The ICSC’s latest report, The Halo Effect III: Where the Halo Shines, quantifies the impact of opening or closing physical stores on online sales and retailers’ overall performance.
The study – the third instalment in ICSC’s industry-leading research on the halo effect of brick-and-mortar retail on online sales – proves again the power of physical retail by demonstrating that a new store boosts online sales, while a closed store impedes them, said the organization.
“ICSC’s data has always shown that consumers prefer shopping in-store over other channels,” said ICSC President and CEO Tom McGee. “While our earlier research on the halo effect demonstrated how physical stores drive web traffic and brand awareness, our latest report dives deeper by analyzing actual spend data. The findings quantify just how important brick-and-mortar is to today’s omnichannel consumers and underscore what retail experts already knew: The core of the omnichannel experience is the retail store.”
Stephanie Cegielski, Vice President, Research & Public Relations for ICSC, said the research continues to show that the core of the omnichannel experience is the retail store.
“Our ongoing research series, The Halo Effect, proves the power and impact of brick-and-mortar retail on online sales. Our first report established that new stores serve as a billboard for brands by showing that opening a new physical store results in a 37 per cent increase in that retailer’s website traffic,” she said.
“Our second report quantified how much shoppers spend online in the days after visiting a retailer’s brick-and-mortar store, with a $100 online transaction driving an additional $131 in in-store spending. Our latest landmark report quantified not only the value of opening a new store on online sales, but also the harm in closing one. A new store drives a 6.9 per cent boost in online sales, while a closed store reduces online sales by 11.5 per cent.”
Cegielski said physical stores are an essential ingredient to the success of retailers by improving brand health and driving brand awareness.
“Brick-and-mortar also enables shoppers to experience the products they’re buying — one of the top drivers for consumers to shop at physical stores according to ICSC’s research — and provides retailers with opportunities to gain consumer data beyond what online shopping allows. Further, the costs to acquire new customers are generally lower in physical stores than online,” she said.
“We’re currently seeing a large wave of digitally native retailers continue to expand their physical retail presence, in part due to lower customer acquisition costs in brick-and-mortar compared to online and the ability for consumers to physically see, test and try products in-store. In our latest report, The Halo Effect III: Where the Halo Shines, emerging direct-to-consumer retailers experience a 13.9 per cent boost to online sales after opening a new store, while established retailers experience a more modest, but still strong, 6.8 per cent boost. Stores are not just sales drivers, but they can also help emerging retailers drive brand awareness and build trust with consumers in ways that they cannot do when solely interacting with consumers online.”
The ICSC research spanned in-store and online sales of 69 retailers and 2,103 individual stores.
“The study, which reviewed nearly $850 billion in credit card transactions over a four-year period, explored the impact of physical stores on emerging retailers, as well as established retailers, in categories including apparel, big box specialty, cosmetics, department stores, discount department stores, and home stores. It found that across nearly all categories, online sales increased following the opening of a store and decreased when a store closed. For instance, among apparel brands, a store opening drives an 11.6 percent increase in online sales and a store closing drives a 19.4 percent decrease in online sales,” said the report.
“Conversely, when closing a location, home stores and department stores took the biggest hit to their online sales, declining by 32.2 percent and 26.1 percent, respectively – emphasizing the importance of a space where consumers can test, browse, and shop for products in those categories especially. The study also examined the impact of opening or closing a store on average basket size, revealing that opening a physical store causes a shopper’s average online basket to increase, and confirming the opposite effect.”
The ICSC said the research also revealed the vital role Gen Z plays in the revitalization of physical retail. Despite being known as “digital natives” and growing up with digital technology at their fingertips, the data found that this cohort shops in-store more than Millennials and Gen X and at a similar rate to Boomers.
