The growth of online shopping has placed the role of the physical store under intense scrutiny over recent years. The drop in traditional shop-based sales has been seen as an indication that the future of physical retail is under threat, and its value to brands in decline.
This scrutiny is only set to increase, particularly with the majority of physical outlets only just beginning to emerge from temporary shutdown, due to the ongoing Covid-19 crisis. As many in the industry will be aware, the full picture is far more complex than first meets the eye. As consumers have moved online and started making use of new channels to purchase goods, the role of the physical store is by no means over – it is simply evolving.
With this in mind, Javelin Group (part of Accenture Strategy), in collaboration with intu, has taken a fresh look at the retail landscape, demonstrating the positive impact physical stores continue to have on retailers’ performance. This includes the significant role they now play in driving online sales, as we move towards a true ‘omnichannel’ retail environment. The research looks at how, in this new context, we should measure the value of stores.
The impact of coronavirus
At this point it is important to acknowledge the impact of COVID-19. The outbreak has created huge uncertainty and new challenges for the sector, complicating the picture. We do not yet know what the full impact of the virus will be – on the health of retail long term, or on consumer behaviour.
Early research is encouraging. A recent study by intu, in collaboration with psychologist Donna Dawson, for example, shows that many consumers are keen to revert to pre-lockdown shopping and spending habits as soon as is feasible. See more on this in our report – The new normal: retail during and post COVID-19.
A Kantar study of consumers in China during lockdown, meanwhile, found that 65%, 58% and 55% of people were most looking forward to returning to out-of-home dining, shopping and entertainment respectively, following the lift of restrictions. Kantar has predicted that UK consumers will be even more eager to return to the shops. Please see more on this in our insights piece here.
It is of course still too early to draw definitive conclusions on the full effects of the pandemic. However, as we move towards a new normal, the insights in our report show the longevity and continued value of the physical store. They should provide confidence to retailers and the wider industry as we navigate a challenging period for UK retail.
Despite the rise of online shopping, the research shows that £8 out of every £10 spent in the UK in 2025 will still be influenced by a physical store in some way (analysis undertaken by Javelin Group (part of Accenture Strategy) in February 2020). This is because whilst in-store sales remain important, they are no longer the only function physical shops fulfil.
The figure also takes into account how a physical store presence now drives online trading – often known as The Halo Effect.
This covers click & collect purchases, in-store orders, ship-from-store orders, as well as the customer service function shops fulfil. It also includes catchment ‘halo’ sales – that is online sales in a store’s surrounding catchment area, following store visits or due to general enhanced brand awareness. Research by CACI into the Halo Effect shows that online sales more than double in a store’s catchment area.
