Reconciling e-commerce and stores: what are the best practices of phygital?

In terms of omnichannel and phygital retail, winners are rare. How do you bring a Web offer into the physical store? What can DNVB and ONVB teach traditional retailers? Is omnichannel a way to bring customers back to a store? Is the extension of the offer (e-commerce, marketplace) essential to gain market share? As traffic in specialized stores shrinks, mind Retail offers an overview of good practices to encourage conversion of enquiry to sale.

Through Sophie Baqué. Published on 07 October 2022 à 13h08 - Update on 21 October 2022 à 23h33


Although they were forced to activate e-commerce from their stores (click & collect, ship from store) in 2020, traditional retailers have now understood that their points of sale play a central role in omnichannel. Even Primark, which has always refused to do so, will be testing click & collect in a few stores in the north-west of England by the end of the year. At the same time, all the DNVBs want to open stores. However, there is almost no massive proven success of a physical retailer in e-commerce, and vice versa. Is the weight of the historical model, in terms of margin levels, stock management, logistics flows and sales priorities for vendors, so heavy that it would be impossible to change the model? 


Market overview

The unprecedented appeal of DNVBs. In the U.S.A. as in Europe, over the last 2 years, 100% e-commerce brands have lost their appeal and switched to omnichannel models. “DNVBs were born 12 or 15 years ago, with the objective of acquiring customers online via Facebook and Google”, explains Alexandre Guillot, Investment Director at Spring Invest. “There were no barriers to entry. Acquisition costs then soared because these brands were all targeting the same type of customer, 25 to 35 year olds with a high budget. Today, some DNVBs spend 30% to 40% of turnover on winning new customers. This model is not sustainable”. In 2022, these brands now see stores as a way to benefit from more attractive customer acquisition costs, and a greater potential for customer recruitment. The Canadian Mejuri, with a concept of jewellery that you can try on freely in store (it is not in closed display cases) will triple its number of stores in 2022 with 17 planned openings (USA, Canada, U.K.). “Despite the sharp rise in rents from the Covid-19 trough, physical retail remains an opportunity for us”, its C.E.O. Noura Sakkijha recently told WWD. “But we are very data-driven, only taking up a location if it makes sense and we have defined targets for payback periods.” In Q1 2022, Mejuri’s physical store sales exceeded targets by 179%. In Europe, accessories brand Cabaia (€32 million turnover in 2021) is growing at a triple-digit rate and is profitable. It has 10 directly operated stores by the end of 2022 and a presence in 2,000 stores (wholesale). “For a DNVB, success in the physical world is essential to break the glass ceiling and really take off. “That’s why in Europe today, no DNVB exceeds €20 million in turnover”, continues Alexandre Guillot. “A DNVB with a 50% gross margin cannot sell to a distributor, who needs to make a higher margin on its purchase price. The brand will give 50% gross margin to any offline distributor, which is not sustainable.” For investors, omnichannel brands are now more attractive than pure DNVBs. Evidence is the Allbirds‘ share price, which has been heavily punished on the stock market. It dropped from US$25 in October 2021 to US$8 today. 

For traditional retailers. Since Covid-19, retailers invested heavily in omnichannel and phygital solutions over the past 2 years. Depending on the sector, the transformation plans are more or less complete, covering click & collect, e-reservation, ship from store and unified stock and CRM data. The most advanced are the retailers that sell products that are easily comparable by EAN code (electronics, books, video games), as well as the sports, D.I.Y. and furniture players. To compete with Zalando, Asos and ManoMano, some created marketplaces, as seen with the D.I.Y. chain B&Q (Kingfisher), Macy’s (department stores), Decathlon (sports), Kiabi (fashion) and Boots (drugstores).

Fashion brands are less advanced in terms of omnichannel capacities, as items are less comparable and the notion of “out of stock” is very different (high number os sizes, colors). Luxury goods and independent networks (franchises and cooperatives) are also among the worst performers.

In food, in Europe as in the U.S.A., omnichannel accelerated strongly. At Ahold Delhaize, digital turnover doubled between 2019 and 2021, from 6.8% to 13.8% of the business. The retailer is banking on “click & collect”, as a system that is more profitable than home delivery, but which loses brand loyalty. The same trend can be seen at Costco, with digital sales rising from 3% to 7% in two years. 

Key figures

John Lewis : for the British department store chain, 59% of revenue were online and 41% from stores in H1 2022

Maisons du Monde: of the 53% of digital sales, 20% are initiated by in-store sales people.

Courir: in 2022, “ship from store” represented 35% of Web sales and 11% of store sales. On average, stores receive between 4 and 15 omnichannel “ship from store” requests per day.



