If you’re looking for proof of the mutually beneficial relationship between physical retail and online stores, just look at the vast array of digitally native brands opening brick-and-mortar stores and established brands expanding into additional markets. Whether it is Casper opening sleep centers or Ulta Beauty opening 100 stores this year, digital and physical are converging in a synergistic manner.
In the largest study of its kind, ICSC recently explored this phenomenon by examining more than 800 individual stores across 145 U.S. markets. The study, “The Halo Effect: How Bricks Impact Clicks,” found that bricks do indeed drive clicks. With the opening of just one new physical store in a single market, for instance, overall traffic to that retailer’s website jumped on average by 37 percent compared to the period immediately before the store’s opening. The research also found the opposite when stores close; in one retailer’s case, the share of web traffic across the markets where they closed declined up to 77 percent.
Brands such as Untuckit, Warby Parker and Wayfair are realizing that digital is only one part of the consumer experience; in order to be successful they must be in front of the consumer in a physical space. Not only does it lower the cost of customer acquisition but it raises brand awareness resulting in brand loyalty that extends to online sales as well.
The halo effect is also present across brands that are operating in partnership under vastly different models from their respective origins. Online retailer Allbirds has opened a store in New York while also partnering with Nordstrom who is hosting a pop-up shop for the online shoe retailer. The popular beauty subscription service Birchbox will occupy anywhere from 400 to 1000 square feet of space in a new partnership with Walgreens.
What we’re witnessing is an increasingly seamless shopping environment in which online performance is very much linked to the presence of physical stores. Our study showed that in markets where retailers have stores, those brands performed better on metrics such as awareness, consumer perceptions, and willingness to recommend, compared to national benchmarks. So it’s easy to see why a brand such as Birchbox would want to tap into the brick-and-mortar footprint of Walgreens; they operate around 9,800 stores in 50 states, potentially serving three-quarters of the U.S. population that live within five miles of its stores.
Physical presence is a powerful force for brand awareness, but it’s not the only requirement in today’s highly dynamic shopping environment. As ICSC’s research shows, there’s space on the shelf for a highly personalized experience that caters to customers of all types, and keeps them engaged.