LEFT Birchbox, Soho Photo: birchbox.com THERE’S NO DOUBT ABOUT ABOVE BLENDING IT. RETAIL IS INCREASINGLY Bonobos, Alpharetta Photo: itsarkeedah.com DRIVEN BY TECHNOLOGY. But shopping still remains a social endeavor. When E-COMMERCE the weekend or a long-awaited vacation arrives, friends text friends, families call up relatives, and people join together to get out, interact with prod- WITH BRICK ucts, and revel in the entire experience. After all, the majority of American consumers still prefer to shop in stores, and most retail transac- AND MORTAR tions still take place in person. Although there was a time when the Internet was thought to be the future of e-commerce, even those whose roots remain in cyberspace are realizing the importance of entering the real world. The Carlson Group is uniquely suited to help tackle the challenges involved with this process by interpreting an online retailer’s brand message and marketing communication style, understanding what the company is trying to achieve, and melding the online and in-store shopping experience for consumers. VOL. 16 APRIL 2016 © 2016 The Carlson Group, Inc. | All Rights Reserved. BACK TO THE FUTURE traditional retail setting. In the process they are New Development expanding and growing by reaching more peo- “Not everybody shops In November 2015, Amazon.com Inc. opened its ple, gathering more customers, and building their online, and not everybody first brick and mortar extension – a bookstore in brand. At first glance it might seem like backtrack- shops brick and mortar, Seattle – and now has plans to open a second ing or reverting to the past. In reality, it’s entering either. Omni-channel 1 the future by embracing the best of both worlds. location in Southern California. When one of the is a way for brands world’s largest online retailers makes a move to- and retailers to reach a ward physical locations, it raises eyebrows – and TREND EVOLUTION different demographic, a rightfully so. In many ways Amazon revolutionized Why are e-commerce retailers drifting away from an different style, a different the way consumers shop. online only business model? type of consumer and buyer.” ~ Mark Adams, When the company began selling books over 20 Crowded Space COO at TCG years ago, its business model seemed simple: Online real estate has become congested, and bid- eliminate the added costs of physical stores, com- ding on keywords to land on the first page of search bine it with limitless capacity for inventory, and results is costly. Macy’s and Nordstrom spent an sell products at lower prices than other compet- estimated $6.4 million and $4 million in paid search itors could. Fast forward to today when e-com- listings for the top 1,000 apparel-related keywords in merce transactions make up close to ten percent the first quarter of 2015 alone.3 of all retail transactions in the United States – a number that continues to grow annually.2 Omni-Channel Movement Though a noteworthy and perhaps surprising example, Amazon’s recent transition into brick and mortar is simply part of a much larger movement that’s now well underway. In the last several years, a number of prominent online companies have launched a physical presence. Designer-gown rental service Rent the Runway, clothing retailer Bonobos, eyewear specialty store Warby Parker and beauty-products subscription company Birch- box all began as Internet-based businesses. This trend toward omni-channel means merchants are looking to provide customers with a seam- Warby Parker, Scottsdale less experience whether shopping online or in a Photo: warbyparker.com Costly Shipping Amazon has established a difficult standard by offering discounted and free – not to mention fast – shipping on its products along with free returns. Most “It’s very hard to launch a other e-commerce companies have been forced to follow Amazon’s lead, but the shipping is expensive. brand these days that’s Ultimately, online retailers must absorb the costs, just online-only. It’s an which cuts into potential profits and places further incredibly difficult and stress on pricing strategies. crowded e-commerce environment.” ~ Sucharita Considering these challenges, it’s easy to see why Mulpuru, retail analyst at online retailers are increasingly taking advantage of Forrester Research4 the benefits physical stores can offer. Amazon Photo: destination360 VOL.16 › APRIL 2016 1. “Amazon to Open Second Physical Bookstore.” design:retail. March 9, 2016. http://www.designretailonline.com/news/retail/Amazon-to-Open-Second-Physical-Bookstore-25647.shtml?utm_source=SilverpopMailing&utm_medium=email&utm_ campaign=Daily%20Newsletter%20Template_030916%20%281%29 2. Sax, David. “Why Would Amazon Want to Be the New Barnes & Noble?” The New Yorker. February 3, 2016. http://www.newyorker.com/business/currency/why-would-amazon-want-to-be-the-new-barnes-noble 3. Walsh, Mark. “The