How To Know Series: When E-commerce Brands Should Open Physical Retail:
Historically, if you wanted to sell a product, you needed a physical store to do it. That all changed with the rise of the internet and online shopping. In the past decade or more, the trend has been for retailers to lessen their store count, or skip physical stores altogether, in favor of digital sales.
Online sales models can have much lower startup and operating costs. They do away with in-store employees, excess localized inventory, costly build outs, and sticky leases. The world wide web is accessible across the globe and can theoretically be shopped from anywhere. So why invest in a physical store?
The reality is that physical retail should not be an “either/or” decision. The most successful brands today use digital and physical channels together. Online platforms have an exceptionally wide reach, efficiently drive awareness, and are open 24/7, while physical stores create opportunities for discovery, engagement, and deeper brand connection. Rather than replacing each other, both stores and ecommerce are tools within a broader growth strategy.
That leads to two fundamental questions: (1) why open a physical store in the first place, and (2) how do you know when the timing is right?
Why brands open stores
(and why it’s not just about sales)
The most obvious reason brands explore brick-and-mortar is revenue.A physical store creates a powerful sales channel that encourages discovery and repeat shopping. A store can increase purchase frequency, attract new customers, and capture spending that would otherwise go to competitors. For certain categories, particularly apparel, beauty, home furnishings, and luxury goods, physical retail will improve conversion rates by allowing customers to truly “touch and feel” before buying.
However, revenue is only part of the story. For many brands, the discussion is no longer simply about rent versus revenue. It is increasingly about rent versus clicks. As customer acquisition costs rise, a physical store can become another way to introduce customers to a brand while simultaneously generating sales.
For years, digital advertising provided a relatively inexpensive path to growth. Over time, competition increased and advertising costs rose. Today, the costs of getting in front of potential customers online is so high that it often costs more than a traditional brick and mortar location.
Operating a physical store can do much more than just add a sales channel. Having an in-person presence amplifies the brand by increasing visibility and understanding in a way digital channels cannot fully replicate. It puts the brand into a physical context within a customer’s everyday environment, informing how people perceive it. The brand feels more established, more tangible, and more real.
There’s a well-known trend in retail called the Halo Effect, where the presence of a physical store directly increases online sales in that immediate area. Once a store opens, an entirely new group of people are exposed to the brand and previously wary shoppers get a chance to demonstrate the product in person. The store therefore serves as both a sales channel and a marketing vehicle.
Touching and feeling is a key component of the emotional human experience. Some products benefit immensely from being experienced physically. Trying on fit, understanding quality, or seeing detail up close all make a difference. A physical store also allows brands to communicate with customers in ways that are difficult to replicate online. A website can explain what a brand sells, but a store can tell a much broader story. From the storefront and merchandising to the layout, music, lighting, and interactions with sales associates, every element contributes to the customer experience. The moment a customer walks through the door, the brand has an opportunity to create an environment that reflects its identity and values in a way that digital channels cannot fully recreate.
Having customers interact with the products in person can also give powerful feedback to the management team. Unlike online analytics, which primarily show what customers click on or purchase, physical retail allows brands to observe how people behave throughout the shopping experience. These observations often reveal insights that are difficult to capture digitally and can influence product development, merchandising strategies, marketing efforts, and future store planning. In some cases, brands discover that customers are using products differently than originally intended or asking questions that expose gaps in messaging.
So when does it actually make sense?
One of the biggest misconceptions about physical retail is that there is a specific sales threshold a digital brand needs that automatically justifies opening a store.
In reality, readiness is usually determined by a combination of customer behavior, market demand, financial resources, and operational capability rather than any single metric. Brands are generally in a stronger position to open a store when they have the financial resources to support the investment, when demand appears concentrated within a particular geographic area, or when the product itself would benefit from being experienced in person. In many cases, the marketing and brand building advantages of a physical location become just as important as the direct sales generated within the store.
Two strong signals are when customers start making repeat purchases and when demand clusters in specific cities or neighborhoods. Another common indicator is when customers repeatedly ask whether products can be viewed, tried on, or purchased in person.
But a company should never overlook operational readiness. Stores require staffing, inventory discipline, and the ability to deliver a consistent in-person experience day after day. Lease obligations, buildout costs, maintenance, and local market management also introduce responsibilities that many e-commerce-focused businesses have never encountered before.
Bringing it all together
Physical retail is not about replacing e-commerce or proving that a brand has reached a certain stage of growth. It is about determining whether a physical presence can create value that digital channels alone cannot provide. A store should be an asset that strengthens customer relationships, supports customer acquisition, enhances brand visibility, generates market intelligence, and contributes to long-term growth across the broader business.
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