As we rapidly approach the peak selling season for 2022, I thought it might be beneficial to take a quick look at where retail stores currently stand. Having recently reviewed some studies by the National Retail Federation (NRF), I discovered some interesting facts. Below is a summary of what the industry is saying about retail stores, ecommerce, and the post (or semi-post) Covid climate.
The biggest news is that despite the Covid-induced acceleration to “digital” consumption, nearly 80% of all shopping still happens in stores. But how is this possible? It is hard to pinpoint one specific thing, but many of the analysts I read seem to feel retailers where in a good position pre-Covid –partly because of good to economic conditions and partly because of investments, automation, streamlining, and profits. When COVID-19 struck, therefore, they were able to react (relatively quickly) to unprecedented demand and disruption and deliver safe, convenient, shopping experiences for their employees and customers. This response is evidenced by the growth in retail just as the pandemic was hitting. According to the Bureau of Labor Statistics, retail establishments in the United States in Q3 2020 were 1,045,422, up 4,801 over the previous quarter — the highest Q3 retail establishment count in the last decade. For this and other reasons, many retailers not only survived, but thrived (think Home Improvement, Grocery, and Apparel). Now instead of scrambling, the NRF reported that major U.S.-headquartered retailers plan to open more 8,100 new stores — nearly doubling the number of stores that closed (The Daily on Retail).
Another surprising takeaway is that the global pandemic produced retail growth the industry hasn’t seen in over 20 years (7% in 2020 and 14% 2021 respectively). And Forecasts for 2022 don’t suggest much of a slowdown; pegging retail growth at between 6% and 8% to reach more than $4.9 trillion. Keep in mind, this record store growth was not only despite Covid but also eCommerce growing 70% over the past three years.
And this brings us to the third point. Studies seem to suggest eCommerce isn’t as competitive to retail stores as it may be symbiotic. Covid forced consumers to adopt to eCommerce, and eCommerce forced stores to adapt to it. The traditional physical retail store is evolving in response to the digital consumer. Although still very much a front-of-the-store experience, they are changing in the back-of-the-store. With a significant proportion of eCommerce orders having to be fulfilled by brick and mortar, successful retailers are re-imagining their offerings to meet consumers both online and in-store, creating an integrated experience that blends channels.
Retailers are driving this transformation through innovative thinking and smart investments that improve the customer experience regardless of how they want to shop. Below are some interesting facts cited by the NRF that digitally-minded product companies may want to keep in mind:
- 9 of the top 10 Ecommerce websites are run by retailers that also operate bricks-and-mortar stores
- NRF surveys show that over 50% of retailers currently offer, or plan to offer, ship-from-store capabilities
- Almost two-thirds of retailers currently offer or plan to offer buy online, pick up in store (BOPIS)
- eCommerce and in-store retail complement each other and often create a “halo effect” — ICSC finds opening a new store increases traffic to that retailer’s website by an average of 37% and drives up share of web traffic within that market by 27%
- Ecommerce levels peaked in April 2020 at almost 19% of retail sales. Since then, levels have dropped to 15% — higher than pre-pandemic but lower than the highest levels in early 2020.
As we look ahead to the peak selling season, there are many balls-in-the air relative to the economy (e.g., inflation, supply chains, fuel, and a possible return of Covid) and reason to worry that retail may yet take a turn for the worse. But NRF Chief Economist Jack Kleinhenz remains optimistic and was recently quoted as saying that “although a roller coaster ride of incoming data is expected in the next few months, consumer fundamentals remain in place. Household finances are healthy and strong job and wage growth should support solid growth for consumer spending for 2022”.
But even if we must put our seat-belts on for the Holiday selling season, I think one thing is clear. If retail stores’ ability to adapt to massive challenges like Covid and eCommerce is any indication, the role of the brick and mortar is not going away but evolving, and possibly becoming the center point that supports buying across all channels.
Interested in launching your brand in retail in 2022? Contact me at rbruza@retailbound.com or click this link to book a meeting with me
