As e-commerce continues to penetrate the consumer landscape, more and more direct-to-consumer brands, many of which were born online and once only existed in cyberspace, are opening up shops in real life.
“What’s really interesting with these online native brands is that we know that they can’t survive online alone,” Kristen Classi Zummo, director of apparel insights at The NPD Group, told WWD. “They have to live in both worlds. It’s important for the consumer. So they’re opening up stores; they’re opening up pop-up shops. They’re partnering with larger department stores.”
The examples of this are many. Online beauty brand Glossier is hosting a fragrance pop-up in Nordstrom — in addition to its other pop-ups and flagships. E-commerce giant Amazon and Refinery29, a media company, partnered for a 10-day “Gift Guide” pop-up this Christmas in Manhattan, complete with real-life influencers. Untuckit, the men’s wear brand for casual men’s dress shirts, which began by selling products out of founder Chris Riccobono’s New Jersey apartment in 2011, now has roughly 75 stores across the U.S., plus a store in Toronto and two in London, in addition to women’s apparel.
“We still think of ourselves as an e-commerce company,” Riccobono previously told WWD. “Our brick-and-mortar stores are for people who don’t want to shop online and still like to touch and feel the product.” There’s also Bonobos, Warby Parker, The RealReal and many more.
Web Smith, founder of 2pm, a subscription platform that tracks growth in e-commerce, added that opening up physical locations is another way of reallocating marketing spend.
“When brands make the decision to invest in physical retail, they’re essentially saying, ‘OK, we have ‘x’ amount of dollars. We could spend it on some form of marketing. But it’s not going to yield that much result,'” Smith said. “So they’re investing in physical retail to hopefully grow well beyond those capabilities.”
Smith’s not far off. According to a March 2019 report by First Insight, a technology and data company that tracks retail companies, shoppers typically spend more money in actual stores than online. This could be because physical stores have more distractions than a typical e-commerce site. Consumers tend to shop online when they know exactly what they want. In-store shoppers, meanwhile, are more likely to fill their real-life baskets with things they find appealing in stores, compared with their virtual baskets.
Still, the trajectory of retail seems a bit ironic in the age of the internet and when consumers are increasingly addicted to their phones.
Once upon a time, brick-and-mortar stores were the epicenter of retail. With the exception of mail-order catalogues, it was pretty much the only way to shop. Then came digital and the advent of brands that existed online only. Their success even caused legacy retailers to invest in online marketing and web site upgrades. Digital stores, after all, yielded less overhead costs, didn’t have to pay rent and therefore had increased margins.
But then something happened. Consumers and brands alike were eager to make connections. Shoppers wanted to touch, feel and see products with their own eyes — and to know they shared the same values with the brands that they loved.
“It’s about, what does the brand represent?” Smith said. “The store imagery, the decorations, how the employees are carrying themselves. To the consumer, especially for direct-to-consumer brands that are new and fresh, that’s what makes the brand real.”
Then many of the digital darlings — the latest cohort of retail experts who emerged by way of e-commerce — caught up with the trend. They realized the importance of building a community around their brand in the physical world.
“If you’re going to truly be a community, you cannot only exist in digital form,” said Michelle Cordeiro Grant, founder and ceo of direct-to-consumer lingerie brand Lively. “You have to exist in real life.”
One perk was that physical locations helped drive on-the-spot sales as well as digital sales at a later date, by way of a halo effect. Shoppers would tell their friends about the store, thus increasing store revenues even more, Grant said. Or, once a shopper found a brand and size they liked, would continue to shop on the web site at a later date to replenish their supplies.
“Even more importantly, it becomes a way to generate earned media,” Smith said, referring to the publicity generated from events and store openings, versus paid advertising. “Because of those pop-up events, or because of those collaboration events, you have acquired all these media companies that are writing about it, that wouldn’t have written about it if it were direct to consumer alone.”
One doesn’t have to look far to see examples of digital brands increasing both sales and awareness by way of brick-and-mortar stores. Online lingerie retailer ThirdLove opened its first brick-and-mortar pop-up shop in Manhattan’s SoHo in July, followed by a pop-up in Minnesota’s Mall of America in September. The lease on the New York store has recently been extended and cofounders and co-ceo’s Heidi Zak and David Spector said the private company continues to be profitable.
