The rise of online shopping and digital retail channels originally spelled doom for the traditional brick and mortar retail model. The convenience of shopping online, and the ease of selling across digital channels, seemed to undercut the value of shopping centers and major malls in every way. At the time, the dominance of online retail seemed inevitable.
E-commerce has certainly had a major impact on the retail industry, and according to the U.S. Census Bureau, retail e-commerce sales in Q1 of 2018 were up 16.4% from Q1 of 2017. Without a doubt, online retail sales are steadily growing, but they still only accounted for 9.3% of all retail sales in Q1 of 2018.
Brick and mortar retail is still as relevant as ever, and a major new trend is shaping up as online retailers double down their investment in physical locations. ‘Clicks to Bricks,’ as it’s called, describes the trend of online-only retailers opening physical locations.
Companies that found success online are now seeking to capitalize on growing sales volumes by investing physical locations.
Retail Strategies for Opening Up Physical Locations
While many online retailers are now launching brick and mortar stores, their business reasons and retail strategy behind the decision vary widely.
Fashion designer Thakoon Panichgul opened his first retail store just a few years ago in SoHo, featuring designs straight off the runway. Panichgul said when consumers shop online they can’t experience the clothing in person, which makes it easier to object to higher prices. Designers didn’t have as much control over their vision when consumers weren’t experiencing the clothes in person. Ultimately, Panichgul found that selling items online undercut the presentation of his clothing, which is an important part of the sales formula when selling fashion straight off the runway. A physical location gave him an opportunity to sell more items by addressing the shortcomings of retail e-commerce.
Panichgul’s success highlights the fact that some small retailers are finding success by shaking up their online strategy. But they aren’t the only ones making a renewed investment in physical locations, and some of the big names in retail are the ones driving innovation.
Warby Parker may be the best example of the interplay between online and offline retail and how opening physical locations can be sound retail strategy. Starting out as an online-only retailer for designer eyeglasses, they opened their first retail store in 2013 after finding massive success online. One year later, there were 8 Warby Parker stores, all averaging over $3,000 a square foot in revenue annually, which was higher than Tiffany, Ralph Lauren, and nearly every other retailer out there.
Now, more than half of Warby Parker’s sales happen in physical stores. But, around 75% of in-store visitors have visited the Warby Parker website. Brick and mortar has become an essential aspect of Warby Parker’s business model, but it’s blended with value derived from online channels.
Part of what makes an online retailer like Warby Parker so effective at brick and mortar retail is that they’ve collected a wealth of information about their customer base through online channels. They know where they live, how often they shop and how much they’re willing to spend. When this information is combined with the data a retailer typically aggregates for retail location strategy – such as area population and demographics, income levels, and competitive sales volumes – the result is a far more informed decision-making process than most retailers are able to achieve. Online retailers like Warby Parker are better able to pinpoint their audience and strategically locate themselves to maximize foot traffic and revenue.
For Warby Parker, brick and mortar stores have become a cornerstone of their business strategy. They provide an entirely new way to reach and engage their customers. For small retailers like Thakoon Panichgul, a physical store expands their brand presence and closes more sales. For retailers big and small, however, a brick and mortar store provides the opportunity for an entirely new experience.
Brick and Mortar Stores are All About the Experience
Physical stores allow for engaging, tactile experiences that simply cannot happen online. Brick and mortar locations give brands the opportunity to make deeper connections with customers and merge offline and online channels to make a truly unique, memorable experience.
Big retailers are merging online and offline channels, highlighting the importance of the customer’s experience.
At Saks Fifth Avenue Downtown, product displays are now inspired by websites to encourage people to browse the store like they would a website, helping to showcase more products per visitor. The store is ‘decompartmentalized’ and some products are even laid down flat on a table to mimic the way they’re presented online.
In an even greater push to merge digital and physical channels, customers can begin shopping online, then make an appointment to see a sales associate in person and continue shopping. Even after their first visit, customers can continue to see the same sales associate online or offline to continue receiving highly personalized service.
Other retailers like Polo Ralph Lauren have introduced smart touchscreen mirrors in fitting rooms that suggest additional items for shoppers based on what they’re trying on. These mirrors even send links to product pages via text message so customers can purchase products online at a later time.
Even when a sale occurs online such as the scenario above, the physical store still has a highly relevant presence. Brick and mortar locations have the potential to drive online sales, and online channels have the potential to drive in-person sales. If a retailer can creatively combine these channels, the customer’s experience is dramatically improved, helping to build deeper connections and brand loyalty.
Overall, physical and digital sales channels and brand experiences are merging. Retailers of all sizes are finding it’s important to strike a balance between the two, so they can provide a highly relevant and memorable experience to their ideal customers.
The “Clicks to Bricks” trend represents retailers’ desire to expand their brand presence, improve the experience they can offer their customers, and ultimately drive higher sales volumes.