Expand the store offer. Many brands and retailers started by duplicating their website on in-store kiosks…without success. This is also what Alltricks (a brand specialising in cycling and outdoor products, in which Decathlon is a shareholder) has done. The brand posted a turnover of €171 million in 2021 up by 30%, via an average expenditure per customer of €100. “Our big challenge at the moment is to succeed in promoting, in stores of a few hundred square metres, our 160,000 products from 850 brands”, Jeremy Viollin, Chief Revenue & Growth Officer, explained to mind Retail. “As a pure-player, our in-store IS, checkouts and stock management were designed to be integrated into our core business, which is natively digital. But how do we make physical customers understand that as they are at, they have access to all the products on the site? How do we motivate them to go and browse the Web range?”

Assisted sales, yes. Autonomy, no. What works for many are assisted sales, where staff offer customers a tablet or kiosk to place orders together. However, for autonomous, self-service customers, it does not work well. For example, Alltricks is looking for a phygital solution that is attractive enough for the customer to want to use it. The brand will soon launch an initiative with Improveeze that will highlight the Web offer in stores. As a reminder, Improveeze had set up at Picwic Toys discovery walls called PushWall, which allowed shoppers to discover the Web range not available in stores such as bulky products (slides, table football) and niche products (models, board games). 

Anchor the brand in a universe. For DNVBs or ONVBs, the stores are often more of a showcase than a real distribution channel. Their aim is to develop the consumer experience and brand awareness through an embodied customer relationship. Although La Redoute defines itself first and foremost as an e-tailer, it also has 15 or so boutiques (AM.PM, La Redoute Intérieurs banners) plus corners at Galeries Lafayette department stores. “Our 15 stores offer an atmosphere, a soul and a place: the physical store is essential to enhance the consumer experience and brand awareness,” explains Amélie Poisson, deputy C.E.O.

Enhancing the in-store experience. However, the Web and stores can be mutually enriching. At Joué Club toy retailer, the share of Web sales risen from 5% in 2019 to 15% in 2021, and should stabilise at this level. Today, the cooperative retailer says it is prioritising the customer experience. “The objective is not to be at 50/50”, explains Franck Mathais, Director of Communication. “We have to keep in mind that toys are a resilient market, with a purchase that is full of affect. At the moment, we are encouraging our members to make greater use of social networks, such as TikTok, which is doing very well: some stores have over 100,000 followers on TikTok! Others are doing “live shopping” events, enabling a dialogue to be established between the Web and the stores, and strengthening their advisory role.” In terms of readability of the offer, the Web also has advantages not available to a store. Joué Club will launch its e-boutique dedicated to “Made in France” in October 2022, with 400 products. “This category is easier to promote on the Web than in the store, where merchandising is more restrictive,” concluded Franck Mathais. This will boost a key “Made in France” category, which already accounts for 20% of revenue. At La Redoute, “live shopping” is also seen as a way of humanising the brand on the digital channel. “It’s not yet a significant part of the business, but it builds the customer relationship with the brand,” adds Amélie Poisson of La Redoute. 

Motivating sales people. Some brands such as Rexel and Maisons du Monde have catalogue sales in their DNA. At Maisons du Monde (€1.3 billion in turnover by 2021), 53% of the business is omnichannel, with 33% e-commerce and 20% “click in store” sales initiated in store (data from H1 2022). The company will soon launch an app for sales staff to transfer all Web and marketplace sales initiated by sales staff to the store’s revenue. Thus, when a salesperson creates a Web or marketplace basket in store, and the customer completes the order within 10 days, the sales person will be able to send a payment link to the customer by SMS or e-mail. This system will replace the old ordering tunnel, which was limited to attributing to the store only the sales collected at the point of sale when the customer came in. “Tomorrow, any sale initiated in the store and concluded either in store either at home will be considered as retail sales. This will reduce the frustration of our sales persons, who have started something without completing the order, by allowing them to be rewarded for the turnover”, explained Yohann Catherine, Operations Director.

At AWWG (Pepe Jeans, Hackett, Façonnable), store salespeople have a direct incentive for e-commerce turnover they generate.

At Bricoman, a D.I.Y. store for professional trade customers, “store teams have access to online sales indicators. In 2022, we set up a challenge to reward the most omnichannel store each month”, said Edouard Roussel, Marketplace Director to mind Retail. Bricoman also launched an omnichannel training programme for sales staff this year, which trains staff to understand why is it important to develop online sales and what customer needs are we trying to meet with the website?

Withdrawals and returns: giving it a try. Many omnichannel initiatives also help to increase overall profitability. In Chile, Victoria’s Secret launched click & collect in 4 Santiago stores in February 2022. Six months later, 21% of online orders in Chile are now picked up in stores. This creates traffic in store, while generating up-selling. About 23% of customers using click & collect have made additional purchases in store. They spend, on average, about 50% more than the amount of their initial order. Another initiative that helps to generate traffic in store is accepting returns free of charge in store, whereas they have to be paid for with online. “Zalando’s return rate is 50%, while at Zara it varies between 20% and 25% with 60% of returns made in store,” explains Cedric Rossi, Analyst at Bryan Garnier. At AWWG, “The objective is not to lose sales, but also to create conversion at the time of returns,” C.E.O. Marcella Wartenbergh told Mind Retail. E-commerce can help the stores and the stores can help e-commerce. It’s like a marriage”. At La Redoute, a company born from mail-order, the 15 physical stores have to be profitable and generate digital sales at the same time. “We have a method for calculating the halo effect,” explains Amélie Poisson. The Holy Grail is to be able to measure sales three or four days after a customer has visited the store”.

