Physical Retail Is Cool Again — but Bigger Changes Are Coming
Just yesterday, the cover story of the New York Times read, “Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores.” It tells the story of store closings finally recovering after hitting bottom last year and how “stores that have learned how to match the ease and instant gratification of e-commerce shopping are flourishing.”
Back in May, Mary Meeker dove into the deeper trends affecting online and offline retail in her annual Internet Trends Report. She noted, among many other interesting things, that tech-enabled stores focusing on engaging, online-connected customer experiences significantly outperform traditional offline retailers. It seems that the specter of the “retail apocalypse” may be fading away.

It may come as a surprise to some, but physical stores were never at risk of being entirely displaced by ecommerce. While dismal news headlines from marquee brand names dominated, sales at physical stores grew steadily in the 4–5% range YoY. Consumers continued to see value in shopping at stores, although perhaps at different businesses. And the projected decline in ecommerce growth rate is ultimately trending closer to 70% physical / 30% online.
But even this is an outdated way of looking at the future direction of retail.
Focusing on the rise of ecommerce and increase in store closures obfuscates that retailers aren’t just online or offline. When a product purchase is heavily considered, requiring research, evaluation, and comparison, we’re checking it out online and in-store. Purchasing a car, computer, home appliance, fine apparel, or jewelry is typically preceded by days to weeks of research and consideration. These kinds of purchases represent roughly half of all retail spending.
The focus of retail will grow towards offering “the ease and instant gratification of e-commerce” in-store. Cumbersome Googling on mobile phones and clunky POS’s will be replaced with store iPads that offer a better experience browsing, configuring, and checking out, all connected to the online experience.
Startup DTC brands have already demonstrated the outsized returns available through online commerce connected in-store via tablets. Warby Parker, having started out online, now makes a majority of sales in-store and at 10X the industry average sales per square foot. Indochino has halved the cost of customer acquisition as they expand their physical presence.

Other players are taking heed and developing their own in-house technology to achieve a connected experience. They will want to stop reinventing the wheel, and standards will emerge. More platforms will be built to tackle common tasks, and specialized modules will be developed to match needs of specific verticals.
The future is looking brighter — rising above ghost town shopping centers and breaking out of cluttered computer screens. It’s a change we can all look forward to.

