Who Needs a Physical Store Today?
Just a few years ago, the dominant view of retail was relatively simple:
The future is online. Physical stores are expensive. And sooner or later, most of them will be replaced by e-commerce.
But reality is starting to evolve somewhat differently.
Yes—today it is still significantly easier to launch a business through an online store than through a physical retail location.
E-commerce offers:
Low barriers to entry
An enormous catchment area
Speed
Easy scalability
And that is exactly why so many new brands are emerging today.
However, the other side of the equation is becoming increasingly visible:
Growing pressure on performance marketing
Ever-increasing customer acquisition costs
Extreme competition
Pressure on pricing and delivery speed
Lower customer loyalty
And, in some categories, very expensive returns
E-commerce remains a highly efficient business model. At the same time, both operating and marketing costs continue to rise, and standing out in an increasingly crowded online environment is becoming more difficult.
As a result, many brands are forced to compete through lower prices or continually increasing performance marketing budgets. Overall profitability in many e-commerce categories is therefore under growing pressure, leaving little budget available for brand-building efforts. This creates a vicious cycle.
And this is precisely where physical retail creates an opportunity.
Of course, simply having a physical store does not automatically solve anything. Today, if you need to buy something, you can do it instantly online. People no longer have to visit stores. If they are going to come in person, they need to want to. They need a reason.
The role of the physical store is gradually shifting far beyond the simple act of selling products.
Increasingly, it needs to become:
A tool for brand building
A space for experiences
A community hub
A place to deepen customer relationships and trust
In 2024, Reuters described the return of physical retail in Europe as the "bricks over clicks" trend—a situation where brands are returning to physical stores once again. (Reuters: "Bricks over clicks as shops come back into fashion in Europe", 2024)
This trend creates an opportunity for independent retail because small, highly curated concepts can often offer something that large corporate models cannot:
Authenticity
Curation
Relationships
Genuine experiences
This does not mean every brand needs a physical store.
It means that a well-executed retail concept can be a powerful competitive advantage for brands that know how to leverage it correctly.
The key is to think about retail strategically—not simply as the "next step," but as an important component of the overall business model with clear added value through both profit generation and brand building.
(For more on retail economics, see the article Business Model & Finance in Retail.)
A Closer Look at the Key Advantages of Physical Stores
1. Bringing a Digital Brand to Life
The internet is full of interchangeable stores and brands competing for attention.
A strong physical store can therefore become a competitive advantage because it creates a tangible, real-world connection with the brand—something that is much harder to replicate.
2. The Intensity of the Experience
A store enables conversation, focus, and undivided attention toward the brand.
Customers can experience the brand through all their senses: the space, products, materials, atmosphere, scents, sounds, and people. This type of experience is something that social media posts or performance advertising can rarely replicate. As a result, customers gain a deeper understanding of the product selection, the brand's philosophy, and the reasons behind premium pricing.
3. Community and Local Relevance
A great store can function as a so-called "third place"—a space where people come not only to shop but also to spend time, discover new things, and become part of a community.
And a well-built community is often one of the most valuable assets a strong brand can have.
When customers develop an emotional connection to a place, physical retail can significantly increase loyalty, repeat purchases, and long-term customer value in ways that purely online environments cannot.
4. Building Trust
A physical store serves as proof that a brand truly exists.
This is especially important for premium, design-focused, local, artisanal, or carefully curated products. People want to see, touch, compare, and ask questions. In an era of AI-generated content, Chinese marketplace platforms, and countless scam projects, the physical presence of a store also reinforces trust in the legitimacy of the brand and business behind it.
5. Higher Margins Through Stronger Customer Relationships
This is one of the less visible advantages of physical retail.
When a brand creates a strong experience, trust, and emotional connection, customers often feel less pressure to search for the lowest possible price.
Forrester noted in 2024 that even small improvements in customer experience can generate additional revenue through increased loyalty and a higher share of wallet. (Forrester: "2024 US Customer Experience Index", 2024)
As a result, strong retail concepts can often maintain higher margins over the long term than brands competing primarily on price.
