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January 3, 2015

The New Kids on the Block

The world of retailing just keeps getting more exciting as the landscape continues to radically shift and morph with new business models and approaches in the age of the Connected Customer. Traditional retailers have been honing their digital chops with omnichannel strategies. But we’re also seeing other brands that are not traditional retailers now expanding with efforts to get closer to the consumer with a “physical” retail presence.

A new form of retailers are emerging and exploring the benefits of physical stores and showrooms. While many brands have leveraged pop-ups and store-in-store implementations, dedicated stand-alone locations are increasingly part of the strategy for many brands. Examples include Nike, Levis, Polo Ralph-Lauren and many others.

Samsung store Some brands have had long-standing programs using their own branded store locations. Some of these brands rely on the bulk of their sales through wholesale channels and now, increasingly, through online purchases. But they have also leveraged their own physical stores for branding and customer insights.

Newcomers continue to move into the physical store landscape. Samsung, seeking to increase brand awareness and better customer education, made a big effort with a store-in-store partnership with Best Buy and will soon be seeking to test their own dedicated stores to further solidify their brand presence and compete with the likes of Apple.

Now, even more interestingly, e-tailers are getting aggressive with new forays into dedicated shops and “showrooms”. While some of these efforts are still experimental, toe-in-the-water programs, many examples are proving to be quite successful to brands seeking to move beyond the confines of the digital world to establish valuable face-to-face connections with customers. Some of these brands may keep their physical footprints relatively small to grow awareness in strategic markets and leverage customer insights to further strengthen their online business. Others may prove to be more expansive and farther reaching.

There are many cases of brands moving into the physical store game, including Bonobos, Warby Parker, Birchbox, J. Hilburn, Trunk Club, Alton, Justfab, SwimSpot, Nasty Gal, BaubleBar, and others.

Many of the newcomer brands like to the physical retailing world are starting the move to the physical world by experimenting with pop-ups and store-in-store formats before taking the plunge into dedicated stores.

Birchbox, Athleta, and Amazon

Birchbox storeBirchbox, a New York-based apparel e-tailer, has been one of the oft-cited examples of this transitional, phased approach to entering physical stores. They partnered to make selections of merchandise available in Nordstrom and Belk stores. Birchbox expanded their own presence with dedicated “Guideshops” in multiple major markets.

Athleta storeAthleta, previously a web retailer for women’s sportswear, was acquired by Gap, Inc. and is making the move into dedicated brand stores. While other e-tailers will face learning curves on the science of merchandising in the real world, Athleta will likely benefit from the operations and traditional retailing expertise of Gap.

And then there’s the proverbial elephant in the room… Amazon. It’s unclear what their overarching long-term strategy is for physical retail presence, but they are likely to make waves.

Insights and Lessons Learned from Brands Moving to Dedicated Physical Stores

  • Boosting brand awareness and creating a connection with new customers is a big driver for many businesses. However, there are lessons being learned related to timing and brand awareness. While going physical may be a good move for some online-only   businesses, it helps to have recognized brand and buzz before opening physical stores.
  • Personalized services like beauty consultations and other one-on-one appointments are playing a big part in this new world of connected retailing. Stylists in Trunk Club locations consult with customers and fill a “digital trunk” with selected products to be shipped to the customer. This approach is proving to be effective at helping men who may not like the hassle of shopping, but need help and consultation to quickly find the right fit, brands and accessories that are right for them.
  • E-tailers and consumer product brands are recognizing the customers’ desire to touch and feel products in the real world. Many products are challenging to effectively sell online. Apparel, glasses, and makeup and beauty products in particular can benefit from physical shopping. This can be a challenge for e-tailers as they move from online to physical. They must learn or acquire the knowledge to merchandise products using best practices ingrained in traditional retail models.
  • The art/science of product curation has a big impact in showrooms for engaging the customer and educating them on offerings. Brands are experimenting with the breadth and depth of the products to show in the store, and they are finding the best ways to merchandise in person. Birchbox, for example, has showcased products by category, rather than by brand.
  • In-store events like celebrity appearances, classes, and other events like make-up and beauty parties provide brands with more opportunities to leverage the in-person benefits of a physical location. Using the storefront or showroom to leverage the “art of the happening” may prove to further enhance the brand to consumer connection.
  • Digital is still playing a part in the physical store. Even as traditional retailers are embracing in-store digital technologies, e-tailers and brand stores have an even stronger reliance on having a seamless connection with the web. Birchbox uses video content and product reviews with their interactive in-store displays. Alton Lane, another men’s apparel retailer, uses a 3D body scanner to take measurements, providing an in-person edge over the challenge of finding the right fit online.

  • Some of these new in-store purchases have shown higher average transaction sizes versus online. They are also seeing customers acquire a higher comfort level with brands in-store, then transitioning with ease to making follow-up purchases online.
  • One of the big findings of e-tailers has been that there are still many people who just like the act of browsing products in person. While traditional retailers are getting better at their web presence, e-tailers are learning how to best bring their website into the physical world.
  • Shopping, for many, is still an activity and event providing an outlet for moving around and exploring. As Warby Parker co-founder Neil Blumenthal has acknowledged, shopping is a form of entertainment.

While the online and physical worlds collide and alter the retail landscape, the recognition of the value of physical presence is gaining more visibility. Online is big, but brands are also getting physical.

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Q:

Why couldn’t the lifeguard save the hippie?

A:

Because he was too far out man.