The Covid-19 pandemic is magnifying the need for retailers to rethink how physical space is used in the future. 

Although much attention over the last year has been given to the boom in ecommerce and the shift away from stores, physical outlets remain a critical part of the shopping journey. 

Euromonitor International estimates that, in 2025, 76% of goods will still be bought in-store, although that would mark a reduction from the 81% in 2020. As the world moves into a “new normal”, retailers and brands are focusing on four key areas in order to prepare for what’s next.

Euromonitor graphic

After rapidly adapting to limitations imposed by government regulations, physical retail is laying the groundwork for transformation. An essential part of this process will be the revision of a vast physical presence. 

Euromonitor International estimates that more than 135 million square metres of selling space and 1.7 million points of sale were lost globally in 2020 alone. Some 5% of all non-grocery retail stores in western Europe and North America closed permanently amid the ongoing operational challenges. 

Inditex is closing 1,200 stores globally by 2022 to focus on larger flagship outlets, for example, while coffee giant Starbucks is shutting 800 stores, most of them in dense metro centres, due to underperformance in comparison with drive-through locations. 

But with the death of stores that are the wrong format, the wrong size or in the wrong location, comes the birth of fresh new thinking. Over the past 12 months we have seen retailers across the board changing their strategies, and experimenting more with pop-up, store-within-a-store and “shop-on-wheels” concepts.

Swarovski’s ‘Instant Wonder’ pop-ups 

Swarovski Instant Wonder Milan

Swarovski used the lockdown to refine its brand image and product portfolio, relaunching with a higher-end lifestyle positioning in 2021. That included the opening of 28 temporary ‘Instant Wonder’ stores, all of which host live and digital events. 

Swarovski was the world’s ninth-largest jewellery retailer in 2019, but its market share in personal accessories has only grown marginally since 2016 amid intense competition from costume jewellery brands and fast fashion giants.

As part of wider plans to reposition itself higher up the luxury tier of jewellery, it launched the first of its ‘Instant Wonder’ pop-ups in Milan in February, providing consumers a more premium multi-sensory shopping experience. 

Pop-up stores of this ilk will become even more crucial in allowing retailers to introduce more creative, brand-focused and experience-led spaces, while allowing them to sign more flexible, short-term lease agreements.

Grocery Neighbour – putting ’wheels on a grocery store” 

Set to officially launch in the spring, Grocery Neighbour is an innovative concept being trialled in Canada that is designed to deliver the store directly to consumers’ doors – no online ordering, no delivery costs. The entire store is in the form of a truck with two doors – one to enter and one to exit – creating a mobile grocery store that comes to you. 

Grocery Neighbour

The concept is neighbourhood-centric, meaning that each truck can evolve its proposition to only carry the products demanded by people living in a particular area. 

A number of post-pandemic trends could work in Grocery Neighbour’s favour. Despite the boom in online grocery shopping, many older consumers still struggle with ecommerce but may not want to return to supermarkets or c-stores. Moreover, according to Euromonitor International’s latest Covid-19 Voice of the Industry Survey, almost 70% of consumers expect to work from home more frequently, even after the pandemic has dissipated.

As consumers flee big cities, localised, neighbourhood-specific solutions of this ilk are likely to gain traction. Grocery Neighbour aims to expand aggressively outside of  Toronto, with boss Frank Sinopoli eyeing as many as 1,000 trucks within the next five years.

Physical meets digital

Although the pandemic has driven polarising fortunes for online and offline business, physical retailers have also been tackling the increased pressure on their supply chains by better leveraging stores to fulfil online orders.  

Some retailers have had success converting their shops to dark stores, which are essentially warehouses that can be used to facilitate click-and-collect services. This has been particularly important in densely populated areas in the cities, as retailers needed to find ways to improve their operational efficiency and speed of delivery. 

In Spain, El Corte Ingles converted a Bricor DIY shop into a dark store to help support online food orders and improve its ability to fulfil them in just 10 days. In France, Monoprix transformed a number of its Parisian stores, located in office areas that registered less traffic, to build online order preparation capabilities. 

Moving forward, local micro-fulfilment centres will become increasingly popular as an extension to existing stores, not just in Europe, but globally. The world’s biggest grocer, Walmart, has already signalled its intention in this area, with plans to roll out local fulfilment centres at dozens of stores in the US this year. 

Physical retail may have taken a battering over the past year, but as stores prepare to re-open in the UK, retailers across the road are already making progress on the road to reinvention.  

Lessons for retailers

  • The rapid uptake of ecommerce in 2020 means physical retail will have to re-examine its size, location and role moving forward. Physical retail must become more multidimensional, with stores simultaneously operating as selling spaces, fulfilment centres, engagement areas and branding vehicles.

  • Physical retail will remain the biggest, most important channel globally over the next five years. Omnichannel, rather than ecommerce, will drive growth and recovery for retailers beyond the pandemic.

  • The suburbs and smaller cities offer huge opportunities for retailers. Such locations are well-positioned to capitalise on the influx of shoppers already fleeing big cities, spurring growth in smaller metropolitan areas at a fraction of the cost.