In a 44-page analysis of the retail sector, analysts at Telsey Advisory Group see a landscape redefined by consumer preferences for online shopping as well as experiential retailing, which is driving traffic to selected stores and malls.
The firm said in this environment, companies that strike a balance between digital and physical stores will come out on top. In the just-released report, titled “Omnichannel: Harmonizing Physical and Digital,” the Telsey Advisory analysts said retailers that are “best positioned” in the omnichannel market include Nordstrom and Macy’s in the department store segment; Wal-Mart Stores Inc. on the discount side, and American Eagle, Lululemon Athletica, Ulta Beauty and Urban Outfitters Inc. in the specialty apparel segment.
With hard-lines retailers, the analysts cited Best Buy, Home Depot and Williams-Sonoma as best positioned while Foot Locker was seen as the best positioned for the footwear and sporting goods market.
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Driving these trends is a retail market that has seen exceptional growth of online shopping. The Telsey Advisory report expects e-commerce sales to reach about 14 percent of the total market by 2020, which compares to just under 10 percent now. But physical stores will continue to play a critical role for traditional retail brands as well as e-tailers.
“We believe, over the next decade, the majority of e-commerce growth will be driven by store retailers’ omnichannel strategies that leverages physical real estate with new technological features, such as buy online, pick up in store, and social media, along with an improvement in delivery speed,” said Dana Telsey, chief executive officer and chief research officer of Telsey Advisory, in the report.
Telsey said companies with “strong brands should gain share as their store networks leverage improved technology. Anecdotally, we find that retailers that have closed stores tend to have a reduction in digital sales in those respective areas. Conversely, overall market share is lower — or has gone down — in areas with no stores or closed stores.”
The Telsey Advisory report noted that as physical retailers expand online e-tailers are opening stores. “We continue to see increased interest in physical real estate from Amazon to enhance its connection to consumers,” Telsey said. “Several other e-tailers are opening physical locations, such as Blue Nile, Bonobos, Fabletics, ModCloth and Warby Parker.”
In regard to improving the shopping experience as well as making shopping more of an experience, the Telsey Advisory analysts cited Nordstrom’s “Prey Design Studio,” which allows shoppers to create their own shoes, as a successful example. Telsey Advisory said Dick’s Sporting Goods allows its shoppers to play virtual golf, and “such services and experiences elevate the value of real estate, by driving traffic to stores.”
Another noteworthy trend is hands-free shopping, “whereby a concierge collects shopping bags from multiple stores to be picked up by the shopper at a centralized location,” the Telsey Advisory report stated, adding that malls also are expanding this type of service to include delivery options.
Shop within a shop is another welcomed approach, which Telsey Advisory said “drives newness and provides exclusivity in many cases.”
Some notable examples include Best Buy stores that “have shops-in-shop by Apple, Samsung, Sony, Microsoft and Google. Similarly, Nordstrom-Topshop (collaboration with British retailer), Nordstrom-Tesla, Nordstrom-J. Crew, J.C. Penney-Sephora, Foot Locker-House of Hoops (with Nike), and Macy’s-Finish Line are a few examples of successful shops-in-shop,” the Telsey Advisory report said. “These initiatives help to drive sales and traffic for the entire center, and in turn, increases the value of the real estate.”