Why Smart Businesses Should Embrace Offline Channels

As businesses increasingly dominate the global e-commerce landscape, some entrepreneurs may wonder whether traditional offline channels still matter. The truth is offline channels remain a powerful, profitable force in today's marketplace. While online shopping continues to grow, offline channels has stood the test of time, proving essential for consumer engagement, brand trust, and long-term revenue growth. Ignoring this key sales channel means losing out on a significant portion of the global retail market.

MOART Group help businesses bridge the gap between online success and offline channels success. This includes building strategic retailer partnerships, mastering offline marketing, and tapping into physical retail channels across North America. We understand the urgency of staying competitive in a multichannel world. If your business isn’t capitalizing on offline channels, you risk falling behind competitors who are already profiting from the advantages it offers. In this article, we'll explore why incorporating offline retail is a game-changer for Chinese brands and how it can amplify growth, brand trust, and revenue potential.

Offline Channels - Numbers Speak Louder Than Words

Despite the rapid growth of online shopping, offline channels sales continue to dominate the global retail market. According to Statista, in 2022, 81% of retail sales in the U.S. were still made in physical stores. Globally, 76% of all retail sales are projected to remain offline through 2028, amounting to $21.9 trillion annually (Forrester). These numbers reveal that while online shopping is growing, offline channels still hold a massive share of the market, especially in key Western economies.

For businesses aiming for global expansion, these statistics highlight the significant opportunity in offline channel. Companies that act now can seize this opportunity, while those that delay risk falling behind as competitors capture offline market share. Businesses that adopt an omnichannel strategy, blending both online and offline sales, see an average revenue increase of 10-15% annually (McKinsey). Is your business ready to exploit this potential?

Key Statistics:

1. Global Retail Sales: By 2028, offline sales will still account for the majority of global retail sales, with 76% of total retail transactions taking place offline (Forrester).
2. Revenue Growth Potential: Businesses that embrace omnichannel strategies—blending online and offline sales—experience an average annual revenue increase of 10-15% (McKinsey).
3. Customer Experience: Physical stores offer a unique advantage—73% of western consumers prefer interacting with brands in-store because they can physically touch and experience products before purchasing (PwC).

Industry-Specific Insights: Offline Channels in Key Sectors

Businesses entering global markets through offline channels must understand the dynamics of their industry and the role offline retail plays in driving growth. Below is a breakdown of offline retail’s importance across several key industries, where offline interactions significantly boost sales and brand trust.

Fashion and Luxury Goods: Offline Experiences Drive Premium Sales

Offline Channels remains the primary driver for luxury goods and high-fashion brands. This sector thrives on sensory experiences, where customers appreciate the opportunity to touch, try on, and engage with products in person. For brands like Louis Vuitton and Gucci, offline retail stores are more than just points of sale—they are immersive brand experiences that build long-term loyalty. Luxury consumers expect in-store experiences that communicate exclusivity, attention to detail, and craftsmanship, all of which justify premium pricing.

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• ‍Case Study: Gucci has built its global reputation not only through product quality but also by creating immersive offline store experiences. In 2020, despite the rise of e-commerce, over 80% of luxury purchases still took place in physical stores (Forrester). The brand's use of unique in-store events and personalized service demonstrates the unmatched value of offline channels for luxury goods

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Key Insight for Brands: For fashion and luxury brands, offline stores are essential for differentiating your brand and commanding higher prices. A Deloitte report found that brands with physical stores can charge 25-50% more for products because of the premium experience they offer.

Electronics and Consumer Goods: The Importance of Tangibility

For electronics, offline retail offers customers the critical opportunity to test products before purchasing. Businesses in this sector, such as Xiaomi, have seen significant success by integrating both online and offline experiences. High-tech gadgets are often complex, and customers want to explore features, functionality, and physical quality in person before making a decision.

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• ‍Case Study: Apple's brick-and-mortar stores are renowned for their sleek design and exceptional customer service, allowing customers to try out products and speak with technical experts. Apple's investment in offline retail has helped maintain its dominant position in the global electronics market. Even as Apple's online sales continue to grow, offline channels still contribute significantly to overall revenue, proving that physical retail experiences are invaluable for tech brands.

