Why brick and mortar stores are still an important part of retail
Retail turnover has slowed, and CBD vacancy rates have increased in recent years. Does this signal the end of brick and mortar stores or is it the start of a new ‘omnichannel’ retail experience combining stores, social media and e-commerce?
In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed US$4.2 trillion worldwide1. The appeal of online shopping was embedded in its convenience during lockdown, alongside more competitive pricing and the fact that people had less discretionary income.
So, who would consider opening a new brick and mortar retail store in this environment? Irene Falcone would.
Founder of Sans Drinks, Irene has a track record of creating successful multi-million dollar companies from the ground up and she loves the thrill of a challenge.
Passion, resourcefulness and a strong determination to succeed are characteristics that define a successful entrepreneur. And they couldn’t be a better description of Irene.
“When I started Sans Drinks, my goal was certainly not just to sell non-alcoholic drinks online. There are plenty of retailers who already do that. I wanted to take something people think is daggy and make it cool and sexy. Many people, myself included, had started to drink more in response to being stuck at home during COVID-19 lockdowns, so it seemed the right time to start the conversation about highlighting the need for non-alcoholic alternatives.”
After creating an online store, Irene quickly discovered that although her website traffic was terrific, customers wanted to see and try the products. She created a pop-up bottle shop outside her warehouse in Brookvale and it was so successful, there were constantly queues out the door. This couldn’t be a permanent solution, particularly given the warehouse was tucked away in an industrial area with no real street presence, so the next step was a full brick and mortar retail store with an impressive storefront.
Sans Drinks rose to the challenge and took on the mainstream bottle shops directly – even opening its first store right across the road from one.
When the store opened, it generated a lot of publicity being the only non-alcoholic bottle shop in Australia. “The store is an ad for my online business, like a walk-in version where the layout, colours and signage are all identical,” Irene explains. “You need to think online first, brick and mortar store second.”
While some retailers might believe brick and mortar isn’t the way to go, those who act on location-rich data to place products and then personalise the shopping experience to suit new habits (with a COVID-19 overlay, of course) could excel in the post-pandemic era.
Mobile technology and social media have transformed the way we think about shopping and it’s possibly one of the industry’s biggest shifts in consumer behaviour. For those who crave experiential shopping, brick and mortar stores have become platforms for that essential hands-on engagement with products and brands2.
To stand out during COVID-19, retailers needed to offer items based on specific qualities tailored to meet consumers’ demands, such as organic produce and environmentally friendly products2.
Sans Drinks wasn’t targeting people who don’t drink, it was focused on those who do drink and want to drink less or less often. The key was to offer products that taste as close as possible to what people usually drink. And to do this successfully, people needed to be able to try and taste the product.
“I wanted to change the attitude around “What’s the point” of drinking if it’s non-alcoholic. I wanted to make non-alcoholic drinks a lifestyle choice and to do that I had to offer quality products, including natural ingredients, low calories, sugar-free and vegan options”. Irene adds, “the website was phenomenally successful, but once I offered people the opportunity to come in-store and try the products for themselves, my sales skyrocketed. It seemed to give them to confidence to try more and ultimately buy more!”.
As shoppers slowly returned to retail stores post the pandemic, the shopping experience hads changed. Social distancing and increased hygiene measures are now the new standards, and retailers have had to rethink the physical footprint to better integrate their digital and physical channels.
Irene’s passion to disrupt industries and challenge norms while providing better shopping experiences for Australians has proved to be a successful formula. In its first year, Sans Drinks recorded a turnover of almost $5 million. “The big challenge for retailers as I see it is meeting the growing demand from online sales alongside brick and mortar stores.”
Sans Drinks has already had to upgrade its warehouse space several times to keep up. Finding warehouses in the right area, at the right price close to logistics infrastructure is growing increasingly difficult. And for Irene, she’s set herself the additional challenge of finding warehouse space specifically on the Northern Beaches as part of her drive to support local. Starting from her garage, before moving to a warehouse, then to a bigger warehouse…the battle to keep up never ends.
“My online business quadruples when the store is closed. While it’s great for sales, it creates a few headaches managing the distribution supply and demand, which is so unpredictable”, says Irene.
As COVID-19 impacted business owners in 2020, Irene had recently sold her beauty business, Nourished Life Australia. “I suddenly found myself at home every day with time on my hands after years of working ridiculously long hours on my business. The world around me was full of uncertainty and I had this incredible need to turn to what gave me the most comfort – starting something new and creating a company.”
All businesses need partners they can trust, and Irene happily admits she couldn’t have expanded her online business into a retail store without the support from Westpac. “I never thought I’d get so much support from a bank. They listened to me, understood my goals and ambition, and removed all the overwhelming paperwork hurdles, even coming to my warehouse with a pen so I could sign everything! My local business banker is amazing, and I have a range of tools and services I can easily tap into. My goal is to open 20 new brick and mortar stores in the next three years, and it’s so reassuring to know I have the right support to take my business to the next level”.
COVID-19 has reportedly accelerated the shift to e-commerce by five years3, so if retailers haven’t already pivoted their business strategy to aligns retail stores, social media and e-commerce, they’re missing a huge opportunity.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.
2 IBM Research Insights: Meet the 2020 consumers driving change
3 IBM 2020 US Retail Index study