Rent the Runway, which began as a purely e-commerce site in 2009, now has stores in New York; San Francisco; Chicago; Washington, D.C., and Santa Monica, Calif. In March, the private rental apparel giant hit a $1 billion valuation.
Or, Rowing Blazers, the online men’s and women’s apparel retailer, which now has a store in New York City.
“Every single time [Rowing Blazers] launches a new collaboration, they have a party at their retail location,” Smith said. “It’s one of the most lively spots you’ll find in the city and it drives organic sales. People tell their friends to get in their to buy before the collaboration is done.”
As a result, all of these digital babies have become believers in brick-and-mortar.
WWD has rounded up a few and found out what they’ve learned in the process.
Michelle Cordeiro Grant: Lively
The former Victoria’s-Secret-executive-turned-direct-to-consumer-lingerie-company started her business online in 2016.
Since then, the brand has opened three stores, with a fourth store coming before the end of the year. In July, Lively was acquired by Wacoal America, with Grant continuing to serve as chief executive officer of the brand.
Meanwhile, Lively, at its roots, is still a digital brand aimed at Millennials and Gen Z-ers in search of bras and undies and want the convenience of shopping online. Hence, the path to physical stores was slow.
Grant said they started with “scrappy events,” like DIY classes or wellness panels.
“We would have these events and we would have products on a rack and people would be like, ‘Can I buy a bra while I’m here?'” Grant said. “It was almost like we were being forced into a pop-up.”
This lead to testing out pop-ups in New York, Dallas and Nashville.
“The results were staggering,” Grant said. “We were [return on investment] positive on these two-week activations. More importantly, we saw our digital transactions — not just our digital impressions — but our digital transactions increased by 175 percent in the city of Dallas and 80 percent in the state of Texas, with similar statistics in Nashville and Tennessee.”
But that’s not all. Physical stores offer other information that can’t be acquired online. Such as early reads on what styles customers were responding to — which means they can react quicker and adjust inventory if needed — as well as what is potentially missing from the assortment.
In the “old regime,” as Grant said, retailers would sign five- to 10-year leases for six or seven figures. Nowadays, with so many legacy retailers shuttering stores, smaller brands — many of who are digital natives — are able to test out pop-ups and shorter leases, anywhere to 12 to 18 months for about $50,000, to see if the location performs well, before trying signing long term.
The team at Lively also found that there are still some consumers who prefer to do their shopping in person.
“Millennials and Gen Z have been on screens the majority of their lives,” Grant said. “They have the ability to buy online, but they’re actually yearning to shop in real life. They’re using it as an activity.
“It’s not about dollars per square foot, which is the old way of thinking about retail,” she continued. “There’s more space and room for activations, events and other things. There has to be other reasons to come to the store beside shopping.”
Kate Hudson: Fabletics
The ath-leisure brand was born online in 2013, a partnership between actress Kate Hudson and Adam Goldenberg and Don Ressler, co-founders and co-ceo’s of TechStyle Fashion Group. The brand was designed with Millennial and Gen Z-ers’ shopping habits in mind and meeting those consumers where they are, which is mostly online.
But two years later the company opened six retail locations in the U.S.
“As a digital native, it’s important that you’re creating a community,” Hudson told WWD. “What we’ve found, at Fabletics, is that people want to see the product. They want to feel it. Even if you’re a digital native, at some point you’re going to want people to have the shopping experience.”
This year, the company is on track to surpass $400 million in sales. But that number is expected to be closer to a billion dollars within three years.
“Our growth rate at Fabletics has effectively more than doubled,” Goldenberg said.
And as revenues continue to expand, so does the company’s physical store footprint.
“We’re now opening up and accelerating our retail stores,” Goldenberg said. “That’s the one area we have just not played in. There’s still 65 percent of sales happening in [physical] retail.”
The e-commerce beauty empire Glossier started as a blog, “Into the Gloss,” in 2010, the brainchild of Emily Weiss. In 2014, after page views continued to multiply, and after securing venture capital funds, Weiss quit her day job as a fashion assistant at Vogue to focus on the business.
