Making Stores Matter in a Multichannel World

As the role of the brick-and-mortar store evolves, retailers will continually have to refine how they use their real estate

October 2015 | by Steve Johnson

For decades, the retail industry has followed the same straightforward formula for growth: open new stores. By replicating a proven store format in a new catchment area, retailers could reliably enlarge their customer base and count on healthy increases in sales.

But the world has changed. More than half of consumers now research their retail purchases online, making purely in-store purchase decisions the shrinking minority. In many categories, e-commerce has dramatically lessened the need for physical stores. “Virtual space”—which we define as the floor space that would be required to generate the sales volume that online retail now accounts for, at a sales density equivalent to the industry average—is expanding at a staggering rate. In this new world, what is the role of the brick-and-mortar store?

Many retailers find themselves struggling with the question and saddled with more real estate than they know what to do with. After all, their property departments are geared up for expansion and acquisition. Their finance departments have traditionally focused on reaping investment returns from stores and tend to be jittery about investing in new and unproven technologies. On the flip side, their e-commerce directors are frustrated by this lack of understanding of the pace such companies need to become digital winners.

Even as retailers reassess and revamp their store networks, they shouldn’t focus exclusively on the stores. A store-network transformation will have the desired impact only if the online channel is at fighting strength. For retailers whose online presence is already robust, it is simply a matter of ensuring a dual focus on both channels. For other retailers, getting the requisite multichannel capabilities and mind-sets in place will require a full transformation. Either way, the online channel must not be neglected in the face of the daunting changes required in the physical-store network. The future of retail will belong to retailers that can satisfy the customer, wherever he or she decides to shop.

To position themselves for success in a multichannel world, retailers would do well to take a disciplined approach that begins with a reassessment of the role of the physical store. We recommend a five-step approach we call STORE: starting with a clear vision for the future role of the store, tailoring categories and formats accordingly, optimizing the store portfolio using forward-looking analytics, reinventing the in-store shopping experience, and executing systematically across channels.


Executive Editor

Ms Anna Sullivan

Ms Anna Sullivan