Digital May Be Growing Faster, but Brick-and-Mortar Is Standing Strong

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Digital retailers get a lot of the holiday sales hype because they have been growing at a faster rate than traditional brick-and-mortar chains. Some of that attention is warranted because digital sales rose by 16.9% on Black Friday to an estimated $5.03 billion, according to data from Adobe's Digital Insights, which tracks 80% of online spending at America's 100 largest retail websites.

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While that's good news for digital retailers, it's not a sign that physical retailers were all sitting empty on the day after Thanksgiving. In fact, traffic to brick-and-mortar stores only dropped 1.6% year-over-year on Thanksgiving and Black Friday combined, according to research from ShopperTrak, a Tyco brand. For just Black Friday, visits were down less than 1%.

"There has been a significant amount of debate surrounding the shifting importance of brick-and-mortar retail, and the fact that shopper visits remained intact on Black Friday illustrates that physical retail is still highly relevant and, when done right, profitable," said ShopperTrak Senior Director of Advisory Services Brian Field in a statement.

It may even be better than it looks

The line between digital and physical sales has blurred. An order placed online but picked up in a store counts as a digital sale, but would the customer have still placed the order if the item could not have been picked up? A similar argument can be made when it comes to the ability to return an item to a physical store.

It's also worth noting that many retail chains kicked off their Black Friday sales early in November. That almost certainly front-loaded some brick-and-mortar sales that may otherwise have occurred over the Thanksgiving weekend.

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In early November, Adobe predicted that total digital sales for the holiday season would hit $107.4 billion, an increase of 13.8%. That would still mean that only around 15% of all sales are digital if you take into account that the National Retail Federation (NRF) predicted $682 billion in total sales for the season.

Using NRF and Adobe numbers from 2016 gives us $94 billion in digital sales and $561.8 billion at brick-and-mortar stores. Comparing those figures to this year's estimates from Adobe and NRF shows a brick-and-mortar sales gain of a little over 2%. That's a lot smaller than the projected digital growth, but it's certainly not a retail apocalypse

What does this mean?

Just because the end is not here for brick-and-mortar stores does not mean traditional retailers have nothing to fear. Many consumers are comfortable buying online and as shipping speeds improve and technology advances in other ways, more dollars will likely move in that direction.

That does not mean retailers can't stay afloat. The success of Wal-Mart, which has embraced an omnichannel model, allowing customers to shop where they want and how they want, shows that old-school companies can adapt. In addition, retailers including Costco, which pushes customers to its stores rather than its digital channels, will likely continue to succeed.

Shoppers may have become more demanding and have set their bars higher when it comes customer service, convenience, and flexibility, but shoppers are still leaving their homes even though nearly everything can be bought online.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool recommends Adobe Systems, Costco Wholesale, and Salesforce.com. The Motley Fool has a disclosure policy.