Should eCommerce Merchants Have a Physical Presence?

The pandemic pushed online sales growth forward by as much as five years. Now that growth is starting to slow down. Post-pandemic, there is a strong emotional desire for more human contact and to once again shop in person. As in-person experiences open up across many facets of our lives, eCommerce merchants may be wondering: Is it time to expand into a physical presence?

For merchant brands born (or re-cast) as direct-to-consumer, there’s ample evidence to support a move into physical sales. Digital retailers have a return rate of more than 20%—more than twice that of physical stores. Ironically, barely two-thirds of shoppers are more likely to shop online if they can return to a physical location. Convenience and the immediate need for satisfaction by any means drive sales, and physical locations are convenient for many shoppers.

But before you rush to sign that lease, here’s a look at why you might consider opening a physical location, some possible alternatives, and some strategies for success.

Do Your Products Have Compelling Physical Properties? Even the most advanced eCommerce store does not let a shopper touch fabric, try on clothing for size and comfort, or smell or taste the products. The shopping experience for new clothing, spices, beauty products, cars, and many other items can be an excellent in-person experience. These (among other products) can be good candidates for a physical location.

But be careful. Some products—like cosmetics and food products—may still face temporary or permanent COVID-19 limitations. This may change how shoppers interact with these products both now and long term. You’ll want to factor in the possibility of temporary shutdowns.

Gain Access to Large Cultural or Moment-in-Time Events. There is immense demand for physical experiences and events, ranging from concerts and festivals to more casual local encounters. Music festivals (such as Coachella), cultural events (Burning Man), and unique venues that intersect technology and culture (SXSW) are all coming back. If you have a substantial online following and customer base, it may be time to up-level marketing with participation in large cultural events. A one-time physical and digital presence at these events can open new communities of customers and create another great touchpoint for existing customers.

Create Smaller Bespoke Experiences. On the opposite end of the spectrum are smaller, more intimate, or bespoke experiences that can occur in a physical location. These would be events like local chefs running a cooking class that showcases your inventory. And, of course, there are always local events (think wine and art shows, etc.) that could provide a lot of foot traffic with pop-up booths. These are a great way to test the waters for little investment in permanent, physical space.

Leverage Marketplace Partners’ Physical Locations. My last Forbes article outlined how to expand the eCommerce business into more digital marketplaces. If you’ve expanded to Amazon, Walmart, and others (like specialist megastores Ulta in beauty), then it’s possible their physical stores could be the first logical leap into physical sales. Customers demand omnichannel experiences, especially from the giants, and adding a physical layer is another channel. Their massive footprint could provide a logical extension. But, of course, this is a significant commitment; there are thousands of locations, and it could be too much for your first foray into physical sales. And you are increasing competition (and digital media spend) for some direct-to-consumer brand search terms.

Warehouse-focused Expansion. Nearly any eCommerce business that’s scaling is looking at expanding warehouses to strategic locations. It is critical to extend coverage to meet customers’ “get it now” inventory and shipping demands. If warehouses can double as retail outlets—or retail outlets can expand with warehouse capacity—you get a series of benefits across both digital and physical business. You provide physical locations for pickup and returns, which (as stated earlier) directly increases digital sales. You have inventory in strategic locations for faster shipping and to help combat supply chain snags. And the warehouse will pay for itself with the resulting retail income.

Get and Give Local Assistance. Your local state, county, or town’s banks, nonprofits, and chambers of commerce may have incentives in the form of grants, low-interest loans, and tax incentives to support physical expansions and job growth. Near a university? Work with the professors and careers department to potentially get labor currently in short supply. Create some bespoke products for local events, even donating them as a marketing cost with invitations to visit a physical store sale. All of this builds community relationships, builds brand, and brings in foot traffic.

Not all digital retailers need to move beyond eCommerce into the physical world. It’s not without brand and financial risk. Even the king of eCommerce, Amazon, has opened and closed unsuccessful stores. But as you face increasing competition and changing consumer shopping preferences, targeted physical strategies could be the right fuel for the next stage of your eCommerce business. 

Originally published in Forbes

Zohar Gilad is the CEO and Co-Founder of Fast Simon, with extensive experience in eCommerce for the past decade. His articles have been published in Forbes, VentureBeat, Total Retail, Martech Series, Retail Touch Points, and more.