A growing number of e-commerce brands are looking to expand their offline presence
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In a year of relatively flat retail performance, online sales have performed well in the UK. Over the summer, online sales grew by 12% year on year according to the Office for National Statistics. The share of retail sales that happens online has hit the highest level we’ve seen since the pandemic (outside of the Christmas period), at 28.4% in June.
It would be tempting to assume the logical route to growth is online only, but that doesn’t show the whole picture. Research by the estate agent Savills shows that several store openings have been driven by brands that started online.
Driven by a desire to foster in-person connections and explore different growth levers, a new wave of digital-first brands are betting on physical retail as the way forward. Why are technologically advanced digital-native brands betting on analog sales to push growth?
To serve the customer more completely
Dessislava Bell is the co-founder and co-CEO of fashion brand Saint and Sofia. They opened their first store in Covent Garden in Central London in November 2024 with the intention to “just meet the customer. To see who she is.”
“We always wanted to have a place where we offer services. It wasn’t just a place to come and shop; it’s a place where we can really serve our customers and offer the best possible experience,” she elaborates.
Bell believes that “the best of shopping has always been very much a social experience”. And she was keen to create that for their customer. But it was important to go deeper and offer even more.
“You can come in and have a personal shopping appointment, a personal styling appointment; you can get your color analysis done. Somebody will help you choose the best things for you.”
Saint and Sofia are using their physical store to deepen relationships with customers and offer services they can’t deliver online.
As another route to acquisition
With acquisition costs rising for online brands, savvy digital players are exploring how a physical store can create another route to acquisition.
At TALA, Hughes has observed, “an amazing compounding factor is that more than half of our in-store customers every week are new, which means not only are we activating our existing community, we’re connecting with a new network who we’re then seeing enter into our returning customer base at a high rate.”
The physical space attracts a customer base that may not have seen TALA online, immersing them in the brand and retaining them for long-term customer lifetime value.
The store as an acquisition channel can completely change the metrics for success for an online business considering a store. When the impact of the store goes beyond the sales that happen in a given time period, the business case for physical retail can become even more compelling.
Bell has seen a “broader halo effect” from the Saint and Sofia physical store. “I think having a retail store creates that brand awareness. Monmouth Street is a fairly well-trafficked street; it’s a very pretty street, and there’s a lot of halo from association with being in the right place.”
Beyond the halo effect, Saint and Sofia have seen that returns are significantly lower in-store than online. For Bell, “this cost benefit has definitely changed my perspective on physical retail.”
What is the future for online businesses moving offline?
Many digital-first brands are recognizing that physical retail can complement rather than compete with e-commerce. And consumers are making it clear that the future of retail isn’t online vs. offline, but a combination of both.
As Benoit-Vernay explains, “customers aren’t thinking in terms of channels, so brands shouldn’t either.”
Shopify research data shows that 41% of UK consumers plan to split their shopping evenly between online and offline, which means someone might discover a product on social media, research it online, and then want to see or buy it in a store.
Rather than a distinct “e-commerce” customer vs. a “bricks and mortar” customer, they’re often the same customer moving between different touchpoints.
This is Hughes’ vision for retail at TALA: to become a “meaningful, growing part of this business in its own right; while also something that makes every other part of TALA stronger.”
E-commerce growth has led many businesses with strong, engaged communities to expand into physical stores to explore new growth levers while super-serving their customer base. This, in turn, benefits the retail landscape, as it brings a new wave of foot traffic to key areas from fans eager to experience the brand in real life.
There is real potential for a virtuous cycle where online brands bring their community into physical spaces. In contrast, the physical spaces connect them with new customers who have not yet discovered them online. The future of online retail moving offline could play a major role in the future of physical retail overall.
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