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Key Insight for Brands: Offline stores are essential for gaining customer trust in the electronics sector. Xiaomi saw a 70% increase in offline revenue in the first year after opening its Mi Home stores worldwide, where customers could directly interact with their products (Forrester).

Home Goods and Furniture: Showrooms Influence Purchase Decisions

In the home goods and furniture sector, offline retail remains a crucial touchpoint for consumers making significant purchases. Items such as furniture, appliances, and home decor are often high-investment purchases, and customers prefer to see these products in person to evaluate size, quality, and aesthetics.

• ‍Case Study: IKEA has mastered the integration of both online and offline channels. While customers can browse and purchase online, the in-store experience—where customers can interact with product displays and get a real feel for items—drives significant offline sales. The company has also invested in experiential retail, providing customers with fully decorated room setups that demonstrate how its products fit into daily life.

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Key Insight for  Brands: In-store customer interaction significantly influences purchasing decisions, especially for high-investment items like home goods. Statista found that consumers spend 60% more in-store than they do online

Benefits of Offline channels for Chinese Businesses

Businesses entering global markets through offline channels gain a variety of benefits that go beyond what e-commerce alone can offer. These advantages include higher conversion rates, enhanced brand trust, and premium product positioning.

1. Higher Conversion Rates

While online shopping provides convenience, physical stores consistently outperform in terms of conversion rates. Customers who visit a store are more likely to make a purchase due to the ability to interact directly with the product.

In-store conversion rates hover between 20-30%, significantly higher than the 2-3% average for online shopping (Forrester).

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• ‍Case Study: Xiaomi gracefully integrates online and offline strategies. In 2016, it opened Mi Home physical stores worldwide, giving customers an opportunity to interact with their products. This approach boosted sales, and Xiaomi saw a 70% increase in offline revenue during the first year of operation (Forrester)

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2. Brand Trust and Visibility

A physical presence gives brands instant credibility. When customers can interact with a brand in person, they are far more likely to trust it. Establishing a physical presence also increases brand visibility in key markets, helping to build brand credibility and permanence.

A Nielsen study revealed that 67% of consumers trust brands they’ve engaged with in physical stores over online-only brands (Forrester).

3. Premium Product Differentiation and Pricing

Offline channels will enable businesses to offer premium experiences, showcasing products in a way that justifies higher pricing. Through thoughtful store design, visual merchandising, and personalized service, brands can elevate their offerings in the eyes of high-end consumers in Western markets.

A Deloitte report showed that brands with physical stores can charge 25-50% more for products, simply due to the enhanced in-store experience (Forrester).

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• ‍Case Study: Nike’s omnichannel strategy allows customers to interact with products in their brick-and-mortar stores and through their e-commerce platform. Their use of "Nike by You", which lets customers customize shoes in-store, has allowed the brand to maintain premium pricing for their products, leading to a 12% increase in sales through their combined online and offline strategies (Forrester).

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4. Faster Expansion and Market Adaptation

Offline channels will allow businesses to tap into local market expertise through strategic partnerships. By collaborating with established retailers and western experts, Chinese brands can quickly learn how to navigate regulatory hurdles and cultural nuances, avoiding costly trial-and-error approaches.

Fictional Scenario: Offline Channel Success for a Business

Let’s imagine a business generating 100 million  annually through its online sales alone. The company decides to expand into offline channels by opening physical stores and partnering with established retailers. Here’s how the financial landscape changes after adopting this strategy, supported by data and insights from successful case studies.

1. Higher Conversion Rates

Before the company expands into offline channels, their online conversion rate is 2-3% (Forrester). With the implementation of physical stores, the in-store conversion rate jumps to an average of 20-30%.

Scenario:

• The company brings in 1 million online visitors per year, converting 2.5% of them into buyers. This results in 25,000 sales per year, with an average order value of 4000 .
• Revenue before offline expansion:
  25,000×400025,000×4000 = 100 million

After opening offline stores:

• If 100,000 visitors come to the physical store, with a 25% conversion rate, the company would convert 25,000 visitors into buyers.
  Assuming the average in-store order value is 60% higher (since customers tend to spend more in-store), the average in-store transaction is 6,400 .

Revenue from offline stores: 25,000×640025,000×6400 = 160 million

In just the first year of adding offline stores, the company now generates an additional 160 million, which is 1.6x the revenue of the entire online business.

