eCommerce has revolutionized online customer engagement and shopping experiences and has grown manifold over the years. Case in point – the global eCommerce retail sales volume has grown from $1.3 trillion in 2014 to $5.7 trillion in 2022. It is predicted to reach $8.1 trillion by 2026. Does this mean brick and mortar formats in retail are going extinct? Has the battle been fought and won by online retail? No and No. While the number of customers who have never shopped online is decreasing, it does not mean online shoppers have completely stopped visiting brick and mortar stores.
In fact, brick and mortar sales saw higher growth than eCommerce sales for the first time in 2021. While eCommerce grew at 14.2%, brick and mortar sales grew at 18.5%. Further, 85% of all retail sales in the US occurred in physical stores. In India, traditional retail still contributes 81.5% to the retail sector while organized brick and mortar contributes 12% and online sales channel just 6.5%.
Despite all the advantages and tech advancements in online shopping, physical stores still have a distinct edge. There is no replacing the engaging and welcoming environment, ability to touch and feel, personalization, one-on-one shopping experiences of the brick and mortar formats. 5.3% of shoppers also prefer physical stores over online shopping since they enjoy finding unique products from local retailers that online shopping often doesn’t provide.
However, brick and mortar stores cannot operate in the traditional manner and succeed. Online shopping is leaving a dent in their conversions and revenues. They need to augment their capabilities and move toward omnichannel retail to thrive in the years to come. In this article, we discuss the major challenges facing brick and mortar stores and ways to prepare themselves for the future of retail.
Dropping footfalls
Offline-only stores are suffering as shoppers have moved online. 81% of retail customers conduct online research before buying a product. A Google survey says that 74% of in-store shoppers who used online means for their primary research looked for something in-store related. For instance, closest store, in stock near them, locations, store timings, contact information, etc.
So, offline-only brick and mortar stores will fade away if they don’t digitize now. If they don’t have an online presence today, their footfalls will continue to drop.
In fact, 73% of retail customers leverage multiple channels to shop and look for unified experiences across the different channels. 84% of customers believe that brands should connect their offline and online channels better.
Increased competition
One of the most significant challenges they have faced is the increased competition from online retailers. With the ability to reach a global audience and offer a wider range of products at often lower prices, online retailers have been able to steal market share from traditional stores.
Further, small and medium businesses are able to compete at a global scale, instead of just the local markets, thanks to the online marketplaces and platforms that help widen their reach.
The removal of market inefficiencies by marketplaces has allowed for the rise of D2C brands. Manufacturers who depended on branded players are now selling the same product for less online. Shoppers’ brand loyalty online is dismal. With 1 in 3 customers lacking brand loyalty, peer reviews are what they rely on. So, it is not unusual for unknown brands to become stars.