Two new studies by Deloitte have shown that the “retail apocalypse” – the extinction of brick-and-mortar stores amid the growth of online sales – is just a myth. As the report states:
It’s an easy, provocative, seemingly obvious, frequently published, and in the end, false theme: “Digital is killing brick and mortar retail.” Like most things, the truth is more complicated, layered, and involved. First it was big box stores, but now the general belief since e-commerce began evolving was that the big online retailers were sucking up business from traditional brick and mortar brands, both big and small. While there is some truth to the notion that both are competing for the same customers, transaction data show that even as we’ve seen more consumers shop online more frequently, they continue to enjoy shopping in-store.
The studies, “Retail Today” and “Consumer Preferences Embrace a Mix of Physical and Digital,” surveyed consumers and small and medium-sized businesses (SMBs) and found that the most successful retailers, regardless of size, are the ones innovating in both physical and online operations and reaping the biggest rewards. Consumers don’t view shopping as “online” or “offline”; instead, they use both, often in a single shopping journey. These findings mirror those found in NetChoice’s own Retail is Everywhere report, released last year.
Consumers are increasingly expecting and using omnichannel fulfillment options, such as buy online, pickup in-store (BOPIS) to curbside pickup, and many businesses are leveraging their physical stores to serve as fulfillment centers to support their online sales. Three quarters of retailers surveyed use store inventory to fill online orders. And consumers are responding positively: 44% of consumers preferred having multiple fulfillment options when purchasing online, rather than just defaulting to home delivery. And 46% of consumers will pay more to pick up an item in-store 5 minutes from home rather than wait for two-day delivery.
Interestingly, online sales are taking consumers in-store: 27% of online sales were fulfilled at the physical store in 2021, up from 21.7% in 2020. Once in the store, consumers are spending more, not just on items they pre-ordered online but on new occasion purchases. From May 2019, before the pandemic began, to the end of summer 2021, the average value of each in-store transaction steadily rose—and today the average in-store transaction is larger than ever. SMBs have differing opinions on whether online or physical channels are more profitable, noting that both are providing valuable revenue streams.
Digital tools are helping SMBs succeed in today’s competitive retail environment, assisting businesses with marketing, payments, customer service, loyalty programs, and inventory management, among others. 99% of SMB retailers (including those who only sell via physical stores) use at least one digital tool or marketplace. These tools have helped SMB retailers increase the digital share of their revenues to about 50%.
Consumers are not interested in a one-size-fits-all shopping experience, and the wide variety of choice in retail reflects this demand.