The Magic Touch for Brick-and-Mortar

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By: Arianne Cohen

The retail executives gathered in a circle. The first one sprinkled in a pinch of free parking. “Voilà!” said the second one, tossing in a dash of store-only specialty products. The third executive stirred in more loyalty programs. Would their magical retail strategy work?

Contrary to popular opinion, in-person shopping is not dead. Yes, closures are up: 80 percent more US stores were shuttered in 2023 than in 2022, according to data from Coresight Research. But those figures belie the fact that nearly 5,500 US stores opened last year, and—critically—that brick-and-mortars still account for four-fifths of worldwide retail spending. So yes, stores are very much open for business and hoping to capture most of the $30 trillion global shopping market. But figuring out a strategy that will keep those cash registers ringing seems to require some kind of magic. “We’re seeing a major shakeout in retail,” says sales guru Paco Underhill, founder of market-research company Envirosell and author of Why We Buy: The Science of Shopping. “If you think of the top stores of the past decades, the list has changed considerably.”

Companies today no longer strive to open at least 60 locations, the number once considered optimal for retail economies of scale. These days, far fewer locations may be needed if the online side of the business is doing well. Indeed, in today’s complex digital landscape, 30 to 40 percent of in-store shoppers now have a phone in hand, says Underhill, which enables them to evaluate products both real and virtual. The average time women spend in dressing rooms is up by 20 percent because “they’re on Snapchat asking friends or family whether they like an outfit,” he says. This has led to new dressing-room enhancements, like fancier carpeting and photo-friendly lighting.

Pandemic-era boosts in digital-shopping and browsing traffic are also driving closures and openings. Simply put: Many stores needed to tinker with their balance of digital and in-person, and some had been waffling since 2022. “A lot of the brick-and-mortar changes we’re seeing now are in response to that,” says retail consultant John Long, a senior client partner at Korn Ferry. Copycat behavior is also a factor, as one store’s shifts or closures can inspire competitors to follow suit. “Depending how investors react, it gives other retailers confidence,” says Long.

The current raft of closures doesn’t augur doom and gloom, say experts, especially in the United States, which has far more stores per capita than most other countries. (The industry has its own word for this: overstored.) Even successful outlets might relocate—to increase or decrease space because of shifting neighborhood demographics, or to dodge rising operating costs owing to leasing and wage requirements.

Interestingly, retail’s new cutting edge has shifted away from North America. Underhill suggests leaders look to sectors and cities with recent influxes of cash, such as the jewelers of Dubai or the grocers of Rio De Janeiro. The latter, for example, are destinations unto themselves, with cafés, butcher shops, bakeries, and upscale cafeterias. And then there are thriving international malls that are often adjacent to residential housing, if not to schools and libraries. “When I talk to a grocer in Cincinnati and ask if they’ve seen the new grocery stores in Brazil, they don’t know what I’m talking about,” sighs Underhill.