Who needs stores anyway?

Over the past month, celebrated British retailers Debenhams and Topshop closed their shop doors permanently. The struggling businesses have been acquired by Boohoo and Asos respectively, and will be relaunched as online-only brands. Other UK brands including TM Lewin, Cath Kidston and Karen Millen have followed suit, closing their stores to focus singularly on online.

Australian online retailer Kogan.com picked up Australian furniture retailer Matt Blatt after its collapse in 2020, taking a similar approach and relaunching the brand as online only. Kogan certainly got its timing right, with Matt Blatt sales exceeding $1million for the first time ever over Black Friday, despite having no actual stores.

Is this something we should expect to continue? What can local retailers considering closing stores learn from these case studies? In an interview with Retail Week, Kath Kidston CEO Melinda Paraie said that the move to close stores and rethink their business model has translated into a leaner, more profitable operation. Without the complexity of a store network and the age-old challenge of stock integrity across multiple sites, a single view of stock has made life easier.

Another major advantage lies in the buying function. Without having to plan for merchandise to fill different sized pads across multiple stores, retailers can buy a broader initial assortment with lower volumes. This allows for testing the product assortment with customers, and buying more volume of successful lines. Without the cost drag of stores, retailers can then invest focused marketing spend into digital channels.

But the notion that stores are past their use-by-date is plain wrong. For fashion retailers, it presents a particular challenge of customers not being able to try on product before purchasing. It is also difficult to build a brand for customers to experience and immerse themselves in without some form of physical store. Cath Kidston ended up re-opening a major flagship store for these reasons. Paraie calls it “a beacon for the brand”, seeing it as a critical piece of the brand experience.

It is not by coincidence that Amazon continues to open it’s 4-Star, Amazon Books, Amazon Fresh and Whole Foods stores across the United States, with analysts believing the ultimate goal is for two thousand retail locations in that country. Amazon knows a bit about online retail, and this doesn’t sound like a strategy which considers stores no longer relevant. Amazon is also growing its store footprint outside of the USA in the UK and Europe.

Of course, the future of retail lies at the intersection of the two extremes. Traditional “stack it high, watch it fly” approaches across large store networks are inadequate for today’s discerning customers. But online channels can never replicate the experience and brand engagement offered by physical stores. Australian retailers like Myer and David Jones must invest heavily into online whilst simultaneously right-sizing their bloated store networks. It will be fascinating to watch the evolution.