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Dozens of formerly pure-play Internet retailers are discovering that their Act II is set inside a physical store. Recognizing that shopping centers represent a clear-cut opportunity to expand their brands, online sellers are setting up shop in some of the top retail properties and locations.
One notable example of the trend is prescription-eyeglass seller Warby Parker, which says it plans to open 25 stores and showrooms this year, which would bring the chain to a total of about 75. “They’ve come up with a concept that’s changing an industry as old as the ancient Greeks and Romans,” said Jeff Katkowsky, a vice president at Detroit-based retail builder Sachse Construction. “They’re selling pairs of glasses for about $95 in an industry that typically charges $600 to $900.”
Indochino, a seller of custom-made men’s apparel, was part of the early wave of online brands to go brick. And this retailer is thinking big: It now has a dozen stores — in places as disparate as Beverly Hills, Calif., and Ottawa, Ontario — with the ambitious goals of opening eight more this year and attaining to as many as 150 globally by 2020. The stores range from 2,200 to 4,350 square feet and are typically located in top-performing centers, such as Chinook Centre, in Calgary, Alberta, which posts $1,057 in sales per square foot, according to the Retail Council of Canada.
For such clicks-turned-bricks retailers, physical formats tend to be either showrooms or smaller stores that offer finely curated selections and emphasize additional online products, says omni-channel retail consultant Bill Mirabito, founder and principal analyst of Plymouth, Mass.–based B2C Partners. “Everything is connected throughout, so the system knows where the inventory is and where to get it if something’s not on hand,” he said. The chief focus of these businesses, unlike many traditional brick-and-mortar retailers is always the customer experience, he says. “It’s in their DNA.”
Investors seem fond of these online seller forays into the physical world. About two-thirds of e-retailers are backed by venture capital money that is explicitly for building stores, according to a 2016 report by international research and benchmarking firm L2, titled Death of Pureplay Retail. Most such retailers are opening stores in urban business districts, ‘A’ malls and lifestyle centers, Mirabito says. “They are going into places with high foot traffic already.” Online jeweler Blue Nile operates so-called web-room locations at Bellevue Square, near Seattle; Roosevelt Field Mall, in Garden City, N.Y.; Tysons Corner, in Virginia; and Washington Square, in Portland, Ore.
Online apparel retailers often come up with timelier, more-cutting-edge fashions in their physical stores than their traditional competitors have because of e-commerce data they have compiled, coupled with carefully considered social-media feedback, according to Brandon Famous, a CBRE senior managing director who is retail leader for the Americas. “This allows them to dictate trends,” said Famous.
On the macro level, tech giant Amazon.com is rapidly expanding its physical footprint with about 30 mall pop-up kiosks across 15 states, up from just six at the end of 2015. Amazon is also on track to open its 10th Amazon Books store by this fall, and the company is exploring numerous other brick-and-mortar concepts as well, according to published reports. Among those is a chain of furniture and home-appliance stores prompted by consumer reluctance to buy such products online, sight unseen. Amazon is also reported to be pondering an electronics-store concept similar to Apple’s stores, plus a brick-and-mortar grocery concept in India. Technical glitches during the test phase delayed the opening of Amazon Go, the company’s first “cashierless” convenience store, in Seattle, though the concept is still moving forward, Amazon says.
Google continues to toy with physical store ideas as well. The company opened its very first branded Google Shop in 2015, at Currys PC World, on London’s Tottenham Court Road. Previously, Google had opened multiple Androidland stores in Australia, in partnership with network operator Telstran. Last year Google opened a YouTube Creator Store in London, on the first floor of its headquarters building there, and also a Google pop-up in New York City that has since closed. And hundreds of eBay drop-off sites have sprung up in FedEx Office stores and other locations.
Meanwhile, smaller e-commerce operators are gearing up for the physical world too. Rent the Runway, which rents designer wear for special occasions, now has six stores, at such locations as The Cosmopolitan of Las Vegas and The Village at Westfield Topanga, in Woodland Hills, Calif., plus a New York City flagship on 15th Street.
Eyes open Warby Parker's first West Coast store opened at The Standard, in Hollywood, Calif.
Frank & Oak, a Canadian men’s apparel online retailer, asked customers to vote on the markets in which they would want to see brick-and-mortar stores set up. The company subsequently opened a dozen traditional stores in Canada and a pair of U.S. pop-up shops, one in Washington, D.C., and the other in Chicago. Birchbox, a beauty-products sample delivery brand, has opened a two-story store in New York City’s SoHo district, with products for immediate purchase. Also in SoHo, M.Gemi has opened its first high-end footwear showroom.
Mattress vendor Casper has opened pop-up stores and now sells bedding in West Elm stores. Aha Front, which specializes in artisan-made home-decor items, gifts and jewelry, chose a second-story space on Front Street in the Dumbo section of Brooklyn, N.Y., for that all-important first physical location. Pintrill, a brand for witty pins and accessories, also opened a Brooklyn flagship store, while high-end outerwear store The Arrivals has rolled out a Manhattan pop-up.
Not all such ventures have worked out, however. Chico’s put online women’s apparel seller Boston Proper, which it had acquired in 2011, into the physical space with 20 stores in various cities from Florida to Georgia, but then closed them all in 2015. Once-high-flying clothing seller Nasty Gal opened one brick-and-mortar store each in Santa Monica and Los Angeles, but closed them this past February after a bankruptcy.
So then, clicks-to-bricks is a growing trend, but it also remains experimental, observes Mirabito. “We’re going through a tectonic shift in retail right now,” he said. “Brick-and-mortar is trying to capture some of that magic created online and bring it into the physical world, and pure-plays are saying, ‘Maybe we can, too.’” A lot of online retailers, he says, are simply filling voids created by traditional retailers that have been slow to connect the dots in customer data and customer service.
But whether any given experiment here or there succeeds or fails, the realities behind the changes are here to stay, suggests Famous. “The blending of the online world in the physical real estate world, and vice versa,” he said, “is just a natural evolution of the industry.”
By Steve McLinden
Contributor, Commerce + Communities Today
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