Rising online advertising costs are giving ecommerce sites more opportunity to turn to bricks-and-mortar investments to sell their brand according to a study by Coresight Research.
Data from commercial real estate firm Jones Lang LaSalle Research (JLL Research) in 2018 digital natives said they plan to open 850 physical stores in the next five years.
The study, Fashion Online to Offline noted the cost of Facebook ads have skyrocketed over the past few years. Data from AdStage showed the price of a thousand ad impressions rose 122 per cent year-over-year in January 2018. The next month, the cost jumped an extra 77 per cent.
While the online real estate is growing, the price of physical storefronts is dropping. According to the Real Estate Board of New York, the average overall decline in 15 of 17 retail corridors in New York City was 25 per cent over the three-year period ended fall 2018.
The authors of the report said the “confluence of higher digital customer acquisition costs and declining, more flexible lease terms is supporting the online to offline migration”.
Ecommerce retailers are creating physical storefronts to provide all-channel experiences. These online stores are finding that their bricks-and-mortars counterparts are thriving and keeping up with its online sibling.
An International Council of Shopping Centre (ICSC) survey noted physical stores are a point of discovery for emerging brands. New stores generate an average 45 per cent lift in web traffic.
According to the report, close to three-quarters of all apparel and footwear sales occur in physical stores. The path to purchase often begins online but usually ends in-store.
A Statista US consumer survey said 71 per cent of respondents say they purchased at a physical clothing, apparel or shoe specialty store in the past 12 months. Department stores (66 per cent) and pharmacies (59 per cent) are the second and third most frequently shopped offline retail formats.
When consumers are in physical stores they are rarely browsing as they have already done research online. A National Retail Federation (BRF) survey found 73 per cent of respondents are much more likely to be looking for a specific item when they shop in-store, while only 27 per cent say they are just browsing.
When shopping online, though, there was a closer split between searching for an item (54 per cent) and browsing (46 per cent).
Coresight Researched referenced Warby Parker, an online-only eyeglass retailer, looking to let customers buy designer glasses online. A year within launched they opened eight physical stores and in 2019 have 64 locations across the US.
The company said 50 per cent of its sales come from instore however 75 per cent of those went online first.
Another example is Bonobos, a menswear retailer that launched exclusively online in 2007, is now one of the fastest-growing clicks-to-bricks stores based on the number of newly opened physical stores.
In 2011, the company expanded its physical footprint with its “guideshop” model, which offers appointments at a store to try on items first and then place the order online while in the store.
The business model keeps inventory costs low by using the website as a virtual back room.