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Making stores matter in a multichannel world

Making stores matter in a multichannel world

Louise Herring, Tobias Wachinger, and Chris Wigley

McKinsey Insights | December 2014

As the role of the brick-and-mortar store evolves, retailers will continually have to refine how they use their real estate.

For decades, the retail industry has followed the same straightforward formula for growth: open new stores. By replicating a proven store format in a new catchment area, retailers could reliably enlarge their customer base and count on healthy increases in sales.

But the world has changed. More than half of consumers now research their retail purchases online, making purely in-store purchase decisions the shrinking minority. In many categories, e-commerce has dramatically lessened the need for physical stores. “Virtual space”—which we define as the floor space that would be required to generate the sales volume that online retail now accounts for, at a sales density equivalent to the industry average—is expanding at a staggering rate. In this new world, what is the role of the brick-and-mortar store?

Many retailers find themselves struggling with the question and saddled with more real estate than they know what to do with. After all, their property departments are geared up for expansion and acquisition. Their finance departments have traditionally focused on reaping investment returns from stores and tend to be jittery about investing in new and unproven technologies. On the flip side, their e-commerce directors are frustrated by this lack of understanding of the pace and mind-set such companies need to become digital winners.

(read more)

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