New ICSC Study, “The Halo Effect III: Where the Halo Shines,” Quantifies How Physical Stores Drive Online Sales

Third installment of ICSC’s research series on omnichannel retail shows brick-and-mortar store openings increase online sales by nearly 7 percent; closures drive 11.5 percent drop

Today, ICSC released its latest report, The Halo Effect III: Where the Halo Shines, quantifying the impact of opening or closing physical stores on online sales and retailers’ overall performance. The study – the third installment in ICSC’s industry-leading research on the halo effect of brick-and-mortar retail on online sales – proves again the power of physical retail by demonstrating that a new store boosts online sales, while a closed store impedes them.

The extensive research, spanning in-store and online sales of 69 retailers and 2,103 individual stores, reveals that opening a store boosts online sales in the trade area surrounding that store by an average of 6.9 percent in the immediate weeks following the store’s opening. For emerging, direct-to-consumer (DTC) brands, the benefits are even higher - the correlating halo effect for online sales is 13.9 percent when opening a new store. Conversely, closing stores has an even greater negative impact on retailer performance, resulting in an 11.5 percent drop in sales.

“ICSC’s data has always shown that consumers prefer shopping in-store over other channels,” said ICSC President and CEO Tom McGee. “While our earlier research on the halo effect demonstrated how physical stores drive web traffic and brand awareness, our latest report dives deeper by analyzing actual spend data. The findings quantify just how important brick-and-mortar is to today’s omnichannel consumers and underscore what retail experts already knew: The core of the omnichannel experience is the retail store.”

The study, which reviewed nearly $850 billion in credit card transactions over a four-year period, explored the impact of physical stores on emerging retailers, as well as established retailers, in categories including apparel, big box specialty, cosmetics, department stores, discount department stores, and home stores. It found that across nearly all categories, online sales increased following the opening of a store and decreased when a store closed. For instance, among apparel brands, a store opening drives an 11.6 percent increase in online sales and a store closing drives a 19.4 percent decrease in online sales.

Conversely, when closing a location, home stores and department stores took the biggest hit to their online sales, declining by 32.2 percent and 26.1 percent, respectively – emphasizing the importance of a space where consumers can test, browse, and shop for products in those categories especially. The study also examined the impact of opening or closing a store on average basket size, revealing that opening a physical store causes a shopper’s average online basket to increase, and confirming the opposite effect.

In addition to proving the direct correlation between physical stores and e-commerce, the research reveals the vital role Gen Z plays in the revitalization of physical retail. Despite being known as “digital natives” and growing up with digital technology at their fingertips, the data found that this cohort shops in-store more than Millennials and Gen X and at a similar rate to Boomers.

To view The Halo Effect III report, click here. The first report in ICSC’s series can be viewed here, and the second report here.

Methodology

An analysis by the strategy and research firm Alexander Babbage for ICSC examined $848.1 billion of in-store and online spending by ZIP code to quantify the impact of opening and closing stores. The analysis covered 69 retailers’ in-store and online sales, including 2,103 individual stores in 50 states plus Washington, D.C., from 2019 to 2022. Data was computed by looking at the 13 weeks following the opening or closing of a store. The study excluded the two weeks before and after the week of the store closing or opening to minimize any final sales for closing, or honeymoon periods following the opening of a store.

About ICSC

ICSC promotes and elevates the marketplaces and spaces where people shop, dine, work, play and gather as foundational and vital ingredients of communities and economies. ICSC produces experiences that create connections and catalyze deals; aggressively advocates to shape public policy; develops high-impact marketing and public relations that influence opinion; provides an enduring platform for professional success; and creates forward-thinking content with actionable insights – all of which drive industry innovation and growth. For more information, please visit www.ICSC.com.

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