram followings are celebrated even if the channel doesn’t drive sales, impressions are used as a measure of reach, and websites are seen as opportunities for engagement even if conversion rates are low. Yet, we don’t give this kind of ‘credit’ to physical stores, and instead, we view them solely from a sales perspective.”
Moreover, Chernofsky argues that thanks to the evolution taking place in retail, the approaches pioneered in digital are now being applied to brick and mortar. Retailers are now asking – What about the brand awareness the store creates? What does a physical location mean to an operational network enabling faster delivery, buy online, pick-up in-store (BOPIS) or more cost-effective return policies? For example, retailers might ask how valuable a location is from a marketing perspective and how impactful it can be in driving bigger basket sizes online or in creating experiences that make consumers fall in love with the brand – even if shoppers ultimately end up buying the products online.
Put simply, the new approach looks at retail location value from a wider perspective.
“The success also centers around a key element, which is that people enjoy shopping,” said Chernofsky. “The pandemic shut down physical locations, made us concerned about gathering in crowded spaces and gave e-commerce the ability to dominate. Yet, every time stores reopened people came flocking back. E-commerce exploded, but then regressed to its previous levels.”
The reason for this, Chernofsky said, is simply that many consumers prefer the in-store experience. Physical retail is experiencing a revival because its value is no longer called into question. It’s clear that consumers want it and that the wider impact is massive. Additionally, major investments are being made to maximize the unique benefits that retail locations bring to the table.
For the consumer, Placer.ai’s insights show that the biggest post-pandemic change around the role of the physical store centers around the recognition of the store’s importance within the wider omnichannel picture. Digital channels are critical, but they don’t replace the value that a store can offer.
The store offers a shopper the ability to engage with products. This means trying on clothing to see how it fits, feels, and looks, or playing with an electronics product to find the ideal item. This simple interaction is a key piece of the puzzle, but importantly, it’s also about brand engagement. The immersive experience that can be created within a store allows the consumer to find and engage with brands in a deeper way.
Chernofsky points to the element of experience that goes beyond just the shopping trip. Malls and shopping centers offer consumers the opportunity to visit many retailers at once or to get lunch and see a movie after shopping. “The shopping center can create a unique experience that can only take place in the physical environment. Retail has a core role to play but it is only one piece of a wider brick-and-mortar ecosystem.”
When thinking about the possibilities that brands must reinvent the storefront, Chernofsky says that the starting point is recognizing that stores are a key part of the brand awareness efforts that retailers are driving. Placer.ai’s data shows that when comparing online and offline visits, most major retailers see more visitors in stores than online. Importantly, this is even before considering the unique level of intent and the power of engagement that comes with a physical visit.
“Obviously, stores are going to have a heavy orientation towards creating a positive sales experience but understanding that this is just one piece of the puzzle is important,” said Chernofsky. “Equally significant is creating a brand experience that will lead to more visits and more sales over time regardless of whether the ultimate conversion takes place online or offline.”
The solution isn’t one size fits all. Placer.ai’s platform provides insights into the best way to leverage each retailer’s physical space with the idea that the key to maximizing the role of a store in the wider omnichannel picture is to recognize the unique benefits that digital and physical channels offer.
The company’s insights show that a big piece of successfully unlocking this evolution is better measuring both entities within a single perspective. The more brands can understand the interaction between digital and physical channels, the more these channels can be utilized to push forward a company’s larger vision and goals.
For example, there have been some major steps forward in leveraging the store for fulfillment, whether it be delivery or BOPIS. The approach combines the ordering efficiency of digital channels with the speed and cost-effectiveness of existing locations. When retailers holistically leverage digital and physical channels, the values of both can be maximized to create a better experience for the end user and a better business result for the retailer.
At the same time, when it comes to maximizing the power of the store, experts at Placer.ai have identified that the next big leap is going to center around in-store media networks. Retail media networks look at retail locations for the advertising reach they provide and offer the potential for a significant revenue stream.
“Whether it be digital signage, in-store pop-ups, end caps, or any other format, the ability to reach a consumer so close to the point of purchase and when intent is at its highest creates a powerful opportunity for product companies,” said Chernofsky. “By leveraging this channel to its fullest – just as many of these same companies have done online – retailers can use their visit strength to drive new revenue and support sales.”
In this way, retailers will open the capacity to think differently about reaching customers. Instead of just looking at regions for customer segmentation, Placer.ai’s technology allows a product company to use different location-based traits to cluster stores.
For example, a brand may choose to push products and advertising within general merchandise locations
that have high cross-shopping with grocery chains or sit within trade areas that are over-indexed for certain audiences. “The utilization of advanced metrics to bring the right messages to the right audiences in the right locations can help product companies tremendously while giving retailers a significant new channel.”
Looking ahead, Chernofsky said, a physical retail strategy is necessary for any brand in the sector that wants to achieve scale and profitability with a multitude of ways to approach the opportunity.
For some, a larger number of owned retail locations is the key, while for others it will center around a smaller footprint or even just pop-ups and store-in-store concepts. “But the real key to success is asking how these locations can be maximized for the widest range of goals,” said Chernofsky. “Whether it be marketing and advertising or operational goals like reducing the cost of fulfillment, physical locations do more than just drive sales. The more retailers embrace this concept, the more value they will drive from locations.”