The Resilience of Bricks-and-Mortar a Harbinger of Retail’s Future

Market observers occasionally experience the quiet satisfaction of an “I told you so” moment. I’m experiencing such a moment courtesy of bricks-and-mortar retailers’ changing fortunes.

In 2017, when many pundits predicted the demise of traditional, store-based retailing. I predicted that the bricks-and-mortar model would not disappear. Today, physical stores remain a vital part of the retail industry.

However, the future is always uncertain. Back in 2017, I did not anticipate the COVID-19 pandemic or the emergence of artificial intelligence (AI) as an industry-changing force.

What might retailing look like in another seven years?

Survival of the stores

In 2017, leading retailers such as Sears, Macy’s, and J. C. Penney announced mass store closures, and the phrase “retail Armageddon” was used to describe the industry’s prospects. Unstoppable e-commerce retailers were supposedly laying waste to the lumbering store sector.

I laid out a different picture in a LinkedIn post.

“But the death of bricks-and-mortar retailing has been grossly exaggerated. A decade from now, people will still be visiting their favorite outlets—it’s just that the environment in which they shop will look very different from it is today,” I wrote.

I gave three reasons for this contrarian view. First, consumer demand for the traditional shopping experience was still clear. Second, online retailers could complement brick-and-mortar outlets. “They are likely to integrate physical stores with online retailing in an efficient and seamless way,” I wrote. Third, there will always be some value in maintaining face-to-face contact with customers.

My rationale is as relevant today as it was seven years ago. ?

“Store owners once viewed e-commerce as a mounting threat to their survival. Now, bricks-and-mortar stores are thriving after integrating their properties with the online shopping experience,” reports the Wall Street Journal.

Today’s shoppers often browse stores to view products firsthand before ordering online. Stores have become hubs for fulfilling online orders and product returns. Physical outlets offer unique opportunities for attracting, engaging with, and keeping customers.

Resilience and adaptability

Not that store shopping has come through the last decade unscathed. Many shopping malls are closed or a shadow of their former selves. They function more as truck stops or real estate projects than places for mass shopping. Customer volumes fluctuate with the ebb and flow of economic performance.

However, the doomsayers’ vision of a retail landscape almost devoid of stores proved wrong for various reasons. The pandemic sped up the integration of the online and physical retailing worlds. Pundits underestimated the lure of in-store shopping and overestimated the comparative attractions of online channels.

The rapid evolution of omnichannel supply chains is another reason for the survival of traditional retailing. These supply chains integrate online and offline channels to give consumers a seamless shopping experience.

Companies remain committed to further improving omnichannel operations. In an industry, survey carried out in November 2023 by my colleague Dr. Eva Ponce, founder and director of the MIT Omnichannel Supply Chain Lab, integrating multiple channels to provide a seamless experience aligned with how the customer wants to shop was one of the top challenges facing companies in shaping their omnichannel distribution strategies. As a result, this challenge is also a focus of strategic investments.

Forks in the road

As regards the future of brick-and-mortar retailing, any discussion about where the industry is headed should include AI. A recent article co-authored by Dr. Ponce based on her research offers some pointers on AI’s impact.

For example, AI is being used by companies like Walmart to personalize omnichannel shopping. The retailer recently launched a generative AI feature that recommends products to customers based on specific needs, such as shopping for a particular event. Fashion retailer Zara’s “click & try” app gives customers access to intelligent fitting rooms. They can select items through a digital interface before trying them on in the store. The tools also yield valuable customer preferences and purchase decision data, improving inventory management and demand forecasting.

Innovations like these, coupled with the inherent advantages that stores offer shoppers, will ensure that brick-and-mortar outlets remain a core feature of today’s hybrid retailing model. ?

Of course, an unforeseen, cataclysmic market change could threaten the future of traditional retailing once again. On the other hand, such a change—a cyberattack that undermines trust in online buying, for example—might bolster in-store shopping.

Divining the future is a risky business. As the management guru Peter Drucker said, “Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window.”

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