×

Why brick-and-mortar stores still matter

I spend my days working with real-estate developers and retailers alike, and the number one issue that keeps them up at night is how to drive foot traffic to the store. In the digital age, online shopping is on the rise, but that revenue doesn't always balance out with a decline in proceeds from the physical store. To keep the brick-and-mortar stores relevant, retailers are implementing new strategies to keep customers coming to their stores and buying big.


David Paul Morris | Bloomberg | Getty Images

In our recently released 2014 Holiday Outlook, PwC projected that 50 percent of holiday spending will occur in physical stores this year —down from 55 percent last year. To counter that downward slide during the holiday season and beyond, retailers are creating innovative in-store experiences to entice customers into the physical retail space, which retains high potential for sales and branding.

Read MoreMillennials might save Christmas by spending more

Some retailers are even encouraging online shoppers to pick up merchandise in the store in hopes that unique experiences will justify the journey to a physical location and inspire purchases both in store and online. Here are three strategies that retailers are focusing on to tailor the in-store experience to the digital age:

Following the flag. As retail becomes increasingly theatrical, flagship stores provide the perfect stage. Many retailers use their flagship stores for much more than spaces for simply viewing, trying and purchasing merchandise. For example, one luxury brand recently highlighted fashion as art at its 5thAvenue flagship, distinguishing itself from competitors with an exhibition of vintage gowns from its couture archives. Another high-end brand catches shoppers' eyes at its Chicago flagship with a façade that evokes the highly sought patterns on which it has built its brand. A third well-known retailer channels the exclusivity of a trendy nightclub at its New York flagship, with crowds of young customers awaiting admission via a velvet rope.

In many cases, companies are betting heavily on flagshipsby shrinking the number of nearby satellite stores and focusing resources on one main attraction. The merchandise previously found at the satellites is easily obtained online, while flagships often carry exclusive, higher-end inventory unavailable from other channels. Flagships increasingly aspire to be can't-miss experiences — destinations for both travelers and locals alike.

Read MoreVictoria's Secret, an angel on analysts' lists

Experiencing a lifestlye. Some stores, like Restoration Hardware, West Elm and Anthropologie, blend multiple product lines — clothes, furniture, kitchenware and home décor, to name a few — to sell a lifestyle. Many retailers aim to provide customers with a detailed vision for their homes, from photo frames to upholstery to cooking utensils. While retailers can try to replicate thelifestyle experience online, the elaborate, well-manicured showroom is the real draw, enticing shoppers to stay longer and spend more.

On trend and on budget. A third key development, which has impacted the in-store experience and many other aspects of retail, is the bifurcation of American shoppers into two distinct categories we call "survivalists" and "selectionists." Survivalists earn less than $50,000 a year and represent two-thirds of American shoppers. This massive segment of U.S. customers necessarily views purchases through the lens of affordability. By contrast, selectionists earn more than $50,000 per year and represent the remaining one-third of American shoppers. They spend more and have greater flexibility, although price is extremely important to them as well.

Interestingly, stylish in-store experiences are now available to both groups. Stores like H&M, Zara and Uniqlo charge lower prices for contemporary merchandise sold in well-organized stores. Today's fast fashion stores are a far cry from thecluttered bargain basement that once typified discount shopping. A sleeker setting also pulls in substantial numbers of both survivalists and selectionists. Many selectionist shoppers value disposable fashion — low prices allow them to frequently update their wardrobes without heavily investing in short-lived trends.

Read More10 gifts gadget lovers will love

Increasingly elaborate and differentiated in-store experiences are primed to be the new normal for offline shopping — a necessarily tantalizing draw to pull customers away from their screens and into physical retail venues.

Commentary by Byron Carlock, the real estate sector leader for PwC. He is a member of the Urban Land Institute (ULI) and a board member Emeritus of Harvard Business School.