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New Study of Retailers Confirms Merging of Physical, Digital

“More brands plan to open stores versus close them this year, which proves that the physical retail store is not doomed as many think it is,” said a top analyst with Forrester.

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Traditional and online retailing are increasingly intertwined as customers seamlessly shop across touchpoints and the industry uses both platforms to better serve them, according to the annual State of Retail Online study released today by the National Retail Federation and Forrester.

Highlights of the Research

  • Net-net, stores are growing: More surveyed retailers say they will be opening stores in 2018 versus closing them. This outlook contrasts with claims that the physical retail world is being displaced by ecommerce and is therefore doomed.
  • Omnichannel remains a key store investment area: Efforts like in-store pickup and endless-aisle investments have been a recurring theme for digital retailers for years, and continue in 2018 as retailers recognize these initiatives are often multiyear endeavors.
  • Digital retail continues to be the bright spot it’s been for years: Retailers continue to experience success in their ecommerce businesses, which have been buoyed by strong mobile commerce performance and improvements in key metrics like conversion rates.

Of the companies surveyed this year, 32% were “pureplay” online retailers while 57 percent were multichannel retailers, including traditional brick-and-mortar retailers that also sell online.

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This year’s data reveals that 43% of store-based retailers surveyed expect a net increase in the number of bricks-and-mortar stores they operate by the end of 2018 compared with 2017, and only 16% expect a net reduction. Additionally, retailers are proactively working on their real estate assets, whether testing new store formats such as opening some type of pop-up store (24 percent), and opening new warehouses or distribution centers (12%).

New physical locations are important because 42% of retailers surveyed say that faster delivery of online orders is their top customer-facing priority, and many plan to use stores to achieve that goal. Omnichannel services such as buy online, pick up in-store are an in-store priority for 21%, along with 15% that cite ship-from-store as a fulfillment priority.

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“More brands plan to open stores versus close them this year, which proves that the physical retail store is not doomed as many think it is,” Forrester Vice President and Principal Analyst Sucharita Kodali said. “Smart retailers understand that the two go hand-in-hand, but customer-obsessed retailers will continue investing in areas like omnichannel to provide customers with the seamless on and offline experiences they expect and now require. This year’s survey proved that while they have work to do in 2018, retailers are moving in the right direction.”

Personalizing the shopping experience was another top priority, cited by 15% of store-based retailers. Retailers surveyed are also focused on using technology to better enable store associates to help customers (12 percent), as well as improving the in-store experience (12%). To support their store associates providing service to customers, 61% of retailers surveyed plan to spend more on employee training.

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Digital continues to contribute significantly to retail overall, both directly and as it influences sales in stores. Seventy percent of retailers surveyed noted that online conversion rates – the number of people browsing an item online who actually follow through and make a purchase online – increased in the past year. Further good news: 62% said repeat customers were up and 57% said average order values had increased.

While online sales coming from desktop computers currently double those of mobile browsers, mobile sales are growing 36% per year versus 8% on desktop. Mobile app sales are growing at an annual rate of 16 percent, and accordingly, 89% of retailers plan to increase investments in mobile initiatives.

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“This report shows more than ever that retail is retail regardless of where a sale is made or how the product is delivered,” NRF Vice President for Research Development and Industry Analysis Mark Mathews said. “Products ordered online are increasingly picked up in-store or shipped from a nearby store, and digital technology being used at bricks-and-mortar locations lets retailers help customers find what they want or make the sale even if the product is out of stock. Traditional retailers have seen the opportunities of online selling for years now, and those selling online increasingly see that stores are part of the key to success.”

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