2. Brand Trust and Visibility

Before the offline expansion, the company’s online-only presence limits its brand trust. However, after establishing a physical presence, customer trust increases significantly.

Scenario:

According to Nielsen, 67% of consumers trust brands more if they can interact with them in physical stores. Suppose 50% of the company’s online customers had moderate trust in the brand before. After opening physical stores, 100% of offline visitors experience a higher level of trust.

This increase in trust not only boosts offline sales but also positively impacts online sales. Assuming a 10% increase in online sales due to enhanced brand visibility and trust from offline efforts, the company’s online revenue grows from 100 million  to 110 million.

3. Premium Product Differentiation and Pricing

One of the key benefits of expanding offline is the ability to offer premium pricing. In-store experiences, personalized service, and visual merchandising allow brands to justify higher prices.

Scenario:

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After opening its offline stores, the company increases the price of select products by 25%, particularly high-end items that benefit from the offline experience.

• If 10% of the company’s 25,000 offline sales are premium products, with an original average price of 4000 , increasing the price by 25% results in a new price of 5000 .
• This adds an additional 2.5 million from the premium product line in offline stores alone.

4. Faster Expansion and Market Adaptation

Through offline channels, the company collaborates with local retailers in Western markets, tapping into local expertise and gaining faster entry into new regions. By partnering with established retail chains, the company avoids costly missteps and leverages retailer infrastructure to scale faster.

Scenario:

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The company partners with 5 large retail chains in Europe and North America. Each partnership secures 20,000 product placements across retail locations. Even with a conservative sell-through rate of 50%, this results in 10,000 additional sales per region. Assuming an average order value of 5000 , that’s an additional 100 million in annual revenue from partnerships alone.

Summary of Revenue After Offline Expansion:

1. Initial online revenue: 100 million
2. Revenue from offline store expansion: 160 million
3. Increase in online sales due to brand trust: 10 million
4. Premium product pricing in offline stores: 2.5 million
5. Revenue from retail partnerships: 100 million

Total revenue after offline expansion: 100 million (online) + 160 million (offline) + 10 million (brand trust) + 2.5 million (premium pricing) + 100 million  (retail partnerships) = 372.5 million

This fictional scenario highlights the numerous financial benefits businesses can achieve by leveraging offline retail channels, from higher conversion rates to better brand trust and faster market entry through partnerships.

The Financial Impact of Combining DTC and Offline Channels

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Financial Breakdown: Offline vs. Online Costs

While offline retail involves higher upfront costs, the long-term financial benefits outweigh these expenses when managed strategically. Here’s a comparison of costs associated with both approaches:

• Store Leases and Overhead: Renting physical spaces in prime locations can consume 5-10% of total revenue. Additionally, operational costs like staffing, utilities, and inventory management are ongoing expenses that businesses must factor in.
• Online Investments: Setting up and maintaining an online store is less capital-intensive upfront, but long-term costs associated with digital marketing (PPC, SEO, social media ads) can significantly impact margins, as businesses must continually invest in visibility.

Return on Investment (ROI)

• Offline Stores: While offline stores require higher initial investment, they typically break even within 1-2 years, depending on the market and location. The ability to upsell products through in-store experiences, particularly for luxury goods and electronics, leads to higher average transaction values.
• Online Stores: E-commerce take longer to see positive ROI due to fluctuating customer acquisition costs and ongoing investments in digital marketing and delivery logistics.

Financial Benefits of Combining Channels

1. Higher Average Order Value (AOV): According to Statista, consumers spend 60% more in-store than they do online, largely due to the ability to touch, try, and interact with products in person. This is particularly true for industries like fashion, luxury, and home goods, where tactile experiences are crucial.
2. Increased Customer Lifetime Value (CLV): Offline retail promotes brand loyalty by enabling face-to-face interactions, which build trust and drive repeat purchases. This significantly boosts CLV as customers are more likely to return to brands they’ve connected with personally.

Cost Efficiency of DTC and Retailer Partnerships

Both DTC and retail partnerships offer opportunities for businesses to expand globally, each providing distinct financial advantages.

Direct-to-Consumer (DTC) Strategy

Building a DTC network allows brands to maintain direct control over customer relationships, retain full ownership of customer data, and craft personalized marketing strategies. While this approach requires a significant investment in customer service, logistics, and brand development, it gives businesses the ability to create highly tailored customer experiences.

