Warby Parker opened its 78th store last week — with a pre-IPO valuation in the billions and plans to have 100 retail locations by the end of 2018, the eyewear brand has helped change the retail narrative that thinking online-first is the only way to succeed in the age of Amazon.
Dozens of similar brands have followed this online-to-offline trajectory, continuing to invest heavily in physical retail — rather than open one or two locations, many are expanding their footprint across numerous U.S. cities. It’s a sharp contrast to the experience of legacy retailers, many of which are faced with store closures and declining revenue.
Direct communication builds a connection
Lingerie retail upstart Adore Me made a permanent commitment to physical retail in 2016 with its NYC showroom and now plans to open more than 200 locations in the next five years. Roman Liot, chief operating officer at Adore Me, said operating stores is a natural evolution.
“Today, the demand for our brick-and-mortar stores is related to the emotional and intimate aspect of trying on lingerie in person,” he said. “We want to offer customers the option to come into our physical store, let them touch our product and fabrics, and get a personal, one-on-one fitting.”
An intimate connection is important, across industries. Approximately 80 percent of millennials believe it’s important for brands to have physical stores, according to research from iModerate cited by eMarketer, and having the opportunity to experience products in person is one of the reasons why. But, as traditional retailers have learned, stores aren’t enough.
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“A lot of traditional retailers are already looking at what DTC brands are doing, wanting to adapt to the new climate,” Liot said. “Where traditional retailers need to learn [has to do with] the customer feedback loop — it should be a two-way communication.”
Research from J.D. Power reinforces this, indicating that two-thirds of all U.S. consumers expect to be able to converse directly with the companies from which they shop.
Adore Me takes appointments at its showroom, giving its smaller number of customers one-on-one attention; Everlane actively caps the number of customers that can enter its stores at once to offer the same kind of personalized treatment.
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Making customers feel like V.I.P.s through direct communication channels is important for retailers of all stripes — as is creating an elevated in-store experience, which plays an important role in turning shoppers into brand advocates who are likely to share their experience on social media.
Physical retail influences digital sales
Opening physical stores impacts both online and offline sales. According to research from the International Council of Shopping Centers, each new store opening increases that brand’s web traffic by an average of 37 percent. A feedback loop is created, with an established digital presence causing shoppers to seek out a store, and each new store driving more traffic back to the website.
This halo effect is more pronounced for digitally native vertical brands, and it’s part of the reason Warby Parker has seen such sustained revenue growth. But the reason these digitally native brands are able to explore physical retail is as a result of aggressive VC funding.
Kleiner Perkins Caufield & Byers, an early Amazon backer, invested $30 million in men’s shirts purveyor UntuckIt so that the brand could open more stores. It’s the same story for many of these companies: With millions of dollars in investment, gambling on diverse types of expansion is expected.
The deck is stacked differently for legacy retailers, who aren’t funded by growth-happy VCs — but the way that online and offline channels can work together to drive traffic applies across industries.
Brands adopt a hybrid mentality
Thinking about retail channels as separate is outdated, according to new research by Interactive Advertising Bureau: “Our research indicates that ‘clicks to bricks’ is actually a false dichotomy,” said Randall Rothenberg, CEO of IAB. “Increasingly, disruptor brands are building integrated hybrid capabilities [across channels]. Whether they’re selling inside existing retailers, building their own stores, setting up pop-ups or establishing VR stores, their goal is to serve consumers wherever they want to be served — without sacrificing the direct, data-enriched relationships that distinguish direct brands from incumbents.”
Jewelry upstart Blue Nile aims to put this hybrid concept to work in its “webrooms,” the brand’s term for physical showrooms that employ digital tactics. Shoppers have the opportunity to try on Blue Nile’s wares, and the store is staffed with consultants who can help with the selection process — but all transactions take place via in-store tablets, reducing checkout lines and making the purchase process the same as shopping online. The vast reserves of data gleaned from connecting digital transactions to real-world store visits also help to further the “data-enriched relationships” Rothenberg cites as key to success for retailers today.
“[It’s not about] simply opening a large traditional store with massive overhead,” a spokesperson from Blue Nile said. “Instead, we’re creating an efficient model that allows us to simultaneously disrupt and leverage the brick-and-mortar experience.”