6. Synergy with Online Channels
A physical store is not a competitor to your e-commerce business.
When properly integrated, it increases brand visibility, customer retention, and online conversion rates. It also helps reduce returns because customers can see, try, and discuss products before purchasing.
According to Reuters, some brands experienced online sales growth of up to 20% in local markets after opening physical stores. (Reuters: "Bricks over clicks as shops come back into fashion in Europe", 2024)
Research on the so-called "halo effect" confirms this trend. Even more interesting is that the greatest benefits are often seen not by large retail chains, but by smaller and direct-to-consumer (DTC) brands. According to ICSC, the positive impact on online performance for these brands can be up to twice as high as for major retail chains. (ICSC: "The Halo Effect III", 2024)
My personal experience is even more striking: opening a physical location can increase sales in a local market by several tens of percent.
What Needs to Be Done Well for Retail to Succeed
1. The Risk of Choosing the Wrong Location
There is a saying in retail:
Location, location, location.
I agree that choosing the right address is one of the key factors behind success.
At the same time, it is not that simple. Rent per square meter alone says very little. What matters is whether the location attracts the right customers and supports the overall retail concept. What may be unsuitable or uneconomical for one retail concept can be a major competitive advantage for another. When selecting a location, the goal is to find the right balance between economics and atmosphere. A great location usually requires both.
2. Greater Demands on the Team
In curated retail, a salesperson is not simply a cashier. They are a guide. If the team cannot explain products, connect emotionally with customers, and actively sell, the store loses one of its main advantages.
That said, technological advances have created many tools that can provide information, recommendations, and elements of customer service without direct involvement from sales staff. This can reduce pressure on the team and lower operating costs. Employees can then focus on situations where they create the most value—advising customers, building relationships, and enhancing the customer experience.
3. More Complex Omnichannel Management
If both an online store and a physical store exist, they must share inventory, customer data, orders, and information. Otherwise, instead of synergy, you create chaos.
A common mistake occurs when a retailer launches an e-commerce store and store employees end up spending most of their time fulfilling online orders. At that point, the primary value of physical retail—customer interaction and customer experience—is lost.
4. Maintaining Control of Economics and Data
A beautiful store can appear successful at first glance. However, if the economics, product assortment, or business concept are not working, problems will eventually surface. Retail should be managed through data, not intuition.
Beyond sales, it is important to monitor metrics such as:
Foot traffic
Conversion rate
Average transaction value
Space productivity
Margin development
Many retailers collect large amounts of data, but real value only emerges when those insights influence day-to-day decision-making. The ability to consistently evaluate performance and respond appropriately is often what determines whether a store will thrive over the long term.
A Simple Checklist
When It Makes Sense to Consider Opening a Store
When you already have a clear concept, not just products.
When you know who your customer is and why they would visit in person.
When your product margins can support operating costs.
When the store can create an experience that online channels cannot.
When the store strengthens your e-commerce business, community, and brand trust.
When you have the capacity to manage staff, inventory, cash flow, and operations.
When I Would Be Cautious
When opening a store is supposed to "save" a stagnating e-commerce business.
When you have not calculated your break-even point.
When you do not know how many visitors you need or what conversion rate is required.
When the concept depends entirely on the founder.
When you mainly want a store because "it would be nice to have one."
Conclusion
So who needs a physical store today?
Primarily brands that view retail as more than just a distribution channel.
Brands that use retail as a way to build trust, create experiences, foster community, and establish stronger relationships with customers than purely digital touchpoints can achieve.
In that case, a physical store can become a profitable sales channel while simultaneously helping to build a memorable and distinctive brand.
If you're unsure whether opening a physical store is the right next step for your concept, I offer a free, no-obligation 20-minute consultation. Together, we can look at your business, opportunities, and the key risks associated with launching a retail location.
A simple way to get started.
