December 27, 2014
From Clicks to Bricks: How Ecommerce Companies Benefit From Physical Stores
A funny thing happened when e-tail menswear pioneer Bonobos tried to sell shirts on its website. The New York City-based brand, which shot to the forefront of the direct-to-consumer online trend in 2007 with its line of pants, believed its model heralded the future of retail and set out to prove it with its first collection of shirts in 2012. Problem was, nobody wanted to buy them.
“Customers kept asking if there was any place they could try them on, though, so we built a couple of fitting rooms in the office’s lobby,” says founder and CEO Andy Dunn. “We didn’t tell many people about it, but it took off through word-of-mouth. Next thing I knew, we were on track to do $1 million in sales—out of our lobby.”
That experience changed Bonobos’ model forever. Today the company has 10 U.S. shops and plans to add 30 more in the next three years. And it’s not just Bonobos that’s changing its tune regarding brick-and-mortar: In October Amazon announced it will open a store in Manhattan, as well as pop-up shops in California. Women’s clothiers Nasty Gal and Rent the Runway are opening storefronts, as are subscription services and e-tailers Birchbox (beauty, grooming and lifestyle) and JustFab (shoes, clothing and accessories). Even Inspirato, a private vacation club, has come to appreciate the power of a physical consumer-facing presence.
Fueling this trend are venture capitalists who finally understand that physical retail isn’t a bad thing. “Back in 2010, holding inventory in a store wasn’t cool,” says Birchbox co-founder and co-CEO Katia Beauchamp, who concedes that she probably wouldn’t have attracted funding at the time if her business plan had included a rollout of retail stores. “But now investors see how the store can add legitimacy to an established online brand.”
At Denver-based Inspirato, a critical part of its latest $20 million funding round, led by tech-savvy firms W Capital Partners, Institutional Venture Partners and Millennium Technology Value Partners, was its plan to open five “experience centers” in upscale U.S. malls.
“An Inspirato membership is one of the only considered purchases where the buyer has no idea how he or she would use it,” admits founder and CEO Brent Handler. “The centers help prospective members understand how they can, and it brings that membership to life.”
None of this surprises Paul Becker, a senior consultant at Short Hills, N.J.-based FitForCommerce and a veteran of developing sales and marketing strategies for multi-channel retail businesses, including Hasbro and Ancestry.com. “E-commerce may be up by double digits, but brick-and-mortar retail is still responsible for more than 90 percent of sales in the country,” he says. “Expanding to retail stores is just another way for these pure-play e-tailers to capture some of that market share.”
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