by Stephan Schambach, founder and CEO, NewStore
Stores will always be an important part of the retail equation. In fact, according to research by the IAB, 30% of direct-to-consumer brands say opening stores is a present priority. This is likely because, in retail categories like fashion, more than 70% of purchases are still made offline.
So while the end-of-year headlines are about all the stores planned to close in 2020, let’s give nod to the brands baking brick-and-mortar into their future success.
Brands to Watch
The company known for “the world’s most comfortable shoe” is growing. It started as an online-only brand back in 2014 and began opening stores in the last few years. It has nearly 15 stores today and plans to more than double its fleet, adding 20 stores in 2020 across the U.S. and expanding globally too.
Company co-CEO Tim Brown said the brand is “hugely excited about the channel.” Fit is a common problem in the footwear industry — apparel too — so Allbirds is looking to give its customers a place to try on its product and also touch it. Its stores are also a way to create even more buzz about its sustainability focus. The brand’s shoes are made with natural materials like merino wool and eucalyptus trees. All in all, Allbirds is focused on putting the customer first with comfort and experience.
We’ve seen a lot of shifting in the industry this past year, with many traditional retailers pivoting to a direct-to-consumer model to better serve their customers. Levi’s is one example. The company is pulling back on its wholesale business as DTC sales grow. With the growth will come about 100 new company-operated stores.
Levi’s is a storied denim brand not afraid to take big risks. CEO Chip Bergh is leading the charge here — he’s helped the brand overcome the “death of denim” and now the “death of physical retail.” The renewed focus on DTC will allow the brand to put its innovative DNA at the forefront, attracting customers into brick and mortar where they can find a customized and immersive store experience.
It’s been a busy year for Nordstrom, the luxury department store chain. Not only did it open a massive flagship women’s store in New York City, but it also launched its Nordstrom Local concept which we can expect to grow in 2020. According to Co-President Peter Nordstrom, the Local stores are a place of service, connecting the digital and physical world and increasing engagement.
The Local store is an interesting format because it doesn’t actually have inventory for sale. Instead, it’s a place for shoppers to get personal styling and alterations, pick up online orders, and make returns, among other things. The goal is to amass frequent visitors, understanding that loyal customers become repeat customers with a higher customer lifetime value.
Target is investing in new stores in neighborhoods across the country. Last year alone, it opened 100 mini-stores and remodeled 500 bigger ones. It is on pace to open over 30 smaller-format stores each year for the foreseeable future. Most of these next-gen stores are popping up in city neighborhoods and college towns.
Even as digital sales have expanded for the brand, it’s been a successful strategy. Why? Well, the brand has a really captive audience in these areas and needs are pretty predictable. As such, Target is able to tailor its assortment to its local shoppers. These locations also make a lot of sense from a fulfillment and delivery standpoint. It’s a win-win.
5. Warby Parker
Warby Parker, the hugely popular eyewear company, will step up its physical retail game in 2020. The brand disrupted its industry nearly a decade ago, experiencing rapid growth early on. It has around 100 stores today and will add to its count in 2020 with second locations in several cities. According to Forbes, we can expect to see 35 additional stores in the new year.
A classic digitally native vertical brand, Warby Parker’s first store was the founders’ apartment. Stores were always a part of the plan. It was apparent from the start that customer interaction would be vital to the brand experience — people want to try on glasses before they buy, even if that means buying online. This is something the brand sees often and it’s why a seamless online and in-store experience is so important.
The benefits of stores
So, why are these brands, among others, opening new stores this year (when many other stores are closing)? There’s no exact formula to brick-and-mortar, but there are some winning elements that contribute to brands investing in their brick-and-mortar footprint. Here are a few.
• Brand building: Stores have long been a place to acquire new customers and build brand awareness. In recent years, we’ve seen brands shift their stores away from being purely transactional to being about the overall experience. Levi’s, for one, is building its store to be more experiential, decked out with customization, tailor shops and other digital features that bring value to customers. Allbirds, which grew from word of mouth early on, is banking on retail expansion to help it continue to differentiate its brand in the competitive footwear market. Its using stores to educate customers about material innovation and all it stands for as an environmentally-conscious organization.
• Experimentation: Stores give brands a place to experiment with different activations and innovations. The future of physical retail is making stores as easy to shop as it is easy to buy online. As such, it’s important to experiment with intuitive and novel digital features that make finding and buying product seamless and friction-free — from mobile checkout with digital payment methods, to VR/AR applications or in-store robotics. The McKinsey ‘store of the future’ is a good proof point for the many areas in which today’s brands are experimenting to bridge the online and in-store shopping experience.
• Store associates: One advantage brick-and-mortar will always have over online is its store associates. Data suggests that 43% of shoppers who interact with retail associates are more likely to make a purchase. Further, their transactions account for 81% more value compared to customers who don’t interact with a store associate. These retail store workers are the heart of the store experience. Even though most shoppers today are tech-first, they still value the opinions and support of store associates. With omni data at their fingertips, store associates are able to maximize the most critical shopping moments.
• The Halo effect: Physical retail can have a direct impact on digital engagement and vice versa. This “Halo Effect” phenomenon includes many halo events. Oftentimes an in-store to online event results in higher net spend because of increased consumer confidence. Warby Parker sees this. It’s customers use stores to try on glasses to see how they look. They then go home and buy online. On the flip side is buy online pickup in-store — a good example of an online to in-store halo event. Those that use the service are more likely to make an additional purchase in-store.
• Store fulfillment: More and more brands are turning their stores into fulfillment channels. This strategy allows them to reduce high shipping costs and fulfill orders more quickly. Even more, having a local store that handles returns (like Nordstrom Local) makes the return process infinitely easier. For the customer, it’s more convenient and often cheaper than dealing with post services. For the retailer, it gets the product back into its inventory pool and available to sell. Target is a good example of a brand capitalizing in this area. Its array of digital fulfillment options, such as same-day delivery, pickup in-store, etc., has helped lower out-of-stocks and increase customer satisfaction.
Physical Retail in 2020
It might be a showroom, a smaller format store, a pop-up, or even a new flagship. Whichever shape physical retail takes in 2020 is a brand-level decision. But, it all comes back to the experience. If the experience aspect is missing, the consumer will simply skip the store and shop online. So, if physical retail is in your strategy for the year ahead (as it should be), don’t simply replicate what stores have been about in the past. Give shoppers a reason to get up off the couch and feel excited to shop in-person again. The benefits are far-reaching and worth it.