Channel crossings

Pragma's recent global survey reveals that 66% of consumers worldwide recognise themselves as mixed-channel shoppers, with a 6% increase year-on-year, indicating the growing importance of omnichannel strategies.

Furthermore, while online giants like Asos and Boohoo experience share price declines and stagnating sales, traditional store-based retailers with established online channels, such as Next and Marks & Spencer, are seeing significant rebounds post-pandemic. This indicates that pureplay retailers might face a more challenging future without a physical presence.

We explore the strategies and current performance of pure-play retailers as they transition from purely online to a mix of online and physical.

Amazon

Amazon continues to experiment with its physical store formats, including Amazon Go and Amazon Fresh, following the acquisition of Whole Foods. These stores, known for their `Just-walk-out' cashier-less technology, represent the company's ambition to integrate advanced technology into traditional retail environments.

Despite channel diversification and gaining larger market share, Amazon's bricks-and-mortar strategy aims to leverage its technology innovations to disrupt the traditional retail market. This move allows Amazon to gather more detailed customer data, facilitating enhanced personalisation and dynamic pricing strategies, ultimately benefit their dominant online platform.

Despite CEO Andy Jassy's optimism, Amazon's expansion into physical retail has hit some bumps. Closures of Amazon 4-star stores, its bookstores in 2022, and clothing stores in 2023 resulted in over $1 billion in asset write-downs. Over the past four years, Amazon's physical footprint has cautiously grown by less than 20%, from roughly 21,000 square feet to nearly 24,000 square feet. This slow expansion suggests difficulties in translating core e-commerce strengths – competitive pricing and vast product range – to physical stores.

While physical retail holds important strategic value to Amazon, it is clear Amazon needs to double down on its focus on the online shopping experience. The stores closure may not have a significant impact on Amazon's overall operations, but it serves as a reminder of the challenges and complexities of managing brick-and-mortar stores.

Glossier

Originally an online-only beauty brand, Glossier has thrived on community engagement through its blog, "Into The Gloss." The brand has leveraged social media and influencer partnerships effectively, developing a loyal online following. The shift to physical stores, influenced by a change in management and a strategic realignment from a tech-driven approach to a focus on core beauty offerings, aims to enhance customer engagement through direct interactions and product experiences.

Glossier's first permanent international flagship store in London's Covent Garden, set in a 17th-century townhouse, offers a unique community-centric shopping experience. This strategy has been extended with three additional stores in London, and a new partnership with SpaceNK from June 2024, broadening its physical footprint across the UK and Ireland. Its physical stores go beyond the transaction and focus on the brand experience, successfully serving as central gathering spots for beauty enthusiasts, significantly boosting footfall and enhancing Glossier's brand presence in a competitive market.

While sales figures for its physical stores are not publicly available, CEO Leahy mentioned in 2023 that Glossier's sales at Sephora surpassed $100 million in its first year, exceeding forecasts by 50-70%. This suggests the pivot to physical stores and expansion has been a strategic success.

Allbirds

Allbirds, known for its eco-friendly footwear and sustainable practices, initially thrived as an online retailer. The brand's transition into physical stores has been driven by the apparel and footwear sector's natural fit for in-person experiences, crucial for verifying the comfort and feel of its products.

With five stores across the UK, including high-profile locations like King’s Road, Covent Garden, and a concession store in Selfridges, Allbirds showcases its commitment to minimalistic design and sustainable materials. These elements resonate well with environmentally conscious consumers and elevate the brand's standing among UK shoppers.

Despite a strategic shift from Direct-to-Customer (DTC) into wholesale, Allbirds faced a revenue decline in late 2023, prompting a reevaluation of its physical retail strategy, with plans to close 10-15 stores in the US focusing on larger, newer locations better suited to a comprehensive apparel range.

While pure-play retailers, like Allbirds, may initially feel nervous about opening stores with high rent and fixed costs, establishing a physical presence in high-footfall prime locations is crucial for enhancing brand awareness. Alternatively, opening concession store within established retailers, like Selfridges, may offer a lower-risk, more flexible option for brands starting out.

As we look at the dynamic interplay between online and physical retail, it's clear that successful brands are those that blend online convenience with the tangible, community-focused experiences of physical stores.

The shift in how consumers shop highlights the importance of embracing a flexible omnichannel approach. Brands that innovate while maintaining strong customer connections in their physical spaces are best positioned to thrive in this ever-changing market.