Bricks over clicks as shops come back into fashion in Europe

The rise of online shopping has led to swathes of store closures, casting doubt over the future of retail malls and high streets. However, in Europe, there are signs that shops are back in vogue and are essential for helping to drive online sales.

European retailers are investing in physical shops to stimulate online and offline sales as they face increasing competition from giant e-commerce companies, such as fast-fashion group Shein.

They also want to capitalize on people's renewed appetite for visiting shops once COVID-19 lockdowns ended, which has made a Saturday afternoon shopping spree fashionable again.

"I come to stores as I want to see things live, try them out, and have them immediately available," said Francesca Marini, 28, while browsing in a mall in Rome. She said the waiting involved in online shopping spoiled the experience.

Data from market research company Euromonitor shows that the overall number of stores in Europe is slightly declining, down to 4.90 million in 2023 from 4.92 million the year before. However, the data showed that the selling space measured in square meters increased by almost 1% and should increase to 2.7% in 2028 compared to 2022.

Thomas Joekel, a portfolio manager at Union Investment, which holds shares in LVMH LVMH, said retailers realize that it is challenging to keep customers without some direct contact with them.PA and Adidas ADSGn.DE.

"This is easier to achieve if you have brick-and-mortar stores rather than just e-commerce," he said. "On the e-commerce side, you can only see pictures, but you don't feel, you don't smell, you don't talk to somebody, so it's much more difficult to be optimistic or enthusiastic about a brand," he said.

Women stand in a shoes shop in Rome, Italy, August 11, 2016. Picture taken August 11, 2016. REUTERS/Max Rossi/File Photo

Try it before you buy

Since the pandemic, sports retailers have seen increased demand for products such as running shoes and training kits as people make the most of going outdoors.

"You look at the success of Adidas or North Face and others. I think there has been a trend towards more outdoor activities, partly during the pandemic," said Deutsche Bank analyst Adam Cochrane. "I think people realized that they needed to get out and do things, and some of that behavior has stuck."

French sports retailer Decathlon has added around 80 shops to its network this year, global chief customer officer Celine Del Genes said, taking its total number of outlets to about 1,700 globally.

Cisalfa, an Italian retailer selling sports clothing such as Nike's NKE.N soccer shoes and Under Armour's UAA.N running t-shirts, has around 160 stores in Italy. It plans to open or refurbish around ten shops in its home market this year.

The company has expanded to 75 stores in Germany with its recent acquisition of SportScheck, adding 25 stores to its German portfolio.

A logo of Decathlon is seen on a store of the French sports equipment and sportswear company Decathlon in Montreuil near Paris, France, May 7, 2024. REUTERS/Abdul Saboor/File Photo

Multi-Channel shoppers

According to data cited by Cochrane, having a physical store can increase online sales by 10% and 20% within a 20-minute drive of the outlet because more customers are multi-channel.

"There is definite evidence, both ways, that opening up a store increases online sales in the vicinity of that store," he said. "And conversely, if you shut a store, there is evidence that you do not fully recover all those sales, either online or transferring to another store."

Mountain sports retailer Oberalp's chief sales officer Stefan Reiner said that "the more stores are present in an area, the higher the interest in the online brand."

To attract shoppers, Decathlon has hubs dedicated to repairing or renting equipment and areas where customers can play sports.

"Stores offer new features such as showrooms and discovery stations to integrate physical and digital elements, facilitating the exploration, analysis, and comparison of products," Celine Del Genes, its chief customer officer, told Reuters.

In the Rome shopping mall, Decathlon has put two table tennis tables near the store entrance where people can play for free.

"It's a nice idea: we can have fun in a place where we usually come only to buy," one of the young players told Reuters as table tennis balls flew by and his friends argued whether the shot was in or out.

Spanish retailer Inditex ITX.MC, owner of the Zara brand, offers group fitting rooms where friends can try on clothes. The fitting rooms also have touch screens so customers can request different sizes or styles.

In Germany, online retailer Zalando ZALG.DE already has 15 physical shops, and another is being built in Freiburg in the south.

Like other retailers, Zalando, which sells everything from swimsuits to Hugo Boss dresses, is fighting increased competition from Shein.

The Singapore-based online retailer has adopted a "pop-up" store strategy, opening shops in European or British cities that close after a few days.

Industry experts believe shoppers prefer the human touch and the convenience and immediacy of buying from a store.

“Consumers are choosing to return to stores as they’re rediscovering the leisure aspect of shopping," RBC analysts said. They also like the convenience of click and collect, and as people return to offices, they said they’re less sure of being at home for a delivery.

"Some people just want to buy a T-shirt and attend a party or school. If you have to wait two weeks, this is too long," said Joekel at Union Investment.

(Reporting by Alberto Chiumento and Paolo Laudani; Additional reporting by Linda Pasquini and Helen Reid; Editing by Matt Scuffham and Jane Merriman)