From Clicks to Bricks: Why Online-Only Brands Are Investing Big in Physical Retail

Clicks to bricks | Shopify Retail blog

We’ve all seen the doom-and-gloom headlines as big-name stores shutter and thousands of workers find themselves without jobs.

While some retail brands are sputtering, all the hype around the “retail apocalypse” is just that: hype. Physical retail isn’t dying, but retail as we know it is shifting beneath our feet. But with the torrent of news, it’s challenging to separate signal from noise.

That’s why Shopify is introducing a retail-focused newsletter to equip you with the perspectives you need to succeed in a fast-evolving industry. We’ll surface the data and analysis that matters, and share undiluted opinions about the future of the industry from leaders on Shopify’s own Retail team.

While we’re all for considered takes on “what’s next,” we also recognize that reality unfolds by way of what businesses do, not what analysts say. And big-picture data shows retail as a whole is thriving — the National Retail Federation reported that for every retail store that closed in 2017 in the U.S., another 2.7 new stores opened.

For our first issue, we’re looking at this newfound enthusiasm and investment in physical stores — specifically, how former online-only brands are betting their future on brick-and-mortar with a strategy known as phygital retail, and what opportunities they see in meeting their customers on Main Street.

The Competition Next Door

Online upstart Adore Me has plans to fundamentally change the way women shop for lingerie — and at the center of their strategy is hundreds of new physical locations outfitted with high-tech amenities and concierge-level service.

Adore Me quickly hit $100 million in sales in 2017 after their founding in 2012. While that hardly touches the $7 billion in revenue from legacy competitor Victoria’s Secret, that isn’t deterring Adore Me from aggressively carving out its own place in the market.

Adore Me revealed it would be rolling out 200 to 300 stores across the U.S. over the next five years. And here’s the kicker: Adore Me plans to open their storefronts in close proximity to existing Victoria’s Secret stores. Talk about keeping your enemies close.

The brand’s first flagship opened on Staten Island earlier this summer, complete with a lingerie bar, light refreshments, and fitting rooms equipped with “smart mirrors” that make it simple to request additional sizes right from your room.

Adore Me has succeeded where traditional brands have stalled thanks to differentiators like a wide range of sizes, the availability of plus sizes, and its focus on comfort and quality. And the brand is leveraging cheap leases and a growing retail presence to lure more shoppers away from competitors.

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You Snooze, You Lose

Casper nap store | Shopify Retail blog

Image: Casper

Just a few months after Casper opened its first permanent storefront in NYC, the original mattress-in-a-box brand unveiled plans to roll out another 200 stores in the next three years.

The announcement comes as Mattress Firm, one of North America's largest traditional mattress chains, revealed it's filing for bankruptcy and will close 200 of its 3,400 stores with plans to shutter up to 500 more by the end of 2018.

Casper has long been awake at the wheel, first taking its products on the road in 2016 with a North American nap tour. Capitalizing on the early traction from that successful tour, the next-gen mattress merchant, which boasted a sizable $600 million in sales in 2017, also opened the doors to The Dreamery, a storefront where sleep-deprived New Yorkers can sneak in a quick snooze for just $25 a session (all on Casper mattresses, of course).

Casper’s initiatives demonstrate how next-gen retailers are successfully leaning into immersive, in-person shopping experiences rather than mimicking the efficiency of buying online.

For retail to succeed, in-person experiences must become more engaging and memorable than online shopping is convenient — and that’s how Casper is differentiating their showrooms and pop-ups from legacy competitors like Mattress Firm.

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Google Goes Offline

Google, still in search of ways to meaningfully enter the retail market, has shown renewed interest in opening their own storefronts, starting with a permanent retail location occupying nearly 14,000 square feet of space in Chicago’s Fulton Market.

This isn’t the first time the titan of web traffic has set its sights on capturing foot traffic — Google has previously dabbled in physical retail with a string of temporary pop-up shops — but the opening of this flagship store is a historic first for the company and a sign of increased investment in its retail strategy.

The store will likely serve as a showroom for Google’s ever-growing list of hardware, including Google Home, Pixel 2, and the Daydream View.

With its hardware selling faster than its Amazon counterparts lately, showcasing all those best-selling products in a brick-and-mortar store echoes the strategies of its big competitors. After all, retail was a cornerstone in Apple’s hardware success. Even ecommerce giant Amazon is investing in more cashierless stores and shelled out $14 billion last year for Whole Foods and its portfolio of choice urban real estate.

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"Online-first merchants were some of the first to figure that retail stores need to adapt to a new buyer journey that often begins on Instagram, continues to their online store, and includes a ton of up-front research into their brand and products. These merchants built their online stores to serve shoppers at any stage in their journey and now they’re bringing that thinking to their retail stores. Their in-store experience isn’t designed just to make sales within their four walls. The experience is about driving connection and conversation, while giving their shoppers a chance to touch and feel their products. And, ideally, that can turn one-time shoppers into brand ambassadors."

— Arpan Podduturi, Shopify’s Director of Product, Retail

Retail’s next evolution

Retail is undergoing a trying period in its long history. Customer preferences are evolving, and in-person sellers must adapt with them to survive. And while that prospect may feel daunting, the folks here on the Shopify Retail team are here to provide you with the tools and functionality you need to run your business better. We even moved into our own permanent storefront in LA recently to help retail merchants learn and grow with Shopify.

The mission of our new retail newsletter is to empower you with news and insights you need to make informed decisions about your evolving retail business. We know your time and attention are limited — which is why we appreciate this space in your inbox. And I look forward to serving up more news and analysis as we move forward together.

This was originally published as the first edition of the retail newsletter. To get industry updates and analysis delivered to your inbox, subscribe today.

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