Saying “yes” to a customer. By creating marketplaces, physical retailers are seeking to keep customers longer. Decathlon (turnover of €13.8 billion in 2021, 20% of which are online sales) launched marketplaces in 12 countries due to the limitations inherent in its private label model. “We launched the project at the end of 2019, when we realised that customers going further into a sport were going elsewhere to find other brands”, explained Thibaut Peeters, Marketplace Leader for Europe, at 1-to-1 conference in Monaco. It was a challenge of customer acquisition and digital transformation.” The marketplace was launched in Belgium in December 2020 after a year of adjustments with Mirakl. By March 2022, it was generating around 7.5% of the company’s digital turnover. 



Sustaining investments. After creating a marketplace, the difficulty is often linked to evolution over time. According to Vikram Ramdul, COO of the company Marjory, “When a retailer deploys a marketplace, it mobilises the IT department enormously over a long period. Then, once it is launched, other IT projects that were put on standby move up the priority list. So, the marketplace tends to stagnate afterwards, for a long time. Indeed, the other omnichannel topics (internationalisation, optimisation of the customer journey) struggle to be addressed due to a lack of anticipation. The choice of technologies, the 3/5-year road map and the quality of the integration are all subjects that need to be secured upstream to allow for the most agile scalability of the marketplace’s functionalities over the first 2 years”.

Kiosk maintenance. For many, the maintenance of the screens in the store is a major problem. “The screens are too restrictive, which is why we are gradually reverting to lightboxes in our sporting goods stores,” confirms Nathalie Hudry, Teamhead trade Marketing at Puma. “For me, the action of a sales assistant who goes to talk to a customer is much more reliable and effective than terminals that break down or are not connected”, explains the C.E.O. of a specialist retailer. During a visit to the Parisian store of the pure-player Basket4Ballers, the “Call a sales person” function was shut on all the kiosks.

Stock accuracy. Despite the RFID adopted by some retailers for almost 10 years (Decathlon…) the unification of stock data and customer data (RCU) is an omnichannel prerequisite. This is where players like Onestock or Socloz come in. This approach assumes access to the stocks in each store thanks to tools enabling omnichannel sales. “This implies having a B2C OMS for “ship from store”, which orchestrates Web orders to the store and a logistics OMS, which takes orders from the Web and wholesale, and orchestrates them in the warehouse”, explains Jeremie Hersovic, C.E.O. of Socloz. At Gérard Darel (between 15% and 20% of e-commerce sales), “the main issue is to limit stock-outs”, told us the C.E.O., David Maruani. Out-of-stock issues do not have the same impact at specialized store and food retailers. For supermarkets, there is no real notion of a breakage: if a yoghurt is out of stock, the customer buys another brand instead. On the other hand, in fashion, if the size or color required is not available, the sale is lost. 

Unified checkout. Some retailers, such as Auchan, offer a marketplace in their stores in addition to the departments. This implies offering the customer a unified payment system, using a service provider such as Adyen or Stripe. “This type of strategy involves changing the points of payment”, explains François Duranton, C.E.O. of Zetrace. Indeed, if the customer has a mixed basket, the receipt must be split in two, part of which (linked to the purchase of the 3P product) will be collected on a blocked account, which belongs to the payment institution. This can be done if the retailer is about to change its POS, but otherwise it is a very heavy investment”. At Bricoman, the company recently added payment by bank transfer to its site. “This is a response to the problems of payment errors caused by bank card limits that our B2B customers frequently encounter”, explains Edouard Roussel, Marketplace Director. We have also introduced the option of paying by bank transfer in our stores.”

Next frontiers

Integration of the marketplace into the store. This aspect still divides many operational staff. How do you offer customers “click & collect” in-store, for 3P products (i.e. products purchased on the marketplace)? Can such customers return these 3P products to the store? If so, what to do with the stock afterwards? “The subject of integrating marketplaces into stores is very complex”, summarized François Duranton. “Third-party sellers have their own routing flows, and the integration of this flow from or to a store, which would cost them much more, does not interest them. On the other hand, we can see that few customers bring products from the marketplace back to the store. It is therefore in the retailer’s interest to direct returns to the third-party seller as much as possible (online return labels, automatic refunds as Amazon does) to avoid managing returns themselves, which are very expensive.” At Kiabi fashion value retailer, the marketplace, launched this summer, is only digital. Customers cannot pick up a marketplace order in a store.