Counterintuitively, Physical Stores Boost E-Tailer Profits
After online retailers dominated the holiday shopping season, many concluded that retail had finally gone the way of e-commerce. However, L2’s Intelligence Report: Death of Pureplay Retail makes the case that physical stores are far from extinction. In fact, they confer so many advantages –from increased site traffic to financial returns — that e-tailers without brick-and-mortar stores might be the ones in danger.
Organic site traffic picks up substantially when e-tailers open their first stores. Rent the Runway, Trunk Club, Proper Cloth, and Warby Parker all saw dramatic spikes in site traffic after opening brick-and-mortar locations, according to the study.
Moreover, online traffic increases as retailers expand their offline footprints. For the 19 evolved pureplay retailers examined in the study (that is, retailers with both online and physical storefronts), retailers with more stores are searched by name on Google more frequently. Retailers with more than 15 stores receive twice as many monthly searches — indicating that stores can be powerful marketing devices.
As evolved retailers invest in brick-and-mortar stores, they are generating not only online buzz, but also financial returns. Rent the Runway, Blank Label, Bonobos, and BaubleBar all report that customers spend more in stores than online. In 2014, stores accounted for 20% of BaubleBar sales and 60% of sales at Blank Label. While investors award exorbitant valuations to e-commerce unicorns, retailers with a brick-and-mortar presence might be the ones to look out for in terms of profitability.
Article originally published in L2 Daily by Elisabeth Rosen (@elsrosen)
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