The next hottest e-commerce trend: physical stores – The Average Joe

    The next hottest e-commerce trend: physical stores

    Victor Lei — Head of Research

    April 26, 2022


    April 26, 2022

    Physical retail isn’t dying. Instead, e-commerce brands see it as a lifeline to the increasingly competitive online market.

    Many are finding a use for physical stores that online stores are failing to meet — a personal connection and lower costs…

    E-commerce trend: COVID accelerated e-commerce — but even shoppers have their online limits…

    • In 2020, as a % of total US sales, online retail peaked at 15.7% — falling to 12.9% in the last quarter of 2021.
    • At the end of March, mall traffic was up 16.6% compared to the year before.

    E-commerce has become overcrowded — driving up advertising costs for brands. According to Meta, the average price per ad increased 30% in the first quarter of 2022 compared to last year’s same quarter.

    Here’s how the marketing cost for two retailers compared between 2019 and 2021:

    • Online: Online pet retailer Chewy’s (NYSE:CHWY) cost to acquire a new customer grew 44% from 2019 to 2021 (WSJ).
    • Physical: Pet retailer Petco (NASDAQ:WOOF) — which makes most of its sales in-store — decreased its marketing cost per new customer by 64%.

    $WOOF is up 5% in 2022, while $CHWY is down 45%. Rent sounds expensive — until brands look at their increasing shipping, returns, acquisition and retention costs.

    Going omnichannel: Online-native brands are launching physical stores to supplement e-commerce sales.

    • Wayfair is opening three physical stores in Massachusetts.
    • Warby Parker plans to open 40 new stores this year.

    Macy’s CFO found that digital sales are more substantial in markets with physical stores.

    Who else? On May 9, Meta is launching its first physical store at its campus in California — showcasing its hardware products.

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