Do physical stores matter to online retailers? Just look at Amazon, and the answer is evidently yes. In 2017, the ecommerce giant bought Whole Foods grocery stores and was immediately catapulted into more than 400 physical locations. Since then, the giant with a digital DNA made other inroads into bricks-and-mortar shops and already physically operates under at least five different brands, besides Whole Foods: Amazon Go, Amazon Go Grocery, Amazon Books, Amazon Pop-Up and Amazon 4-Star.
Amazon was a trailblazer and now former online-only retailers are increasingly coming to the conclusion that they are missing out by not having a physical presence as well. Some companies have created “experience stores”, offering clients a place where they can not only buy things, but also interact with what the brand has to offer. Mattress retailer Casper, women’s intimate Adore Me, and sneaker company Allbirds are only three recent examples of brands migrating from purely online to store-front sales.
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In Latin America, another movement, just as important, is more strongly felt: most large retailers using their physical stores to fulfill online orders, allowing customers to move easily from the virtual world to the physical one.
According to Ana Paula Tozzi, CEO of AGR Consulting and an expert in the segment, retailers in Brazil are now making up for the time lost during the years their businesses were being disrupted. “Up until 2018, Brazilian retail was merely trying to survive. Now we see chains with more advanced setups, like Magazine Luiza, Centauro and Renner“, Tozzi told LABS. These offer a more integrated approach of online and offline operations with the aim of giving customers more of what they want, where they want.
Stores don’t necessarily need to make clients set aside their laptops and smartphones — nor do they need to offer deep discounts. “Expressions such as online channels and physical channels are outdated. Even omnichannel, we are using it less and less. Retail is in the age of anywhere-channel”, explains Tozzi.
Physical stores function as distribution locations and reverse logistics points, where a customer that bought an item online is given the chance to return it or substitute it. Physical stores represent an opportunity to create social and sensory experiences for consumers. Convenience, after all, is an excellent feature to keep shoppers coming back.
Currently, Brazilian legislation ends up restricting the ability of the consumer purchasing online and picking up his or her order in a physical venue. Offering multi-channel options is still a complex task.
But there are new experiments. MadeiraMadeira, the largest online retailer for home products in Brazil, recently opened its first physical store in Curitiba, the city where the company has its headquarters. The space follows the model known as “guide shop”, a store with a small part of the catalog on display and “guided purchases” made online.
“We started looking at offline stores and we realized that we needed to be where the customer was and wanted to be served – both online and offline. So, seeking to strengthen our relationship and the bond of trust with the consumer, we created our physical store”, says Daniel Scandian, CEO and co-founder of MadeiraMadeira. The company plans to open 10 physical stores in 2020, both in Curitiba and São Paulo.
A recent study from Wharton Business School of the University of Pennsylvania found that customers who enter a physical store end up spending more, and the products they do buy are more expensive. “These customers will spend up to 60% more on average on a particular order. They also show up at a higher velocity, so the time between purchases is reduced by 28%, says Santiago Gallino, Wharton professor of operations, information and decisions and and author of the study.
“[Through a physical showroom], from the retailer’s perspective, they can learn more about the customer. They can see who is [shopping] with the customer when he’s buying the product. They can understand and see what types of questions they have in mind, what other products they tend to see — and that’s all valuable and rich information when you want to please the customer and make them come back again”, says Galino.
Besides that, as paradoxical as it may seem, e-commerce may help physical stores in the coming years. Jadson Andrade, head of Market Research at Cushman & Wakefield, told Canaltech that according to data from E-Bit, e-commerce in Brazil has been growing 16% per year. “This forces large retail chains, which operate both in e-commerce and on bricks and mortar, to use their physical store structure as distribution centers for speed deliveries. And this applies not only to deliver to the consumer’s home, but also the other way around. In other words, the customer can go to the establishment to collect the purchased product”.