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Why single channel retail is no longer an option

Jonathan De Mello is head of retail consultancy at property adviser Harper Dennis Hobbs.

Jonathan De Mello

Jonathan De Mello

Shoppers’ desire to try on products will always inhibit pure-play fashion etailers’ potential for growth. Given online sales growth is now slowing and more players are entering the market, the time has come for such etailers to consider investing in limited physical retail networks.

A single channel retail offer is no longer an option. Amazon opening its first store in New York in time for Christmas is just the start; our research shows the UK’s most successful high street brands are those that have developed their multichannel offer, but whose physical stores are still crucial in terms of customer engagement, increasing sales and awareness.

We looked at ecommerce data provided by about 20 of the (mostly fashion) retailers we have worked with over the past year. On average, they recorded a 7% uplift in online sales in the catchment area of a newly opened store, suggesting customers are seeing or visiting stores first and later ordering products at home. A physical store not only achieves sales in its own right but grows brand equity, encouraging customers to then search out the brand online.

A physical network also goes hand in hand with the rise of click-and-collect, which is growing far faster than home delivery as a method of online fulfilment. Click-and-collect gives traditional bricks-and-mortar retailers that have invested in a transactional website an advantage over their pure-play peers, particularly at Christmas when people may be reluctant to rely on the postal system for delivery of presents.

Rather than investing in a substantial physical store network, however, pure-play etailers would do well to emulate international retailers when they enter a new market: creating flagship stores in key high footfall centres to build brand equity and using pop-ups to test new markets or fashion lines. This approach allows for the testing of new concepts, while keeping the cost of operating a physical store network to a minimum. It also gives them access to click-and-collect services they can fully control, with the added opportunity of upselling other products to customers coming into the store.

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