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Brick and Mortar: From the Ether to Real Estate

2 months ago

By sangeetha m

It will be interesting to see the data around 2020’s eCommerce adoption numbers given how people are panic buying staples such as toilet paper, pasta, yeast, hand sanitizers, vitamins and hair dye, while travel has been curtailed and over 250,000 retail outlets shuttered in the US alone.

If anything, brick and mortar stores have become an even more key part of the fulfillment process during the COVID-19 situation where logistics snarls have made same-day and next-day delivery a complicated proposition. 

‘Buy online, and pick up in a store’ (BOPIS/BOPUS) services were being used by at least two-thirds of US shoppers in recent times and now they have become indispensable. Stores such as Walmart, CVS, Target, Staples, Office Depot, Pet Smart, Best Buy are offering either in-store or contactless, curbside pickups or both.

For eCommerce businesses, it will be imperative to have a brick and mortar location for the highest conversion rates, given that in the US, online spending represented only 16% of total retail sales for 2019, according to a Digital Commerce 360 analysis of Commerce Department retail data. Amazon’s share is a third of that. 

While those numbers are on a trend upwards, from a global perspective, pure-play eCommerce is the exception, not the rule.

eCommerce giant Amazon realizes the value of retail stores – it bought grocery chain Whole Foods in 2017 for US$13.4billion. Using insights gained from that purchase, Amazon now operates seven kinds of retail stores – Amazon Go cashierless groceries and convenience stores, Amazon Books bookstores, Amazon Pop Up themed kiosks,  Amazon 4-star general merchandise stores and Amazon Fresh Pickup grocery pickup locations.

While Bonobos, which started out in 2007 and is now owned by Walmart, gained some success offering menswear as a purely online business, it took the opening of a trial space for shirts in 2011 in the lobby of its New York headquarters for business to explode.

One of the biggest and most well-known examples of a purely online business that moved into brick and mortar has to be Warby Parker, which upended the business of purchasing eyeglasses online with its direct-to-costumer (D2C) play in 2010. Experimenting first with popups and then stores on wheels – decked-out buses – the company opened its first physical store in 2013, and surprised even themselves with the overwhelming response. The founders have said that the first few shops generated US$3,000 per square foot of sales, a number topped then only by Apple stores, and physical stores have remained the company’s biggest growth drivers. Since then, they have gone on to open a raft of stores in nearly 90 locations across 30 states in the US and Canada, each tailored to the local market with a custom and unified point-of-sale system. As they expand into contact lenses, the Warby Parker cross-channel strategy will employ more doctors and see all their retail stores equipped with eye examination suites.

Inspired by the ‘Warby Parker model’, D2C brands such as Allbirds, Glossier, Everlane, Casper and Away have disrupted the traditional sales channels for products as varied as shoes, makeup, clothes, mattresses and luggage. These DNVB (digital native vertical brands), all of which put their customer’s interests at the forefront, see physical stores as an extension or scaling up of their online presence, a core part of their omnichannel sales strategy to heighten brand awareness and unify the customer experience.

Not only that, bedsheet brand Boll & Branch has said that its “very profitable” physical store gives consumers the chance to touch products, a very important experience when shopping for a tactile product such as bedding. In-store average order value is said to be two to three times higher than that of purchases made online. No wonder pure-play online companies are racing to set up brick and mortar stores, mostly with a smaller footprint than the usual retail store in its class, despite the steep initial set-up investment.

Define the purpose of your stores

Stores are not only for sales. Digital retailers get to know their customers fairly well, with all the data they gather about the customers and their behavior on the site, but a store is a customer touchpoint like no other. DNVBs get to communicate their brand through another channel, while customers go to a nearby store to get a personalized, tailored experience or to trial products. Stores offer more effective pickups and returns. In-store staff become knowledgeable ‘guides’ to help them through the sales process, while receiving feedback, and their interactions provide learning and insights to make better marketing decisions. Bonobos physical stores are actually dubbed Guideshops. Products ordered there are directly shipped from warehouses to the customers’ homes, reducing the need for storage space.

Differentiate between online and off

The assortment of products offered as well as the customer experience could be different on the Internet and in stores. They use social and experiential touches that can scarcely be recreated online. Mattress company Casper opened “The Dreamery”, a so-called ‘nap store’ where customers can take a 45-minute nap for US$25. Furniture retailers Snowe or Burrow House, have a showroom model. Burrow House offers a  newly-opened space where customers can lounge, drink a coffee, watch movies, made videos of themselves and, of course, shop the displays. Beauty brand Glossier’s bubblegum pink stores, said to top Apple stores in revenue, are tailored to its millennial customers with communal tables for testing, a washroom with sinks and cleansers to wash off the makeup, and staff walking around with iPads taking orders for that instant gratification.

If your DNVB is considering adding on a large or small footprint retail location, there are a few things to consider:

Popups to test the waters or expand your reach

Popups are not a recent trend but remain a solid method to experiment and gauge market response especially when done in collaboration with an established retailer. They can be found within a traditional brick-and-mortar stores as a store-within-a-store, as a standalone kiosk or even a motorized vehicle like with Warby Parker. Such popups increase brand recognition or credibility when placed next to established brands inside stores, and gives shoppers a way to visualize them differently. The lower costs and risks of going this route are another factor in its popularity. Even if you have a physical store, you could consider pop ups as an alternative channel to get your products to travel.

Team up with tech

A recent study reveals that nearly 66% of shoppers check their smartphones in-store for knowing more about the product. As 5G opens up the way to a faster and richer surfing experience, online shopping via this channel will get even more pervasive and companies need to think about incorporating it into their sales and marketing strategies. Using analytics also helps you locate your stores where your customers are. Bluetooth beacons allow messages to be broadcast to customers’ mobiles within stores to aid conversion. POS systems reduces queuing time, while touchscreens can display offers, and enable customers to check stock availability or ask for help. 

Keep costs down but retail staff are valuable assets

While a low-inventory policy might be able to keep a store’s physical footprint down, many DNVBs realize that their retail staff as offering a unique competitive advantage compared to chatbots and artificial intelligence. Consequently, they are investing in training them specifically for their interactions with customers in their physical stores.

Online customers that don’t buy right away can be given an incentive to visit another channel, whether by way of a follow-up discount, scanning in a barcode for exclusive content, or giving digital customers a redeemable coupon to entice them into your physical store
According to CBInsight, since 2012, retail space occupied by brands that started online has grown by 1,000% in the top 300 malls in America.  A physical store might not result in a sale but it should be an integral part of a DNVB’s sales strategy – to keep abreast of modern customers’ shopping habits and engage them to create a cohesive and memorable customer experience where both online and offline channels work seamlessly together to clinch sales.

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