“Physicality matters in the Internet age,” said Jerry Storch, CEO of Hudson’s Bay Co., this morning at the Store 2015 conference in Toronto hosted by the Retail Council of Canada trade group. Storch laid out his view of retailing in his keynote presentation, saying that established store retailers need to add more Internet elements and Internet-only retailers need to add more stores and other physical elements to serve customers across multiple channels.

Speaking to an audience composed largely of store-based retailers, Storch reasoned out the economics of retailing today. “Stores make money even in the Internet age,” he said. “The Internet is absolutely growing much more rapidly, [but] most of that growth is inextricably linked to the bricks-and-mortar stores [that are said to be threatened by the Internet.]”

Storch joined Hudson’s Bay late last year. He previously was CEO of Toys R Us and has long been a proponent of stores’ role in the future of retailing.

Where stores have an advantage on web-only e-retailers is in supply chain economics, Storch said. He said for products sold for direct-to-home delivery, the supply chain cost at the distribution center level is 1.5 to 2 times higher than the cost for products that are ultimately sold in stores. The reason for that cost differential, he said, is that shipping a single item to a consumer’s home is 30 to 40 times higher than the per-item cost for shipping inventory to stores. “Direct-to-home delivery is one of the most inefficient, and not green, economic models in the history of the world,” he said.

But the economics shift if a retailer can get a consumer to come to the store to retrieve a product, he said, which is why Storch sees stores as the “essential hub of the all-channel universe.” He says retailers must find ways to guide customers to shop in a way that is profitable to the retailer, and that means retailers must have multiple models that meet consumers’ needs. That may mean fulfilling from stores, using drop-shipping from manufacturers or offering in-store pickup.

“[The Internet] changes everything, but it is not everything,” he said. Retailers, he said, just have to work harder to adapt to how the consumer wants to shop and do so in ways that are profitable for the retailer. “The laws of economics always win,” he said.

Hudson’s Bay Co. is No 97 in the Internet Retailer 2015 Top 500 Guide. It is the largest Canada-based retailer in the Guide, as measured by its North American web sales. It owns and operates TheBay.com, the e-commerce site for the company’s Canadian flagship brand, as well as LordandTaylor.com and Saks.com. Hudson’s Bay Co. acquired the New York-based Saks Inc. and the e-commerce business Saks Direct for $2.9 billion in 2013. The combined web revenue launched Hudson’s Bay up the Top 500 rankings: It ranked No. 130 in 2014 based on 2013 sales and ranks No. 97 in 2015 based on 2014 sales.