Future of E-commerce: Bricks and Mortar.” Guardian. January 30, 2016. http://www.theguardian.com/business/2016/jan/30/future-of-e-commerce-bricks-and-mortar 4. Ibid. Bonobos. Newport Beach Photo: brickandvine.com TESTING THE WATERS It’s much more difficult to move from online to brick and mortar than it is the other way around. From selecting the right locations and negotiating leases to hiring and training new employees, the process is complex, so it makes sense that online retailers Rent the Runway, Georgetown are finding ways to test the market before diving in of inventory, keeping the rest in the warehouse Photo: thechicincumbent.com head first. where it can be shipped directly to the customer. The growing trend of venturing offline has been to Rent the Runway open a pop-up location or showroom before taking Designer-gown rental service Rent the Runway the plunge and investing in full-fledged physical didn’t invest much capital in its first physical location, operations. The goal of these stores that operate either. The store was set up in August 2012 within for a short duration, from a day to several months, its corporate headquarters. Giving women the is to spread the word and highlight the brand in a chance to touch and try on fancy dresses made high traffic area. This allows the retailer to try out a good sense, and the transition was a success, lead- physical location without committing to a long-term ing to locations in New York City, Washington, D.C., lease or other traditional retail costs, experiment Chicago, and Las Vegas. with different locations and promotional initiatives, “Pop-up shops are the and allow customers to sample products. most effective way to GOING BACK TO BRICK AND test the retail waters and Bonobos MORTAR bring your product to Founded in 2007 as a men’s pants online store, When encouraged by the results of less risky the consumer in a low Bonobos first launched its “guideshop” showroom ventures such as showrooms and pop-up shops, cost, short-term [way]. concept when it opened its office lobby as a fitting it can make sense to launch flagship stores, and The test might also help room for customers back in 2011 and has since e-commerce companies tend to be well-suited to brands realize they are find success right out of the gate. Typically they have launched a number of stores in major cities across actually not ready for solid data in terms of their buyers and can gener- the country. the physical world.” ~ ally mine that information to determine good store Stacey Widlitz, president These guideshops are places for customers to be locations, an appropriate product mix, and merchan- of SW Retail Advisers 5 guided through a catered experience. They can dising techniques to use within certain locations. check out clothes, try them on, and place an order The stores can become brand awareness genera- that will be delivered to the shopper’s address. The tors and drive added traffic to a company’s website, concept allows the store to hold a smaller quantity enhancing e-commerce sales along the way. VOL.16 › APRIL 2016 5. Saiidi, Uptin. “Why is E-commerce Eyeing Brick and Mortar?” CNBC. April 5, 2015. http://www.cnbc.com/2015/04/02/why-is-e-commerce-eyeing-brick-and-mortar.html Birchbox, New York Warby Parker concept to those exploring it for the very first time. Photo: Fortune.com After Warby Parker’s first foray into the physical The store was modeled after their online “try, learn, realm (with its Manhattan showroom in 2013) the buy” mantra, creating a cohesive brand identity both company opened its Soho flagship three years later in-store and online. Birchbox engages customers and now has over two dozen stores nationwide. by incorporating video tutorial streams, a “Product Stores that have been open at least two years are Matchmaker” touchscreen, in-store user reviews already profitable, according to Warby Parker’s displayed on iPads, and a “Try Bar” that incorporates 6 Co-founder and Co-chief Executive Dave Gilboa. manicures, makeup applications, and hair styling. LINKING ONLINE WITH REAL CONCLUSION “The big benefit of the A common misconception is that the growth of on- flagship stores is that WORLD line shopping has dramatically reduced the amount they’re terrific marketing In an era when traditional retailers are scrutinizing of shopping that takes place within physical stores. vehicles. Not only do their physical store counts , e-commerce retailers The reality is that many still want to see, feel, and those stores tend to be are less wary of making the move to brick-and- try on products before making a purchase. In fact, economically successful mortar because they’re able to view storefronts as according to one study, 85 percent of consumers on their own but they an extension of their brand as opposed to the sole 8 still prefer to do their shopping in a physical store.