As digitally native direct-to-consumer (DTC) brands eye growth in 2025, the question of opening physical stores is critical—and nuanced. Does going into retail cannibalize a DTC’s core online sales, or does it unlock synergistic growth? The answer, according to industry analysts, recent studies, and leading brands, is that physical retail can be both a risk and a major opportunity.
The Cannibalization Myth: What Actually Happens?
For years, DTC leaders worried that opening a brick-and-mortar location would simply steal purchases from their online store, not add new revenue. However, current data and expert commentary show that this view is outdated. In reality, physical stores can expand the brand’s pie—creating a halo effect that benefits both online and offline revenue.
A 2025 study by the International Council of Shopping Centers (ICSC) found that: For every $100 spent at a physical store, the same customer would spend an additional $160 online. Conversely, customers who shopped online with a DTC would spend an average of $231 in-store.
In a previous 2023 study, ICSC’s “Halo Effect III” study, emerging DTC brands experience an average 13.9% increase in online sales following the opening of a new physical store. The research analyzed data from 69 retailers and 2,103 stores, finding consistent uplifts across nearly all categories.
How Physical Retail Boosts Digital Sales-“The Halo Effect”
This halo effect plays out in several distinct ways. Stores offer tactile engagement, boosting trust with customers who discover or test drive a brand offline before making their next big online order. Cities with recently opened DTC stores routinely see a measurable spike in local e-commerce traffic and conversion rates, as the store increases brand visibility.
Buy Online, Pick Up In Store (BOPIS) and in-store returns for online orders smooth the omnichannel journey and lift total sales by as much as 40%.
The Real Pros of Entering Retail for DTC Brands
Physical locations provide new shopper acquisition, drive walk-in traffic, and cement brand credibility—especially as e-commerce competition tightens.Brick-and-mortar stores see much higher conversion rates than digital, with 2025 stats showing in-store conversion rates holding , compared to typical online rates.
In-person shopping unlocks categories like customization, eventing, and retail exclusives, which can command higher margins.
Retail stores provide valuable behavioral and location data, creating rich loops for omnichannel personalization and marketing.
Physical stores make returns easier and cost-effective, reducing friction for customers and increasing online-to-offline cross-traffic.Physical stores reduce dependency on paid digital advertising and social media, helping DTCs hedge against rising online acquisition costs and platform instability.
The Cons and Potential Pitfalls
Retail partners (or DTC-branded stores themselves) risk competing with the brand’s own website, especially if pricing or assortment differ. Channel strategy must be careful to avoid customer confusion or dilution of the brand promise.
Physical locations add new fixed costs, demand inventory management, and require hiring and training for in-person service, challenges for lean DTC teams.
Tracking where a sale “belongs” (online or retail) can get murky, especially with omnichannel behaviors. Overlapping incentives and siloed metrics can lead to internal misalignment.
In densely populated urban markets, high overlap in store-footprint and digital customer bases can create cannibalization if stores do not differentiate experiences or drive unique value.
How DTC Brands Can Minimize Cannibalization
- Unified Omnichannel Strategy: Align pricing, promotions, and loyalty across retail and online, so all touchpoints feel seamless (not competitive).
- Local-First Launches: Open stores in markets with low online penetration first, then expand omnichannel touchpoints as a second act.
- Experiential Retail: Make the in-store experience unique—events, workshops, services—so walk-in value can’t be replicated online.
- Data Integration: Combine store data with digital profiles to create full customer views and avoid channel siloing.
- Test-and-Learn Approach: Pilot small-scale pop-ups or partner stores to measure impact, adjust, and avoid costly missteps.
Will entering retail cannibalize online sales for DTC brands in 2025?
The reality: done right, physical retail boosts—not cannibalizes—online performance, thanks to the halo effect, omnichannel engagement, and higher customer lifetime value. The risk comes when brands fail to integrate, align, and differentiate experiences across all channels. For most DTC brands today, an online versus retail mindset is the biggest limitation of all—omnichannel is the only future-proof route.
