Why Physical Retail Is Still a Dominant Player

Consumers say human connection is essential to their loyalty in a business.

January 16, 2023

ALEXANDRIA, Va.—Physical retail proved successful last year, as many new brands opened their first locations and existing companies expanded their footprints, reports Forbes.

Vacancy rates are at a 15-year low, with third quarter rates at 4.3%, down from 6.3% in the second quarter.

U.S. convenience stores reversed a four-year decline in store count. The are 150,174 convenience stores operating in the United States, a 1.5% increase from a year earlier, according to the 2023 NACS/NielsenIQ Convenience Industry Store Count.

Brick-and-mortar locations may be the key to success in 2023, according to Forbes. These locations can be used as marketing and advertising platforms, as well as a way to acquire new customers—for less.

Bandit Running, a running and performance retailer, opened its first brick-and-mortar location, and according to its CEO and co-founder Nick West, "customer acquisition cost was significantly better [in-store], as compared to paid digital investment."

Digital brands are also seeing the online customer acquisition cost increase exponentially over the past few years. Online retailers lose $29 for every customer acquired, which is up about 60% from five years ago, according to a SimplicityDX study. The increase is likely due to a crowded online ad space and more privacy regulations limiting the ability to target customers, writes Forbes.

In addition, physical retailers, including convenience retailers, are able to reattract additional customers after the pandemic pushed consumers to e-commerce by making their stores an experience. Brands are looking beyond shopping and offering experiences like dining, art and music, and an interesting store visit is vital to success, according to industry experts.

That’s in line with recent NACS research indicating that convenience store customers have evolved and are looking for retailers to meet their new, heightened expectations for convenience, product assortment, speed of service and friendly staff, among others. That’s according to findings of the 2022 NACS Convenience Voices survey featured in the January NACS Magazine cover story, “Looking Backward and Forward.”

7-Eleven is an example of how c-stores can create that “wow” experience for customers. The company is developing new store concepts, which have been unveiled in Dallas and Washington, D.C., and will eventually be rolled out across the brand’s store portfolio.

“Consumers can now buy everything online,” Carlie Russell, a senior designer who worked on 7-Eleven’s Dallas store redesign. “Even convenience stores need to step up their game to get people to come in.”

Also, according to a PwC survey, a third of respondents said that human connection was essential to their loyalty in a business.

“If you want to connect deeply with the running community, you can't rely on Instagram ads to build a connection with the people driving the sport forward,” West told Forbes.

A barrier for some brands entering the physical retail space is cost. However, because vacancy rates are low, companies are on waitlists to get into locations, so brands are contemplating alternative options, such as neighborhood centers, destination street locations and even class-B malls. In fact, one of Placer.ai’s predictions in its Retail Trends Forecast is that brands will begin to enter new real estate categories this year.

“Ultimately, creativity will be critical to any retail brand that wants to build a presence in the physical world,” writes Forbes. “And for all brands, but digitally native brands especially, the advantage of stores is clear, the opportunities in physical retail are endless, and a wavering economy isn't going to stop them.”

7-Eleven is one of many convenience stores revolutionizing their stores for a unique experience. The NACS Ideas 2 Go video series features multiple innovative convenience retailers today that are operating the convenience store of tomorrow.

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