Black Friday Goes Digital ... and Physical

Why more and more brands that started as digital-only are rushing to open physical locations, particularly in malls.

On Black Friday, consumers can shop for men’s dress shirts at UNTUCKit, an interactive exercise bike at Peloton, and best-selling novels at Amazon Books. Except there’s a twist to all that this year: instead of shopping online, they can go to the Westfield Garden State Plaza mall in Paramus, New Jersey, and visit these actual stores.

In a move that might have been unthinkable in the early days of e-commerce, once-digital-only brands like UNTUCKit and Peloton are taking up physical locations in malls across the country. Data shows that more than 1,700 retailers that began as digital-only businesses currently have physical stores in the United States. David Barnes, a senior client partner with Korn Ferry’s Global Consumer Markets practice, calls it “going in reverse” and says it will give digital brands a new presence in the minds of consumers.

The trend comes upon (and may be related to) a backdrop of what is expected to be a strong holiday shopping season. The National Retail Federation estimates that holiday retail sales in November and December will be up around 4% over 2018 for a total of roughly $730 billion. Barnes says, for these digital brands, having a brick-and-mortar presence “is a way to further embed themselves as a real brand instead of an upstart online business.”

The widely held view today is that shopping in stores, and particularly in malls, is supposed to be going out of style. But the vast majority of people actually still buy things the old-fashioned way. And while online sales are the fastest-growing segment in retail, projected by the NRF to increase by 11% or more this holiday season, they are estimated to account for only about one-quarter, or $165 billion, of the expected $730 billion total.

In fact, the digital-only firms that are incorporating brick-and-mortar are of course moving into mall space vacated by a host of traditional but troubled retailers. Denise Kramp, a senior client partner and retail sector leader in North America for Korn Ferry, says the experiences and services that retailers offer consumers will play a big role in where and how they choose to shop this holiday season. “There will be very clear winners and losers,” says Kramp. “Quite a few retailers are on borrowed time already.”

E-tailers, as the industry calls them, used a direct-to-consumer model to reach younger, more digitally savvy consumers. But as retail stores in general and malls in particular have become social environments, e-tailers are banking on their ability to offer a better experience and service than their predecessors—and thus capture a bigger share from the combination of online and physical store sales.

As for why now, Barnes notes that so many mall operators that have lost tenants are likely to give these new ones a few breaks. “E-tailers can take advantage of perhaps shorter terms and more economical terms within a mall environment to see how having physical stores impacts overall performance,” says Barnes.