Why Online Retailers Are Opening Brick-And-Mortar Stores | Entrepreneur

Opinions expressed by Entrepreneur contributors are their own.

When I walk around shopping in Salt Lake City, Utah, I see a few interesting sights — Cotopaxi, Thread Wallets and Kizik. Physical, brick-and-mortar retail locations for what started as local, direct-to-consumer (DTC) online retailers. When the “retail apocalypse” was on the tip of everyone’s tongue, especially during Covid-19, why did these online brands expand into the real world?

It’s currently projected that 50,000 U.S. stores will close by the end of 2027, with clothing, consumer electronic and sporting goods stores suffering the most. Small chains and mom-and-pop stores are most at risk. However, this hasn’t stopped the real-world expansion of brands like Warby Parker and Allbirds.

Warby Parker began selling eyeglasses online, circumventing traditional retail spaces by sending frames to try on directly to consumers. At the end of 2022, Warby Parker had 200 stores across the U.S. and Canada, generating 60% of the company’s total sales. Long term, they are looking to expand to at least 900 U.S. stores. Why? Warby Parker executives said that when a company opens a physical location, online sales in the area roughly triple.

Allbirds noticed a similar trend. The shoe brand has opened 23 stores since 2022. These physical locations drive online sales. When the company opened its Boston Back Bay location in March 2019, web traffic in the area rose by 15%. Just from that neighborhood alone, Allbirds saw 83% more new customers.

Brands are turning to the physical world because maintaining an online presence is becoming more expensive. With Apple’s privacy changes limiting tracking of potential customers and rising advertising prices on Facebook and Google, it’s harder for brands to get the most bang for their buck advertising digitally.

In a time when digital ad spending is expected to rise in the coming years, these online brands can afford to use their physical locations as not just points of advertisements but larger omnichannel experiences. It’s not like a simple video banner — some employees can answer questions, in-store displays and designs that further brand identity, and the ability to make returns without shipping. Plus, there’s a greater opportunity for physical interaction with a product.

This physical engagement is necessary for what some researchers have described as “deep” products. These products “require ample inspection for the customer to make an informed decision.” Items like shoes, glasses, headphones and furniture require that extra tactile interaction to determine if they fit. You don’t get this in a solely digital transaction.

If you have an up-and-coming e-commerce business, would a brick-and-mortar location be the right fit for you? I think about what I would recommend to my own clients. Would I recommend a client with a line of hand lotions invest in a dedicated brick-and-mortar store? No, probably not. But, a pop-up in an established retail location would be an interesting place to start.

Small products like that can be easily showcased in strategic retail locations. Warby Parker first partnered in 2015 with Nordstrom for a month-long pop-up. Harry’s razors are now seen in 2,200 Walmarts around the U.S. Retailers like Nordstrom, Target and Walmart understand the importance of these partnerships, expanding their consumer base to younger shoppers who are more aware of DTC online brands.

Would I recommend a brand with colorful e-bikes have a pop-up location where all the bikes are set up for people to try? A product they otherwise would have to buy and try themselves to see if it was a comfortable fit? Yeah, absolutely. If that went well and the statistics were correctly tracked, having a flagship brick-and-mortar might be an option.

The costs and steps to procuring real estate are an inhibitor, depending on location and market. Some companies are helping smaller brands tap into temporary physical spaces. Showfields and Neighborhood Goods offer retail space within larger storefronts for smaller brands.

Every brand will have a different journey when approaching a brick-and-mortar presence. Kizik CEO, Monte Deere, saw the limitation of using online video to relay their shoes’ “step-in process” and comfortable fit. The brand initially partnered with Nordstrom to show off its shoes but is opening more of its own stores. Deere noted that 75% of customers who came into their Salt Lake City store and tried putting on their unique shoes made a purchase.

Physical locations aren’t just opportunities for those “deep” product interactions and deepening a brand’s presence. As a Benefit Corporation, Cotopaxi gives back to the communities where its stores open. Stores have “Community Grantee” areas where customers can learn about local nonprofit organizations, like at their Portland, Oregon location. Cotopaxi’s most recent partnership here in Utah is with the International Rescue Committee, dedicated to helping refugees new to Salt Lake City. By practicing what they preach in the communities they’re tapping into, Cotopaxi is helping others while reinforcing their brand.

These are big moves from relatively large brands. They all had humble beginnings, using online as a launchpad for their brands. Even when you’re starting small, there is value in those “real-life” interactions.

Online DTC selling has been an outstanding launchpad for small brands, but it seems like a robust brick-and-mortar experience can take those brands to the next level. Digitally native brands have the upper hand in expanding their omnichannel experiences — data. From search queries to click patterns, online brands can leverage data to find the best market to tap into and customize every aspect of their in-store experience. If you have a DTC brand, use your data and see if going offline is right for you.

Source link