BRANDS BORN ON THE IN­TER­NET EM­BRACE PHYS­I­CAL STORES

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On­line re­tail­ers are get­ting phys­i­cal.

A grow­ing num­ber of brands born on the in­ter­net are now open­ing brick-and-mor­tar stores and mov­ing into the suburban malls once con­sid­ered doomed as more Amer­i­cans shopped on­line.

But they’re tak­ing it even fur­ther by dou­bling­down on the tac­tile ex­pe­ri­ence. On­line mat­tress re­tailer Casper, for in­stance, is open­ing stores that al­low cus­tomers to book naps and test out mat­tresses be­fore buy­ing. In­dochino — the on­line tailor — de­cided to bor­row from the old Sav­ile Row model where cus­tomers can be mea­sured face-to-face for cus­tom suits.

“On­line brands have em­braced clicks-to­bricks,” said Faith Hope Con­solo, chair­man of Pru­den­tial Dou­glas El­li­man’s re­tail divi­sion. “Shop­pers love to touch, in­ter­act and try on in per­son and malls are up­ping the ante by of­fer­ing im­mer­sive ex­pe­ri­ences that are ex­cit­ing and mem­o­rable.”

The store open­ings mark a ma­jor shift for formerly on­line-only brands that just a few years ago be­lieved they didn’t need a phys­i­cal pres­ence to gen­er­ate ro­bust sales growth.

Dig­i­tal na­tives are now find­ing that the cost of ac­quir­ing new cus­tomers on­line is soar­ing as com­pe­ti­tion for eye­balls has in­creased the cost of on­line ads on Google and other plat­forms. At the same time, open­ing a store has be­come more af­ford­able as higher mall va­can­cies have prompted land­lords to of­fer flex­i­ble leases and other perks. It can be 10 times more ex­pen­sive to ac­quire a new cus­tomer on­line as it is with a phys­i­cal store, said Jim Ward, who heads up re­cruit­ing for on­line brands for mall owner CBL.

There are now roughly 600 stores across the coun­try from these on­line na­tives, ac­cord­ing to Green Street Ad­vi­sors, a real es­tate re­search firm. Bono­bos, which now has 60 stores and sells men’s cloth­ing, plans to have 100 by 2020. On­line eye­wear re­tailer Warby Parker, which opened its first store in 2013, will have nearly 100 stores by year-end.

Oth­ers are fol­low­ing suit. Casper plans to have about 200 stores in the next two to three years, up from the cur­rent 20. And Fablet­ics, an ac­tive sports­wear brand co-founded by celebrity Kate Hud­son, aims to quadru­ple the num­ber to 100.

For a brand that’s less than 10 years old, new store open­ings mean a 45 per­cent in­crease on av­er­age in on­line traf­fic, says a re­cent sur­vey by In­ter­na­tional Coun­cil of Shop­ping Cen­ters.

But not ev­ery mall is ben­e­fit­ing from the shift by on­line re­tail­ers. Dig­i­tal brands are clus­ter­ing in top-tier shop­ping cen­ters, driv­ing an in­creas­ingly large gap be­tween the posh­est of malls and those strug­gling to fill va­can­cies. While many on­line brands are plant­ing stores in tourist des­ti­na­tions around New York and Los An­ge­les, they’re also launch­ing stores in Ok­la­homa City and Birm­ing­ham, Alabama.

“We’re not con­sid­er­ing any­thing out­side of the pre­miere malls,” Dave Gil­boa, co-founder and co-CEO of Warby Parker.

The phys­i­cal stores of­ten pro­vide a level of con­ve­nience that the web lacks.

At the up­scale Mall at Short Hills in New Jersey, pre-den­tal col­lege stu­dent Calev Glick, 20, stopped by In­dochino on a re­cent Fri­day to get mea­sured for a suit for syn­a­gogue. He con­sid­ers him­self an “Amazon guy” be­cause he doesn’t have much time to go out shop­ping.

“At a tra­di­tional depart­ment store, you kind of hope it fits,” Glick said. “Here, I am get­ting all the help I need. I am go­ing to be here two hours and I’m go­ing to get it shipped to my house.”

Dig­i­tal na­tives still ac­count for a tiny frac­tion of over­all mall ten­ants, yet they could soon have a “ma­te­rial” ef­fect on mall rev­enues, says Bill Taub­man, chief op­er­at­ing of­fi­cer of mall op­er­a­tor and owner Taub­man Cen­ters.

Ron Har­ries, head of re­tail for Fablet­ics, said that open­ing phys­i­cal stores wasn’t in the com­pany’s orig­i­nal plan in late 2014, but it re­al­ized that a phys­i­cal lo­ca­tion could ac­quire cus­tomers more ef­fi­ciently.

“This gives you an op­por­tu­nity to reach cus­tomers who are not shop­ping on­line,” Har­ries said.

In fact, Fablet­ics en­joys a two-and-a-half times in­crease in rev­enue from its most ac­tive cus­tomers within a 30-mile ra­dius of a Fablet­ics store. Cus­tomers who live near a store are more likely to re­turn an on­line pur­chase at that store, Har­ries said. That cre­ates more op­por­tu­nity for an ex­tra sale. The sports­wear com­pany also elec­tron­i­cally tags items in its stores and tracks what went in and out of the fit­ting room so it can learn which items shop­pers were most likely to try-on but not pur­chase.

On­line re­tail­ers are also find­ing that they can pro­vide a fuller, more im­mer­sive set of cus­tomer ser­vices at phys­i­cal stores than they could on web browsers.

At In­dochino, cus­tomers first get mea­sured by a stylist. Then they in­spect 200 dif­fer­ent fab­rics in suits and se­lect dif­fer­ent styles be­fore hav­ing it shipped for free two to three weeks af­ter pur­chase. The price of a suit is about $400 to $500, and any ex­tra tai­lor­ing is free of charge.

“We want cus­tomers to feel that they cre­ated a one-of-a-kind gar­ment that they can’t get any­where else,” said Drew Green, CEO of In­dochino, not­ing he’s pulling cus­tomers once loyal to a tra­di­tional brand at the mall. “I be­lieve we are pro­vid­ing a dis­rup­tive, al­ter­na­tive ex­pe­ri­ence.”

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