Pandemic Effect: Is This the Decline of Brick-and-Mortar Stores?

A store as a place of inspiration and social interaction? Not only can it be that, but it should be, if entrepreneurs want to keep customers in brick-and-mortar stores. Their footprint will also shrink, as part of it will be allocated to warehouses so that goods ordered online reach consumers faster.

According to research by Edge by Ascential, a company that provides analysis to the world's largest brands, e-commerce, which has developed over the past dozen or so months driven in part by the pandemic, will continue to enjoy its golden age. According to Edge by Ascential analysts, the growth of e-commerce may be so enormous that stores around the world will reduce their display space by a third and allocate it to warehouses to fulfill online orders more efficiently.

Suburbs are depopulating stores

– The pandemic changed more than we think, and it's not just about increased online sales, but generally about a change in the way purchases are made — says Marcin Michalski, an expert in digital marketing strategies and online advertising, as well as a columnist and author of the blog Marketing Hacker, and specifies: – The vast majority of shopping centers and brick-and-mortar stores are located around densely populated human clusters. However, city centers are slowly beginning to depopulate. I'm not talking only about Poland, but about the whole world. Especially in the era of remote work, people are no longer putting the advantages of living in the hearts of cities first, and are more willing to look at suburbs and less populated areas. There, e-commerce plays first fiddle, among other reasons because it's harder to find specialized stores in those places, and going shopping is already quite a logistical challenge.

Suburbs are depopulating stores

This translates clearly into the data. According to a report, in 2021 30% of retail trade took place online, and estimates indicate that by 2023 it will be close to 35%, rising to as much as 40% by 2025.

Pandemic effect: brick-and-mortar stores in a new role

According to specialists from Edge by Ascential, the pace of change is dizzying, and in a few months progress was achieved that normally the online trade market would have had to work for two years to accomplish. However, the change is not cheap and not as smooth as it might seem at first glance.

New clothes for the same stores

– The biggest challenge, however, is the logistics of the so-called last mile, that is, the speed of delivery to the end consumer. In connection with the accelerated arms race in e-commerce, this is the most important factor that can encourage customers. Consumers expect free or very cheap delivery, preferably same-day. However, this is not cost-free and problem-free for the entrepreneur – notes Marcin Michalski.

New clothes for the same stores

After all, fulfilling online orders and last-stage deliveries are still more expensive and less efficient than retail sales in stores. Therefore, it is worth considering a solution. Centralized warehouses will still be an important element in the logistics chain for every company, but in a situation where retail chains have a huge number of their own stores, it is they that should deliver the shipment to the consumer. The closer the store that becomes a warehouse is to the customer, the cheaper and faster the product can be delivered.

– This is not the only change awaiting brick-and-mortar stores. The store of the future should become a place of experiences related to the brand and products. That is where consumers should draw inspiration, learn, and even establish social contacts and experiment with new products. We already have examples today, and the operations of stores such as eObuwie, Smyk or Empik will serve as a model for others – describes Michalski.

The digital transformation of traditional retail chains is also a challenge. In the long run, cases such as handing out goods ordered by phone at a side entrance are unacceptable. Yet we saw such scenes in the very middle of the pandemic. As Marcin Michalski of Marketing Hacker emphasizes, all processes need to be redesigned, software changed, and the right people hired, for example those handling remote customer service, even at the cost of thousands of in-store salespeople.

– This is a process that will take years, but the sooner it is started, the better. Marketing, customer service, and logistics all need to be redesigned. The so-called building of customer experience also needs to change, as until now it was geared toward offline service, and it should be improved so as to ensure the best possible customer experience from online shopping – says Michalski.

Summary

According to Edge by Ascential analysts, e-commerce will grow, and brick-and-mortar stores will reduce their display space by a third, converting it into warehouses. Expert Marcin Michalski points to the depopulation of city centers and the growing role of suburbs, where e-commerce dominates. The key challenges are last-mile logistics and the digital transformation of traditional chains. The store of the future is to be a place of experiences and inspiration, with the activities of eObuwie, Smyk or Empik serving as a model. An interesting fact is that in 2021, 30% of trade took place online, and by 2025 this is to rise to 40%.