More and more online brands are getting physical and opening brick-and-mortar stores. How many? JLL Research reported the top 100 digital-native brands they researched have announced plans to open at least 850 stores over the next five years.
Some start off as pop up stores and move into permanent spaces. Many are locating in upscale, premier malls. Most are what you’d expect — higher-end fashion clothing retailers where customers prefer to try on items before they buy. Some examples include Fabletics, an online active wear retailer, which recently added two dozen stores, and women’s intimates retailer Adore Me, which is planning 300 additional stores.
Other examples where customers want to interact with products before purchasing include mattress maker Casper (already in Target stores), which plans to open 200 of its own stores. The original online eyeglasses retailer, Warby Parker, opened its first retail location in SoHo in 2013. It now has 75 brick-and-mortar stores in the U.S. and more opening soon. Indochino offers tailored suits for men. You send them your measurements or visit one of their stores (now in most major markets) where a professional can take your measurements.
What’s driving this?
Boosting online traffic – For a brand that’s less than 10 years old, new store openings will result in a 45 percent increase (on average) in online traffic according to a recent survey by International Council of Shopping Centers. Plus, acquiring new customers via online marketing is getting more costly and difficult.
Expand customer base – In categories like clothing, there will always be a large customer segment that will only buy if they can first try it on. Yes, items can be returned, but many customers dislike having to re-package and send items back to the online company. Returning items to brick-and-mortar stores is relatively easy especially when it’s a store they visit regularly.
Deeper insights – Online retailers have compiled valuable customer product preferences and buying behaviors, which help them to choose ideal store locations, design appropriate floor plans, and determine optimal product assortment. Plus, gaining face-to-face customer intelligence can lead to new areas of opportunity.
Flexible leasing – Store closings have led to excess retail space and that means landlords are more open to shorter leases and lower rental costs. Plus, landlords can be more flexible when there’s less risk leasing to an established online brand.
Innovative strategies – The showroom model allows customers to interact with products, but they’re shipped from a warehouse. No onsite inventory = less square footage = lower rental costs.