8 Strategies and tactics of clicks-to-bricks pioneers
Lessons learned from Amazon, Bonobos, Warby Parker, and 28 other clicks-to-bricks brands
I recently became infatuated with the increasing number of pure-play e-commerce brands opening physical retail stores. Why are they doing it? Are they successful? What have they learned so far? Where are they going next?
These questions among others were on my mind as I studied more than 30 brands making the leap from clicks to bricks. I scoured news outlets, retail strategy firms, and even visited several of their stores in NYC to get familiar with the offline shopping experience of e-commerce retailers.
Along the way I started to find patterns in the strategies and tactics of these early pioneers. I’ve tried to capture the essence of these lessons learned to be used as guidance and inspiration for other e-commerce brands looking to make the leap to brick and mortar retail.
Lesson 1: Prototype and experiment before committing to a physical store
Brick and mortar stores carry new types of fixed costs and risks: leases, labor, training, utilities, inventory, etc. Many of the brands I studied started small with a pop-up shop or two in major retail thoroughfares. But some brands experimented at an even smaller scale.
Warby Parker co-founder Neil Blumenthal let customers try on spectacles at his dining room table before opening the first store. Customers would use his laptop to make the purchase on the Warby Parker website. Bonobos and Rent the Runway first tested the market for physical retail using their corporate headquarters. Blue Nile experimented with temporary counters in a handful of Nordstrom stores. Amazon took a similar approach when they set up kiosks in malls and college campuses.
BaubleBar co-founders Daniella Yacobovsky and Amy Jain discovered that these early experiments can also generate valuable data:
“Most importantly, it provided us with useful data around mall format and how that differs from standalone…We now feel well armed with information to think through what BaubleBar retail should look like.”
Melissa Gonzalez of pop-up architecture firm The Lion’esque Group summarized the benefits of prototyping nicely when she spoke with Shopify,
“A pop up is much more than just a sales channel… via pop-ups, brands can test locations within a country, state, or city. They can learn about foot traffic, dwell times, conversion rates, and compare cart sizes to online sales.”
Lesson 2: Offline retail can create a halo effect for the online store
Although many brands open physical stores as part of an experiential marketing strategy, they can also be a significant revenue driver. Bonobos, Warby Parker and Birchbox have all seen economic success from their offline store expansion. Warby Parker Co-founder Dave Gilboa told The Guardian,
“We also see a halo effect where stores themselves become a great generator of awareness for our brand and drive a lot of traffic to our website, as well and accelerate our e-commerce sales.”
Gilboa added that stores open for at least two years are already profitable.
Birchbox estimates that customers who visit the store have three times the value of customers who only shop online. Rent the Runway also found that average order size has been higher in the physical store, but their conversion rate also increased. The average order size of Bonobos Guideshop customers is twice that of the online store. As co-founder Andy Dunn shared with the New York Times,
“The guideshops attract a really high-value customer. He spends more money, he’s more valuable in the long run, and he’s more engaged with more categories.”
Why are offline stores creating such a huge leap in value for these brands? Liraz Margalit, a web psychologist, shared an idea with Retail Dive.
“When you go to buy something, it’s not always a rational decision. It’s an emotional one. But sitting at our screens is a more ‘rational’ environment than being in a store.”
Lesson 3: Leverage the online store to create more cohesive offline experiences for customers
E-commerce brands that start online often have a mountain of data about their customers before they ever step foot in a store. Leaders like Birchbox, Warby Parker and Rent the Runway are using that data to create brand new in-store experiences.
Rent the Runway stylists will use online member data to pre-curate dresses before the customer arrives. Before visiting a Warby Parker store, customers can browse frames and book eye exams. Sales associates armed with iPads can pull up customer information in store — making the transition nearly seamless. But it’s not just about efficiency. Discovery specialists at Birchbox stores will pull up data on subscribers to make targeted sales. By reviewing the sample products a customer received in past boxes, specialists can make suggestions about full size items that command a higher margin.
Lesson 4: Exploit online experience gaps to increase engagement
Although there is much brands can do online to create unique customer experiences, offline presents an entirely new engagement model. Simply merchandising goods sold online is a flat footed approach. Top brands are taking a strategic look at the experience gaps in their online store and creating targeted solutions to fill the gaps offline.
Rather than set up a standard physical store, Harry’s, the razor subscription service, created a barber shop in NYC. The barbers use Harry’s products and lightly merchandise the store with Harry’s and partner products to boost the brand image. Their “Cut Archive” app allows customers to save their preferences and help the barbers deliver a consistent experience.
If you’ve ever shopped for kitchen and bath fixtures you know how frustrating it is to have to choose a new faucet or appliance without actually using it. Pirch, an online kitchen and bath brand, recognized this experience gap and addressed it beautifully in their 32,000-square-foot store in SoHo. When I visited, I was delighted to test fully functional faucets and ovens with full menu structures. Pirch also offers several live cooking demonstrations that help bring complex in-use experiences to life.
