10 Reasons Brick-and-Mortar Retail Isn't Dying

E-commerce is predicted to continuously grow, leaving some investors wondering what brick-and-mortar retail stores will do. While some are ready to put a nail in retail stores' coffins, here are 10 reasons retail is far from dead.

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E-commerce sales surged at the start of the pandemic, jumping from 11.4% of all retail sales in the first quarter of 2021 to 15.7% in Q2. However, since the peak of Q2 2021, e-commerce sales have steadily declined while retail sales have climbed, meaning there's less demand for shopping online, with stores continuing to make up 80% of all retail sales.

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April 2022 marked the highest level of foot traffic for indoor malls, shopping centers, and outlet malls since the start of the pandemic. While it's still not at pre-pandemic levels, it is a step in a positive direction, showing a growing appeal for visiting or shopping in malls and large retail centers.

According to the National Retail Federation, 2021 was a strong year for brick-and-mortar retail. Around 3,950 stores opened their doors -- over double the number of stores that closed. This is a huge improvement from 2020, when it was estimated around 10,700 stores announced closures. New store openings include small and regional operators to bigger names across a wide range of industries.

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There is value in local presence. A survey conducted in 2021 found that 47% of respondents said they were more likely to purchase from a brand based on it having a local presence. And online-based retailers have taken notice.

Eyewear company Warby Parker (NYSE:WRBY) opened 35 stores in 2021. A Shopify (NYSE:SHOP) survey also found that 90% of the top 10 e-commerce sites are operated by retailers that also operate brick-and-mortar stores.

Consumers looking for a deal are shopping in stores. Since the price of gas has soared with inflation, hitting consumers where it hurts, foot traffic at dollar and discount stores -- like Five Below (NASDAQ:FIVE), Dollar Store, Dollar Tree (NASDAQ:DLTR), and Walmart (NYSE:WMT) -- is booming. Weekly visits through May are up as much as 20% or more compared to 2019.

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Shopping online can offer ease and convenience, but not always. Clothing, for example, can be a difficult product to buy online because it may not fit or function as hoped. And that requires returning the product, which takes time, effort, and possibly money.

Shipping costs can also make products more expensive than they would be in store, and shipping times also have to be considered. For that reason, many people still prefer to buy in stores rather than buy online.

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Online shopping's 24-hour access and coupon savings appeal to many, but people equally like that they can compare, try on, and touch products in stores before buying. Rather than trying to compete, retailers can offer both.

Of respondents in a recent survey by June20, 56% stated they visit a physical store before shopping online. And a survey by Innovating Commerce Serving Communities (ICSC) found that opening a new physical store increases traffic to its website by 37%.

Retail sales in 2021 were 21.9% higher than in 2019, reaching a record $6.6 trillion. This surge in sales could be attributed to the reopening of retail stores across the country as vacation rates increased and concerns surrounding COVID-19 eased. Or it could be retail therapy as new strains of COVID-19 forced people to stay indoors again. Either way, spending is up, helping retailers across the board.

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Shoppers in today's age are looking for a complete retail experience, one that allows them to engage with the local community, take their minds off things as they browse or shop, and benefit from ease and convenience.

This happens more often than not in brick-and-mortar stores, however, there are ways retailers can create a better shopping experience all around with things like apps or real customer service for online shopping. Either way, going the extra mile is what shoppers want, and, thankfully, many stores are listening.

Omnichannel solutions, which utilize a variety of channels to deliver a product to the consumer, are the future of retail. Buy online, pick up in store (BOPIS) is likely to become more popular, as well as ship-from-store capabilities, as people merge the demand for e-commerce and brick-and-mortar retail.

By utilizing multiple delivery channels, retailers are able to maximize reach and increase sales while meeting the demands and preferences of all consumers.

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As you can see, the landscape for brick-and-mortar stores is simply changing, not becoming obsolete. Investors can take advantage of the various channels relating to the booming retail industry by investing in select retail stocks, retail real estate investment trusts (REITs), and even certain industrial REITs.

Liz Brumer-Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Five Below and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.