The Supply Side: Retailers bet on brick-and-mortar in 2023

by Kim Souza ([email protected]) 2,082 views 

The once-thought-dead mall and brick-and-mortar retailers may see a rebound in traffic this year, but retail insiders say the gap between the winners and losers will also likely widen.

Carol Spieckerman, CEO of Spieckerman Retail, said the brick-and-mortar store remains core to many retailers’ growth strategies this year and beyond. She said the prognosticators who expected online-only deals to take over the world haven’t proven true.

She believes 2023 will be “the year of the store,” noting many new motivations behind that sentiment. She said there will be those still playing catchup, others will fold and some will pull back on store footprints, “but there will be so much to land in brick-and-mortar.”

“‘Choice’ is the operative word. Retailers have learned, in some cases the hard way, that they must offer options or risk shoppers doing business with competitors that will meet them where they are. That equates to retailers offering multiple convenience options, including brick-and-mortar. Retailers that stubbornly refused to expand options will be left behind, and excuses are running out,” Spieckerman said.

She said retailers have also realized that stores are critical to driving the brand awareness that fuels their digital businesses.

“True scale isn’t achieved in a single channel, including digital. Even Amazon has come to that realization and is pushing into brick-and-mortar more aggressively,” she said.

Segments that have managed to grow without significant investments in omnichannel capacities are the discount dollar store and off-price retailers., an analytics firm, reports that in January, three of the four chains —  Dollar Tree, Family Dollar, and Five Below —  saw year-over-year visit growth of 10%, 3.7%, and 18%, respectively. And though Dollar General did experience a decrease in visits compared to January 2022, the difference was the smallest visit gap the chain has posted in the past four months.

Coresight Research reports that the dollar store segment continues to bet big on stores leading retail with new location openings in 2023. Five Below plans to open 200 new stores this year. Dollar General plans for 1,050 new stores, Family Dollar and Dollar Tree have also announced plans to open around 800 Dollar Tree Plus stores this year, as well as 500 Combo stores that combine the Family Dollar and Dollar Tree merchandise under one roof.

Retailers are also using stores as fulfillment centers for online orders. According to Chief Financial Officer John Rainey, Walmart said its store-fulfilled delivery sales have nearly tripled over the past two years to more than $1 billion monthly.

Target is ramping up its next-day delivery capabilities using stores as fulfillment hubs. Boot Barn added in-store fulfillment to its omnichannel offering, giving online customers access to merchandise from more than 300 U.S. stores, CEO Jim Conroy said in January.

“In-store fulfillment has resulted in shorter delivery times and a pronounced expansion of exclusive brand sales online, which further contributes to the profitability of the business,” Conroy said.

Retailers also use stores to provide ancillary services to consumers. Walmart announced this month plans to expand its healthcare clinics over the next year. The retailer said it plans to add 45 more clinics through 2024.

“With this growth in 2024, we will nearly double our current footprint, offering accessible, convenient and affordable care in two new states and expanding our presence in Texas to help the communities we serve live better, healthier lives,” said Dr. David Carmouche, senior vice president, Omnichannel Care at Walmart.

Electronics retailer Best Buy recently partnered with Atrium Health, one of the country’s largest nonprofit hospital systems. The partnership combines Atrium’s hospital-at-home program with Best Buy’s technological services.

Like Walmart, Best Buy has invested in healthcare services for several years as an alternate revenue stream. Best Buy CFO Matthew Bilunas expects continued growth of the company’s health services to contribute to gross profit rate expansion even as it anticipates cooling demand in 2023.

Brick-and-mortar also allows retailers to be return centers for online orders from other retailers. Kohl’s began this service with a partnership with Amazon in 2019 and has said it benefits both parties. Hibbett Sports announced a partnership with Paypal subsidiary Happy Returns to use more than 1,000 of its stores as return centers for items purchased online from hundreds of online retailers. Hibbett said the partnership with Happy Returns would provide a new audience for shoppers who may not have shopped at the retailer.

“Returns are finally being recognized for their importance in the shopping journey,” said David Sobie, vice president of Happy Returns. “Shoppers have no patience for printing labels or boxing items to return via mail and instead overwhelmingly choose to return box-free and in person whenever possible.”

While the new year has just begun, early reports of shopper traffic in brick-and-mortar stores in malls and shopping centers are positive. The January mall index report from indicated that indoor malls saw a 4.1% increase in visits year-over-year. Open-air malls reported a 5.2% gain in traffic compared to a year ago. Outlet malls also reported a 2.7% gain in traffic compared to January last year.

“The wider trend of year-over-year uptick is significant because of the draw these formats have shown in the face of powerful economic challenges. They also indicate the lingering power of key shifts to tenancy strategies that many top-tier malls have deployed,” the report noted.

The report also indicated that a return to mall normalcy seems likely if an economic downturn is brief this year.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.