At the risk of being a pessimistic, I haven’t stopped thinking of different reasons physical retail will continue to struggle, most probably in perpetuity, above and beyond consumer behavior changes accelerated by the pandemic. It’s an inter-related vicious cycle resulting from a number of factors.

1) Fewer stores & farther to travel

Many retail chain stores and banks still standing have closed their lowest performing locations and are operating fewer, large footprints. This means many people will have to travel farther to go to that chain, a friction point.

2) Retail store experience worsening because space is being devoted to fulfilling online orders

Many stores are doing online order fulfillment and returns from their retail locations, as shipping is cheaper due to shorter distances, and in-person returns have no shipping costs. Less space for browsing in stores worsens the shopping experience. At Whole Foods, for example, there are Instacart and Prime Delivery people crowding the aisles with carts taking up floorspace, making shopping an obstacle course. Even with COVID spacing, it felt annoyingly crowded with less open aisle space.

3) With a lower percent of sales coming from physical retail, allocation of items and sizes to stores can be less, hence it’s can be harder to find what you hoped to walk out with

With fewer customers coming into physical stores, there’s less need to carry as much merchandise in each. If customers can’t find their size or explore as many items, that partly defeats the purpose of taking the trouble to go into a store. The Zara I visited in Manhattan this week had the least merchandise I’ve ever seen, and I’ve been to Zara’s all over the world.

4) Fewer random/unplanned impulse store visits from passing by

With fewer shopping mall or urban shopping street visits because favorite chains are no longer around, there will be fewer unplanned/impromptu visits to stores that might have caught your eye as you passed by.

5) Corporate resource/investments are increasingly focusing on further improving online experiences, at the expense of retail

In the past few weeks, I heard a major global beauty company and a major global sports apparel company each state they expect 50% of all their sales to be online in the not-too -distant future. Corporate resources are being focused on further improving the online shopping experience through to make digital, as closely as possible, simulate the benefits of shopping in person. Examples include one-on-one beauty consultations, item try-ons through augmented reality, L’Oreal’s online True-Match shade finder, or programs like Warby Parker mailing customers 5 pairs of glasses with easy returns and no shipping fee.

6) Making stores truly experiential is costly, and hard to justify for many locations

Prior to the pandemic, in order to attract customers to get off their couches and shop in-person, the trend for those who could afford it, was to invest in retail stores to make them more experiential, digital, and interactive. Nike House of Innovation and Puma’s flagship store on 5th Ave., Melissa’s Shoes and Dolby Sound on Broadway Manhattan are examples. With declining sales coming from physical retail, it’s hard to justify to making these investments chain-wide for even those retailers with the deepest pockets.

7) Retail is no longer expected to pay for itself. It’s viewed by many as a marketing awareness investment

The founder of a DTC unicorn stated at NBC Universal’s Innovation Day, they were budgeting their retail stores out of their marketing awareness budget and didn’t expect a positive ROI on the locations themselves. Rather their retail locations are an omni-channel investment that enabl customers to try out/touch and feel the products, some of which are then purchased online. At an Alibaba thought leadership conference in January, one speaker referred to retail as a media outlet for viral events and “Instagramable” social sharing. Examples include Nike House of Innovation’s in-store basketball technique assessment, Puma’s motocross racing video game play, American Girl Doll’s dining with your doll, Under Armour’s giant selfie-inspiring torso on Michigan Ave. in Chicago, or Glossier’s life-size Instagramable mascara tubes.

8) Muscle Mmemory and post COVID traumatic stress associations make many thinktwice about shopping in crowded stores.

While previously crowds were a good thing, indicating something in demand and desirable, muscle memory PTSD now makes many of us cringe when we see large crowds of people inside stores. Many bought online during COVID in categories we previously resisted and found it surprisingly preferable.

9) Less in-person retail can reduce the ease of discovering new items

An exec at a large multinational apparel company recently confirmed what I’d suspected. It’s harder to launch new items exclusively online, as discovery is harder. As a result, the company is being more selective and focused about what they launch. The well-known pandemic trend of consumers buying comfort foods they were familiar with (like Kraft Mac and Cheese) rather than taking new food item risks, supports this. While some new niche brands are succeeding in being discovered exclusively online with great social media and influencer programs, in general it’s harder to get known strictly online.

Key take-aways

- Having a great digital experience is more important than ever and digital needs to replicate positive in-person experiences in as many ways as possibl.e

- Products might need to limit endless SKU proliferation and focus on fewer, surer bets.

- Physical stores will have to be even more exciting to attract consumers, but it’s costly and can’t be done everywhere. To get the maximum benefit, exciting retail locations must be looked at as venues for events and social media buzz, product sampling, and demos

- Online order fulfillment from physical retail needs to make sure it doesn’t markedly compromise the in-store customer experience.

- New small shops might re-consider where they locate. If major urban areas with reduced office traffic and shopping visits don’t spring back to pre-pandemic levels and large numbers of people continue working from home, suburban location for new shops may now be an appealing option.