Four years later, Glossier had more than $100 million in annual revenue and two permanent stores — one in New York City and one in Los Angeles — along with three pop-up shops. (Two more are coming by the end of the year.) That’s along with the one billion-dollar valuation the company received in early 2019.
Early on, the digital beauty business realized the importance of the added real-life experience, said Ali Weiss, Glossier’s senior vice president of marketing.
These days, more than 50,000 shoppers visit the Glossier flagship in Manhattan’s SoHo neighborhood each month, waiting for hours in lines outside, just to get a peek at the Instagram-able interior. It’s what Ali Weiss, who is not related to founder Emily, calls the “Glossier World.”
“We’ve designed our stores to be a pilgrimage of sorts,” Ali Weiss said. “You’re able to touch and feel all of our products, but you don’t grab and go. It’s really about engaging and getting that ownership of your routine and also connecting with people who are part of the community in the store.
“What we gain from that is this depth of engagement,” continued. “Within that community we’ve built an experience you wouldn’t necessarily be able to have through a digital interaction with the brand.”
Miki Agrawal: Thinx
Canadian-born entrepreneur Miki Agrawal started the period-panties company by way of the Internet in 2014. She left Thinx three years later.
But the company continues to grow — both online and offline. In addition to the e-commerce shop, Thinx is now available in London’s Selfridges, 10 Nordstrom locations throughout the U.S., Galeries Lafayette in Paris and a number of boutiques in Germany and Iceland.
Even so, executives at the company quickly realized that wasn’t enough. The intimates company needed to build brand awareness and help educate people on the product.
“A lot of people are still grappling with what period underwear is,” said Siobhan Lonergan, chief brand officer at Thinx. “Sometimes it takes a store visit or an in-person conversation to really get that understanding across. People are often delighted to see how beautiful the quality of our product is. And they really appreciate the explanation of how it works.”
In October, Thinx opened its second pop-up shop in New York, in Manhattan’s SoHo neighborhood. The shop will stay open until the end of the year. The company also had pop-ups in Sydney and Melbourne this past fall.
Lonergan said the physical locations also allow Thinx to collect customer data and insights, as well as build community in real life.
“We have a really strong New York community and it’s important for us to touch base with them every so often, to just to have a presence,” she said. “And we welcome the opportunity to have conversations with customers, to really give them a deeper understanding of who we are and what we’re about.”
Tim Brown: Allbirds
Joey Zwillinger and New Zealand entrepreneur Tim Brown started the eco-friendly shoe company as a direct-to-consumer digital-only brand in 2016. Brown, a former professional soccer player, wanted an everyday sneaker that included natural materials and was free of logos.
The sneakers quickly resonated with consumers who were digging the shoes’ mix of sustainability and minimal fashionable aesthetic. Allbirds said within the first two years of operations, it sold more than a million pairs of shoes. Fans include actor and environmentalist Leonardo DiCaprio, who is also an investor, and former president Barack Obama.
The company’s response to the intense demand was to open brick-and-mortar stores in New York, San Francisco, Chicago, Los Angeles, Seattle, Boston, New Zealand, London, Berlin and various cities in China. It’s also expanded into new categories, like socks.
In June, Travis Boyce, head of global retail operations for Allbirds, told WWD that the exposure gained by opening an Allbirds in L.A. — a prime shopping market — was the equivalent to opening in five medium-sized cities.
Still, the retail expansion was far from over. In October, Allbirds said it has plans to open roughly 20 more stores next year, 11 of which will be in the U.S. A spokesperson for Allbirds added that all stores have been profitable within a few months of opening.
“Retail has been and remains to be an important part of our growth,” the Allbirds spokesperson said in a statement. “We’ve been able to provide shoppers with a unique in-store experience, educating them on our novel sustainable materials and practices and allowing them to touch and feel the product in-person.”
The spokesperson added that more than 80 percent of Allbirds’ sales are now in store. During last year’s holiday season, Allbirds’ permanent New York City store sold nearly two pairs of shoes a minute at its peak. The majority of the online orders, meanwhile, are from repeat shoppers.
“There is clearly still a strong demand for a physical retail experience,” the spokesperson said. “Retail isn’t dead; bad retail is dead. Our goal is to continue to approach the retail market with a fresh, human perspective, with a focus on reaching our customers where they are.”