Online retailers are shifting back towards brick-and-mortar stores

Online retailers are shifting back towards brick-and-mortar stores
Digital startups assumed their brands could make more money online rather than relying on traditional retail stores. However, once marketing, shipping, and other costs were factored in, many of these brands ended up losing money.
Whole is the practice of selling goods through a third party like a department store of a mall chain. This is almost immediately profitable. However, the trade off is that the third party department store or retailer owns the data on what people are buying which results in less visibility. Some contracts with third parties require the brands to make up for any shortfalls in expected sales. Brands also lose control over how their products are displayed.
Many digital brands never reach profitability because marketing expenses are so high to acquire customers.
During the low interest rate environment that persisted after the 2008 financial crisis, many venture capitalists funded digital startups and prioritized growth rather than profitability.
Expenses to acquire customers online has risen. Many startups competed against each other for Facebook ads and other digital marketing which increased the price.
After tech companies, like Apple, made privacy changes, this further increased the costs for online advertising.
Now that interest rates have risen sharply, investors are less likely to fund risky ventures that are not profitable.
Many companies are returning to the brick-and-mortar mode by opening physical stores. These physical storefronts expose brands to potential customers in a less costly manner than online marketing.
Nike will resume selling apparel and other gear via Macy’s in October. This is a reversal from its 2021 decision to stop selling most products at chain stores to focus on its own locations and website.
Works Cited:
https://www.wsj.com/articles/brands-wanted-to-cut-out-stores-not-anymore-817b3809?mod=Searchresults_pos1&page=1
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