Online sellers get physical
Storefronts making a return,
Indie clothing retailer ModCloth began as a purely online store in 2002. After 13 years of doing digital sales, earlier this year it opened its first physical store — and learned much about improving their business by just talking with those who came in the shop.
“We discovered small things, the details our customers love,” said Matt Kaness, the company’s president and CEO. “They loved linings in dresses and skirts and they loved pockets.”
ModCloth’s move to a physical store is an example of a growing trend: once proudly pure-play online companies are signing leases and opening physical stores.
The movement got a boost on Tuesday when Amazon opened a brick-and-mortar bookstore in Seattle, the online retail giant’s first foray into what retail experts call “omni-channel marketing.”
“Today’s customers shop in multiple formats,” says Vicki Cantrell, who heads the digital division of the National Retail Federation.
The move to multiple channels is “absolutely a growth strategy for these companies.”
Other firms making this play include Bonobos, a men’s cloth- ier; Warby Parker, an eyeglass seller; Renttherunway, which rents designer dresses; and Birchbox, a subscription service for beauty and grooming products.
And there are some big benefits that can come when a company opens a physical location, says Wendy Liebmann, CEO of WSL Strategic Retail in New York City.
Physical stores make for excellent marketing and advertising vehicles, Leibmann said. “It’s a way to differentiate from the plethora of virtual stores online.”
A physical location can be a place for customers to check out merchandise firsthand, but not necessarily walk out with it. That’s partly Amazon Books’ plan.
Customers can buy books there but also are encouraged to check out other products that Amazon sells online.
In a letter on its website, Jennifer Cast, vice president for Amazon Books, called the store an extension of Amazon.com.
This strategy can reduce the cost of running a store, since a company doesn’t have to keep as much in stock.
For instance, New York-based Bonobos offers four styles, 20 color options and about 30 sizes in its clothing mix.
That’s more than 2,400 different possibilities.
“If you were actually to stock that in inventory, the amount of space you would need would be exorbitant,” said Erin Ersenkal, the New York-based company’s chief revenue officer.
The advent of rapid delivery has played an important role, says John Talbott of the Center for Retailing at Indiana University’s Kelley School of Business in Bloomington.
“If I’m interacting with something today and I can have it at home tomorrow, I don’t need to drag a huge shopping bag around,” he said.
The model has been used by other retailers, such as sellers of large-size products.
“How often do you go into a furniture store and walk out immediately with a couch?” says Bonobos’ Ersenkal.
One reason online marketers like real-world stores is because they are full of real-world customers that they can observe in order to gain valuable insight into
shopper likes and dislikes. For ModCloth, having a store near San Francisco’s Union Square, near its corporate offices, gave it a natural place to learn from its customer base.
The original plan was to create a pop-up store, but the location proved so popular with shoppers that the company has renewed the lease multiple times. Now ModCloth is looking to open multiple shops.
Warby Parker is “medium agnostic,” co-CEO Neil Blumenthal says. “In five years, I’m not sure what other channels will exist,” he says. “The key is to stay flexible and follow the customers.”
Talbott thinks the few online businesses now moving into brick and mortar is just the beginning of a larger evolution.
“Increasingly you’re going to see a blended environment,” in which each business will have to find an equilibrium where there’s an ideal balance of e-commerce and a physical presence, he says.
That will vary by category and by geography, he adds.
“The bifurcation between ecommerce and traditional retail is gone,” Talbott says.
“Retail is always evolving and it’s always changing. At the end of the day they’re trying to figure out what consumers want and provide it for them, wherever that is,” he says.