Magazine Spring 2018 Issue Research Feature

The Store Is Dead — Long Live the Store

Legacy offline stores and next-generation online retailers are each finding their way to a new kind of shopping experience: the showroom.

David R. Bell, Santiago Gallino, and Antonio Moreno Reading Time: 20 min 

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Offline demise and offline renaissance is the paradox of new retail writ large. Swiss multinational financial services company Credit Suisse projects that by the time the numbers are in, more than 8,500 stores in the United States will have closed in 2017.1 Consensus estimates predict that 25% of all shopping malls will shrink or close in the near future. At the same time, online-first brands from suitcase retailer Away to eyewear maker Warby Parker are successfully opening pop-ups, showrooms, and full-blown stores.2 Not to be outdone, Amazon.com, the granddaddy of online-first, has opened bookstores and is rumored to be planning to open 2,000 AmazonFresh grocery stores over the next 10 years.3

The net result: Offline is dead and dying, yet it is also alive and thriving.

To understand why, consider the arc of Bonobos, founded in New York City in 2007 as Bonobos.com and sold in 2017, as Bonobos, to Walmart Stores Inc. for $310 million.4 CEO Andy Dunn founded the company with Brian Spaly while both were MBA students at Stanford’s Graduate School of Business.5 Their vision was simple: Sell men a better-fitting pair of pants, and do it without the “burden” of physical stores. Looking back to 2007, Dunn readily admits, “I really thought stores were going away at that time.”6 Ironically, nearly 10 years later, The Economist praised Bonobos for pioneering a new form of physical retail. The “zero-inventory store” is a small-footprint store where customers get a high-service, tactile experience, purchase via tablet, and order the product shipped to a location of their choosing.7

The trends exemplified by Bonobos reveal retail’s future: It will be small footprint and high experience, regardless of whether the retailer is online-first with offline additions or offline-first (legacy) plus e-commerce.

In this article, we pursue two interconnected themes: the expansion of online-first retailers into offline stores that serve the purpose of “supercharging” customer value, and the transformation of the stores of offline-first retailers from fulfillment-dominant centers into experience-dominant centers, which simultaneously reduce store size and inventory while improving the customer experience. In doing so, we explain how offline-first retailers can benefit from mimicking the showroom concepts started by online-first retailers, and why online-first retailers can benefit from opening more traditional stores.

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About the Authors

David R. Bell (@davidbnz) is the Xinmei Zhang and Yongge Dai Professor of Marketing, Wharton School, University of Pennsylvania, and president of Idea Farm Ventures, a New York City-based venture studio. (He is also an investor in Bonobos and Warby Parker.) Santiago Gallino is associate professor of business administration, Tuck School of Business, Dartmouth College. Antonio Moreno is the Sicupira Family Associate Professor of Business Administration, Harvard Business School, Harvard University.

References (26)

1. J. Wattles, “Stores Are Closing at an Epic Pace,” April 22, 2017, http://money.cnn.com.

2. J. Smith IV, “Long Live Retail: Fashion Startups Finally Learned Why Physical Stores Still Matter,” Observer, Jan. 8, 2015.

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Comments (2)
Kevin Moucha
Interesting and profound article about the challenges many retailers are currently facing. Addionally, in my opinion, the results can be applied also in other regions such as Europe as we see a trend of online-only retailers opening pop-up or pick-up stores in central stations or shopping malls/streets. Although the risk of potential lost sales due to no instant gratification might be substancial, it could be reduced in connection with state-of-the art fulfillment services such as same-day delivery or possibly 3D-printing at home in the future.
Richard Reisman
Compelling analysis of the power of bricks & clicks strategy. Offline-first and online-first retailers need to get beyond their myopia (as depicted in the classic Steinberg cartoon of the New Yorker's view of the world) to embrace a bricks & clicks perspective. This article provides excellent details, examples, and extensions of principles I suggested to Barnes & Noble in 1997, and revisited recently (see "Bricks and Clicks - Showrooming, Riggio, and Bezos:" http://bit.ly/2rJUhFh).