'Welcome to Web -1.0, where pureplays struggle and stores are stars'

A week of ecommerce car crashes has been counterbalanced by good news on the stores front.

After the online retail surge during the pandemic, the performance of prominent pureplays or predominantly online retailers has plummeted, but a raft of initiatives is bringing excitement to bricks and mortar.

The stream of bad news from online players has been pretty relentless – most notably from Amazon, which warned this week that earnings in the fourth quarter could come in at zero.

Eve Sleep, founded only in 2015, crashed into administration after failing to achieve a sale. Assets were subsequently bought by specialist investor Alteri, which also owns Bensons for Beds.

Asos, one of online’s brightest stars, slumped to a full-year loss and is reviewing the very fundamentals of its proposition, including the commercial model and customer acquisition.

“All the talk during lockdowns that online had accelerated by decades and the pandemic had sparked an irreversible digital shift looks debatable now”

The fate of online furniture specialist Made.com was hanging in the balance at the time of writing. As with Eve, hopes of a sale have evaporated and, as new customer orders were suspended, it also looks destined to end up in the hands of administrators.

In the US, quarterly profits at Facebook owner Meta halved as losses mounted at its Reality Labs division, charged with making good on ambitions to move the internet into a new era of the virtual-reality metaverse. 

All the talk during lockdowns that online had accelerated by decades and the pandemic had sparked an irreversible digital shift looks debatable now. Never mind the metaverse – the struggles of online operators have left it feeling more like Web -1.0.

In contrast – and in real life – furniture giant Ikea revealed plans to open three small-format Plan and Order Points in the Northwest of England.

The value of stores was then hammered home by Ikea, which is preparing to open in the former Topshop flagship on Oxford Street and came out in support of M&S’ controversial plan to redevelop its Marble Arch store.

Ikea UK boss Peter Jelkeby wrote to the inquiry on the matter: “We strongly believe that bricks-and-mortar retail continues to play a vital role, even within an increasingly digital retail landscape and as customer expectations evolve.”

Meanwhile, value fashion powerhouse Primark and sausage roll specialist Greggs teamed up once again, in what must be one of the most inspired and unexpected of retail partnerships, to open a Tasty by Greggs cafe in Primark’s flagship at the east end of Oxford Street. While the claim that it is the “most Instagrammable Greggs in the world” may be stretching things a bit, it certainly adds appeal and fun.

Also in London, Gymshark will open its first-ever permanent store on Regent Street this weekend in the latest bricks-and-mortar experiment by one of the new generation of digital brands. 

Indeed, Gymshark as a business epitomises some of retail’s wider dynamics at present. Despite the high-profile difficulties and collapses occurring in online, digital is no more dead than the store was when online was growing rapidly.

An omnichannel approach, so often talked about but less often achieved, is the holy grail. 

In Gymshark’s case, a store in a top retail location enables it to burnish its credentials as it seeks to become, in the words of founder Ben Francis, “one of the most brilliant brands in the world” and create an engaging “community hub”.

He says: “I really think that is done through various different channels, right? You need an ecommerce store, you need an app, you need flagship stores, you need retail stores.

“You need to be doing all these different events and you have to be communicating with the consumer in lots of different ways.”

Although ecommerce generally may be going through a difficult period, Francis’ words will resonate with many in the industry.

Apps, websites and the rest will remain central to the retail ecosystem for the foreseeable future. Ikea’s new store type would not have been possible without the digital infrastructure to support furniture selling in small spaces.

The permanence of digital has been acknowledged by Primark, which long resisted non-store retail, but is now introducing some elements such as click and collect.

You can bet it won’t stop there, and it will be fascinating to see the extent to which Primark can augment its in-store appeal by adopting a more multichannel approach.

The value of doing so, along with evidence that ecommerce should not be written off, was shown by Next in its August update. The retailer said then that stores had staged a recovery while online appeared “to have ground to a halt”.

“Change is a constant in retail. Just as stores rebounded – often to a surprising degree – so eventually the seesaw will swing once again towards online”

However, Next boss Lord Wolfson observed at the time: “We think that these changes reflect a short-term reversal of pandemic trends, and are unlikely to be indicative of longer-term trends in consumer behaviour.”

His view was reflected in the compound annual growth rate of the retailer’s online business over the past three years, which came in between 12% and 15% every month between February and July. The equivalent store figures were in positive territory just twice during that same period.

Change is a constant in retail. Online players are facing challenges now, as stores did during the lockdowns. But just as stores rebounded – often to a surprising degree – so eventually the seesaw will swing once again towards online.

The more retailers can combine the benefits of various channels to create genuinely omnichannel businesses that add up to more than the sum of their parts, the more successful they are likely to be – during what will be a tough golden quarter and beyond.

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