Partnering with Offline Retailers

Retail partnerships can be a more cost-efficient way for businesses to expand into new markets, particularly when the goal is rapid scale. By leveraging the infrastructure and local expertise of established retailers, brands can avoid many of the operational costs associated with opening their own stores.

‍MOART Group specialize in helping businesses find the right balance between DTC and retailer partnerships. Our Cross-Border Retail Management service ensures that brands can expand into new markets efficiently by optimizing both their DTC strategy and their partnerships with major retail chains.

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How Combining DTC and Retail Partnerships Maximizes ROI

Many global brands successfully combine both DTC and retail partnerships, using a multichannel approach that enhances revenue streams and customer engagement across touchpoints.

1. Multichannel Reach: By combining DTC and retail partnerships, businesses reach a broader audience, capitalizing on DTC channels for personalized customer relationships while using retail partnerships to gain market access and brand visibility.
2. Optimized Marketing Spend: A multichannel approach allows businesses to balance online advertising costs with offline marketing efforts, such as in-store promotions, providing a more efficient use of marketing budgets.
3. Scalability: While DTC offers control and customer insights, retail partnerships provide the scale and resources needed to quickly enter new markets without bearing the full operational costs of a brick-and-mortar network.

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• ‍Case Study: Warby Parker, initially an online-only eyewear brand, effectively combined DTC and retailer partnerships to expand its footprint. After achieving success online, the company opened brick-and-mortar stores and partnered with retail chains, maintaining a hybrid model. This allowed Warby Parker to benefit from direct customer relationships through DTC while gaining the in-store visibility and trust of offline retail partnerships.

• ‍Case Study: Nike exemplifies a hybrid approach, blending their DTC strategy with partnerships with major retailers. Nike’s DTC stores—including the Nike Town concept—give the brand full control over the customer experience. Simultaneously, the company partners with retail giants such as Foot Locker and Dick’s Sporting Goods, allowing Nike to capture a broader audience while maintaining a highly effective retail footprint.

Offline Marketing and Branding Opportunities

One of the most significant advantages of going offline is the opportunity to execute offline marketing campaigns that engage consumers in ways that online efforts cannot. These marketing strategies are critical to driving foot traffic, reinforcing brand recognition, and enhancing customer loyalty. By utilizing a combination of in-store promotions, pop-up events, billboards, and print advertisements, brands can connect with their audience on a more personal level.

Examples of Successful Offline Marketing Tactics:

1. Pop-Up Stores: Pop-up retail events allow brands to test new markets without the commitment of long-term leases or significant upfront investments. These temporary stores generate excitement, offering a controlled environment to showcase new products and create exclusive experiences for customers. By strategically placing pop-up stores in high-traffic areas, brands can create buzz and boost brand awareness while testing the market for future permanent locations.
2. Experiential Marketing: Hosting in-store events that immerse consumers in interactive experiences increases brand recall and positive brand perception. According to EventTrack research, a well-executed offline campaign can lead to a 35% increase in brand loyalty. These campaigns can range from product demonstrations to workshops or even themed events that highlight a brand's values and offerings.
3. Retailer Co-Branding: Collaborating with local retailers for joint marketing campaigns can amplify a brand’s credibility and reach in a new market. Co-branding initiatives such as shared promotions, in-store displays, or joint advertising campaigns help introduce a new brand to the retailer’s established customer base, building trust and visibility in the process.

Offline channels as a Catalyst for Global Growth

While e-commerce has proven to be a powerful tool for reaching global consumers, offline channels remain a critical component of any successful international expansion strategy. Businesses that incorporate offline channels into their strategy not only enhance their revenue potential but also gain invaluable customer insights, build brand trust, and improve long-term profitability. Offline channels provide an immersive way to engage with consumers, creating memorable experiences that foster brand loyalty.

MOART Group Cross Border service equips businesses with the tools and expertise to navigate the complexities of offline channels in foreign markets. From forming strategic retailer partnerships, implementing and localizing DTC, to executing high-impact offline marketing campaigns, we help brands achieve sustainable growth through a balanced, multichannel approach.

We understand the delicate balance between risk and reward in business. We help businesses navigate global expansion, including identifying bold opportunities for innovation and growth.

For more insights and support on your business journey, visit moartgrp.com.

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