The Halo Effect III Where the Halo Shines: How Physical Stores Drive Online Sales

In 2018, The Halo Effect I quantified, for the first time ever, the value of physical stores by measuring retailer web traffic and brand awareness. Our next report, The Halo Effect II, analyzed the incremental spend that occurred in the days following an online purchase. Post-pandemic, the importance of an omni-channel retailer strategy is well documented, but just how important is it? In ICSC’s latest report, The Halo Effect III: Where the Halo Shines, we analyzed nearly $850 billion in credit and debit card transactions, 69 retailers and over 2,100 stores to answer that question. And, once again, the data prove the power of physical retail:?Opening a store boosts online sales, while closing one decreases them.

The Halo Effect III found that opening a physical store boosts online sales in the trade area surrounding that location by 6.9% on average in the immediate weeks following the opening. That number is even greater when looking at emerging, direct-to-consumer retailers, who saw a 13.9% increase in online sales after opening a new location.

Across six retail categories, the trend was largely the same, with some seeing an even more substantial halo effect. For example, online spending in the trade area surrounding a new department store increased 50.6%, while apparel brands saw an 11.6% positive halo. Further, the study found that in addition to the increase in online sales, retailers also benefit from increased online basket sizes – or dollar amount per online transaction. Both emerging and established retailers saw average online basket sizes increase between 8.1% and 10.6% following a store opening.

As much as opening a store improves retailer performance, closing one hurts it. Our research found retailers who closed a physical location saw online sales in the trade area drop by 11.5% across all combined categories. The negative impact was particularly felt by retailers that largely sell discretionary items – like home and department stores – underscoring the value of in-person, in-store discovery in these categories.

To further understand our findings, we dug into generational shopping preferences. ICSC’s earlier report from this year, The Rise of the Gen Z Consumer found that 97% of the cohort shop at brick-and-mortar stores. Taking this a step further. The Halo Report III shows that Gen Z’s penchant for in-store shopping exceeded nearly all other generations. In fact, Gen Z shops in-store more than Millennials and Gen X and at a comparable rate to Boomers. They’re known as “digital natives,” but they’re also playing a major role in the revitalization of physical retail as they mature into greater spending power.

Ultimately, The Halo Effect III demonstrates that stores remain an indispensable component of marketplaces and the omnichannel shopping experience retailers create for consumers. The value of opening a store extends beyond customer convenience and even beyond the significant benefit to sales at that location. Store openings drive online sales, positively impacting overall retailer performance. and increasing brand loyalty. To read more from The Halo Effect III, please visit this link.