Many digitally born businesses are taking the plunge into physical retail as they tap into the rise of the experience economy
American eyeglass retailer Warby Parker’s foray into bricks-and-mortar retail began in one of its co-founders’ apartments.
Warby Parker launched in 2010 as an e-commerce business enabling customers to order a range of affordable glasses to try at home before sending the unsuitable ones back. After a surge in demand, customers started asking Warby Parker if they could buy the spectacles in person.
Without a store or office, co-founder and co-chief executive Neil Blumenthal let people come to his apartment to try them on, displaying the stock on his dining room table. Dave Gilboa, also co-founder and co-chief executive, used his laptop as the cash register, getting customers to make transactions via the website. “It was clear that some of our customers wanted a physical shopping experience,” says Blumenthal.
This experience became the blueprint for Warby Parker’s brick-and-mortar strategy. After several experiments with pop-up shops, concept stores and a mobile store on a bus, Warby Parker opened its first flagship store in New York City in 2013. Now the business, which is valued at $1.2bn (£908m), has 31 stores across the US.
“There’s something special about interacting with customers first-hand, and we’re thrilled to have an opportunity to create immersive environments filled with books, locally specific design features and, of course, lots of glasses,” says Blumenthal.
Warby Parker is in the vanguard of digitally born businesses praised for their online business model but taking the plunge into physical retail. Nasty Gal, Everlane, Bonobos and Birchbox are also among those. Even e-commerce megalith Amazon has entered the fray, with a bookstore in Seattle and more reportedly in the works.
This may seem counterintuitive; after all, Amazon’s rise was due to the fact it could undercut high street competitors on price and convenience, contributing to the demise of Borders, among others. But with so many e-commerce businesses opening physical stores, and many traditional retailers bolstering in-store technology, the mass migration of shoppers from offline to online has not been as straightforward as pundits predicted.
“Shoppers will always want to touch and feel and experience a product in the flesh before they purchase it,” says Zoё Kelly, planning director at Vivid, a shopper marketing agency. “They might use digital to research and narrow down their choice, but when it comes to paying, they want to see it in the flesh and make sure it’s the right choice.”
The majority of Warby Parker’s sales are through e-commerce and 80% of its customers who have visited the store have also visited the website, according to Blumenthal. Warby Parker helps customers prepare online for a store visit, such as allowing them to browse frames, book eye exams or reminding them to bring along their prescription. It has also integrated social media in-store.
“We believe the future of retail sits at the intersection of e-commerce and brick and mortar,” says Blumenthal. “The two experiences should be seamlessly integrated and complementary. The ultimate goal for each shopping experience is the same: to make the process of buying glasses as easy and fun as possible.”
In recent years, many e-commerce businesses launched with the false assumption that it would be cheaper to operate than physical retail, says Ari Bloom, chief executive of Avametric, a fashion tech startup that creates virtual fitting rooms. As the e-commerce landscape becomes more competitive and the cost of deliveries and returns rises with shoppers expecting on-demand and speedier services, the cost of acquiring customers has become higher.
“It’s hard to present a compelling, sticky brand experience online, especially when selling non-utility items like apparel, accessories, home goods,” says Bloom. “Many companies actually lose money online and are still highly profitable offline.
“Many of us who come from the physical retail world have been waiting for the balance to tip – and I think we are finally see that happening, with more e-commerce first companies finally realising that physical retail is a crucial part of their brand experience and business,” he adds.
Take Birchbox, for example. It delivers boxes full of beauty product samples, with the aim of getting subscribers to buy full-sized versions from its e-commerce site. The dilemma it faces is that many people still buy beauty products in-store, meaning other bricks-and-mortar beauty retailers stores also feel the benefit of customers buying full-sized versions of the beauty product samples. Birchbox opened a store in New York in 2014.
While bricks and mortar presents an ever more compelling business case for online retailers, this does not mean they are following in the footsteps of traditional retailers; the retail space is being reimagined as something different, such as a gallery, museum, clubhouse or events space.
Birchbox’s store is not just for flogging stock. Spread over two floors, it has a beauty and nail salon, and people can use touchscreen devices to create bespoke beauty boxes. The staff have iPads and the in-store tech allows Birchbox to get valuable real-life insights into how their customers interact with the brand.
Similarly, Harry’s, the online razor subscription business, has focused on experience as a way of selling its products. A few years ago it opened a barber shop in New York, where its barbers introduce customers to its various products. It also uses an app so customers can get the same haircut each time.
This trend is being driven by a desire to tap into the rise of the experience economy: people choosing to buy experiences over products. While e-commerce is convenient, customers are still looking for surprise and spontaneity in their shopping experience, which can be achieved in the physical environment, says Michelle Du-Prat, experience strategy director at retail design and branding agency Household.
“There’s a positive tension between convenience and smart shopping, in the knowledge there will be this experiential element too,” she says. “That’s being pushed by millennials, who want to spend money on experiences as much as items.”
But traditional retailers also have the opportunity to compete with the internet upstarts by reimagining the shopping experience. Homeplus, for example, experimented with a virtual reality store that enabled people to buy their groceries in real life using their smartphones.
According to Du-Prat, there is also an untapped opportunity in click and collect, which is growing in popularity for traditional retailers such as John Lewis and Marks & Spencer. She says they could create engaging brand experiences for customers when they pick up items, which might compel them to shop in-store more.
“It’s about understanding different needs of customers and meeting them in interesting and quirky ways, not just online and offline, but the link between them all,” says Du-Prat. “It’s about how you can disrupt that.”