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THE TRANSFORMATION OF PHYSICAL RETAIL 

 As traditional retail chains downsize, vacant spaces will be filled by e-commerce brands expanding into physical stores. According to Moon-Suck Song, CEO Pangora Room AB, this trend signifies a transformative shift driven by the appeal of unique in-store experiences, which e-commerce platforms struggle to replicate.  

–  The intense competition has made the cost of acquiring customers through ads on platforms like Instagram more expensive than the cost of opening physical stores. In addition, a shift from traditional push marketing to pull marketing has reshaped the marketing landscape. The ability to create extraordinary experiences for customers, leading to widespread sharing on social media, therefore make physical stores an attractive avenue for expansion.  

This development does not, however, mean that e-commerce brands will copy the concept of traditional retailers, who are struggling to survive. 

–  Traditional retailers often follow a traditional format resembling a grocery store, with products lined up and staff actively selling to customers. On the contrary, innovative brands like Gentle Monster in Korea have revolutionised the concept of physical stores. Their stores resemble art exhibitions, with each location having its own artistic theme. Nike’s concept stores also focus on providing experiences rather than immediate transactions. When visitors enter these stores, they are compelled to share their experiences, creating a social media phenomenon that reaches a wider audience. This shift in strategy allows retailers to reach customers without having to allocate significant budgets to digital marketing platforms like Google and Meta.  

The trend of e-commerce brands opening physical stores is also evident in the growing number of Shopify stores. With over 2 million stores on the platform, many of them are now expanding into the physical realm. The fact that Shopify has its own point-of-sale system, Shopify POS, further emphasises this trend. 

–  Independent stores in Manhattan frequently adopt the Shopify POS system, and this trend is now spreading across Europe. While the phenomenon is yet to reach Sweden, it is predicted that Shopify will witness 2,000 new store openings per quarter in the country. With 13,000 stores in Sweden and 30,000 in the Nordic region, several of these young companies are poised to become the future “category winners” in various industries, such as the next major player in skincare, potentially spearheaded by ventures like Bianca Ingrosso’s brand.  

The dominance of a few major players in the digital marketing sphere mirrors the control exerted by Hufvudstaden and AMF Fastigheter, the major property owners in Stockholm. Companies like Google and Facebook control the pricing of retail spaces online, just as the two property owners dominate physical retail spaces in the city centre.  

–  For the first time in a long time, property owners might change their inclination towards shorter leases, as leaving premises vacant would lead to reduced rental income. This shift presents an opportunity worth monitoring.  

Although this scenario is not yet pervasive throughout Sweden, disruption in the physical retail infrastructure is already underway and we may be on the verge of witnessing a potential “Stockholm bloodbath.” 

–  Consequently, we can expect to witness the emergence of numerous new brands on major shopping streets in big cities in the future. Unfortunately, smaller cities are already experiencing the harsh reality of retail death, concludes Moon-Suck Song. 

NEXER ADVISORY: RETAIL 

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