For Warby Parker, trying on eyewear was an obvious experience gap online, but they didn’t stop there with their offline stores. In addition to offering on-demand eye exams, Warby Parker cleverly offers shoppers reading material with shelves full of books and an extensive visual brand timeline under the glass tables. Many locations also have a photobooth, which, in addition to being perfectly hipster, also gives shoppers something tangible to share a new look with their friends and family before purchasing.
Lesson 5: Recognize the importance of hiring and training talented in-store staff
Native brick and mortar brands are well aware of the importance of the in-store sales and customer service staff. Nordstrom in particular has developed a reputation as the pioneer of early customer service excellence that many brands still struggle to replicate.
Most pure play e-commerce brands also understand the importance of customer service — it just looks different online. The key is understanding the dual role of in-store staff. Many are responsible for not only customer service, but also sales. Stylist at Rent the Runway are critical to achieving the larger cart size of in-store shoppers. They do so by recommending accessories or suggesting other occasions where a new outfit may be needed, among other things.
Upselling and cross-selling are well established goals for most retail sales staff, but most pure-play e-commerce brands lack the human skill to do this well because they rely on their technology platform to do it automatically. Bonobos founder Andy Dunn said finding and training staff was one of his most difficult problems. As he told Entrepreneur Magazine,
“We were searching for what I refer to as the ‘unicorn,’ someone who understood the old world and is excited about the new world.”
Lesson 6: Use online data to inform the store, and offline data to inform the strategy
Few retailers leverage existing customer data effectively in their physical stores today. Even fewer are using data from their physical stores to inform their omnichannel strategy. The major exception is Amazon.
Amazon is reportedly using their extensive shopper dataset to make merchandising decisions in their new book stores. The Guardian reported that, “Its bookstore is closely linked to its website. Amazon Books’ 5,000 titles are selected based on customer ratings and pre-orders on Amazon.com.”
Many believe Amazon’s pushing into physical book stores represents a strategy to collect an entirely different type of data. As Forrester Research analyst Sucharita Mulpuru told Business Insider:
“If they sell books, awesome. Even if they don’t sell books, there’s a lot to learn about how people discover products, how they shop for products. Does a physical store increase your likelihood to spend with Amazon in general? Does it make you more loyal to Amazon?”
Lesson 7: Build strategic partnerships with those that already have physical storefronts
For e-commerce brands, going offline doesn’t have to mean opening a stand-alone store. Some of the top brands started by creating partnerships with existing retailers before opening their own store — and many still exist.
This can be mutually beneficial. West Elm President Jim Brett told CNNMoney:
“I would rather move faster and partner with someone who really knows the business. The guys at Casper are living and breathing that product. They’re going so much deeper into the category than we typically have.”
Lesson 8: Leapfrog traditional retail with emerging technologies like AR and VR
Giving shoppers the ability to see and experience a product is the primary motivator for pure-play e-commerce brands to move into brick and mortar retail. However, new technology may allow brands to skip physical stores completely.
Wayfair is leading the way with a suite of AR and VR technologies emerging from their seven-person R&D team. WayfairView for Google’s Tango AR platform and Patio Playground for Oculus Rift are the latest applications that allow shoppers to engage with 3D models of furniture. The WayfairView is perhaps the most promising. It allows users to view 3D models of furniture in their own home — a step further than any physical showroom can deliver.
Mike Festa, the head of Wayfair’s R&D lab said,
“Home goods is one of the last remaining industries that still retains a strong brick and mortar presence, and we believe that there’s an opportunity to further accelerate the shift to online for this category through VR and AR technology.”
And this is just scratching the surface of the massive potential for AR and VR in retail.
Conclusion: Test before investing, leverage existing data, target online experience gaps, don’t skimp on staff, and keep an eye out for emerging technology.
With 90 percent of retail sales still coming from physical stores, it isn’t surprising that many e-commerce brands are exploring brick and mortar stores. People still enjoy the spontaneity and excitement of the in-store shopping experience in spite of the convenience of e-commerce.
Meanwhile, traditional brick and mortar brands aren’t standing still. In fashion, Saks and Rebecca Minkoff are starting to master what early disruptors like Bonobos started. Saks is pushing an omni-channel experience that include: 1) product displays inspired by websites, 2) de-compartmentalizing the store to commingle handbags, jewelry, and outfits, 3) allowing online shoppers to live-chat with a sales associate at a nearby store, 4) seamless online-to-store-to-online transitions, and 5) free in-person style consultation over lunch (Power Lunch program)
Just as many physical retailers are looking to emerging e-commerce brands for inspiration, e-commerce brands would be wise to watch how established retailers are responding. Technology is quickly leveling the playing field and no one is sitting still.
Full list of sources and brands here