Direct to Consumer Companies Opening Stores

Direct to Consumer Companies Opening Stores

A recent US study by ICSC called The Halo Effect III examined store and online sales for 69 retailers and 2,103 individual stores.  The findings are impressive. Opening a store boosts online sales by 6.9% in the surrounding area in the first few weeks following the opening.  For direct-to-consumer brands opening a store the impact is even higher at 13.9%.  Conversely, closing stores causes an 11.5% drop in sales in the relevant area.

A new store provides several omni-channel possibilities, such as order online, collect from or fulfil from store.  These options are mostly more profitable, than order online and deliver to the customers home by a significant margin.  Returning online orders to stores also gives staff a chance to sell an alternative product, and potentially accessories too. 

New space also provides opportunities to have a larger assortment in less square footage with a different balance between selling and stockroom space.  Stockrooms can use cube more efficiently than selling space.

Stores account for 70% to 80% of retail sales and while online share may grow a few percentage points in the next several years, it is still likely that stores will dominate retail sales, they may just operate in smarter ways.  Next week’s post will give more insight on store performance.

Posted by Brian Hume
15th March 2024

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