Online retailers or “digitally native brands” are expanding their operations beyond e-commerce channels and creating physical footprints in markets across the country to enhance consumer engagement and elevate their brands. According to the International Council of Shopping Centers (ICSC), the migration from online to physical storefronts is gaining momentum. Digitally-native brands have realized that physical locations are an indispensable part of the retail mix. As a result, e-tailer brands such as Allbirds and Casper are now looking to invest in physical store locations and expand their presence. Given the increased rate online retailers are opening physical storefronts, what is driving them to expand? Let’s take a closer look at the growing clicks-to-bricks movement.
Physical footprints benefit digitally native brands
Creating physical storefronts is essential for digitally native retailers looking to grow their brands. Unlike online shopping, physical stores are able to provide customers with an immersive experience and a personal level of service. Despite the convenience of online shopping, consumers still enjoy visiting physical stores to see and feel products before purchasing them. Physical stores also have the opportunity to upsell additional products to customers when they come in to return merchandise. A simple return can easily lead to another transaction resulting in greater sales.
An additional benefit that comes with creating a physical footprint is the uptick in online traffic, or what we like to call “the halo effect.” A recent study from ICSC found that opening a new store leads to a 37 percent average gain in overall traffic to a retailer’s website and increases its share of web traffic within that market by an average of 27 percent. For emerging brands (less than 10 years old), store openings drive an average 45 percent increase in web traffic versus a 36 percent boost for established retailers. Digitally native brands that leverage both physical and online can expand their customer base and provide their audience with a 360-degree shopping experience.
Omnichannel retailing targets younger demographics
Omnichannel retailing is a natural fit for digitally native brands targeting millennials and Gen Z. Millennials and Gen Z grew up with technology and are more digitally savvy and aware. They interact with their favorite brands on social media and engage with daily content and targeted ads. While these demographic cohorts are most comfortable buying online, they are still concerned with value and crave an immersive in-store experience where they can see and test products. A 2017 Harvard Business Review study found that out of 46,000 surveyed shoppers, 73 percent used multiple channels to make purchases. Having the ability to interact with brands across multiple channels is a win-win for the consumer and the e-tailer. It provides customers with a seamless shopping experience and gives e-tailers a competitive edge over retailers who are solely online or brick-and-mortar.
How to create a successful physical footprint
When creating a physical footprint, there are a few things to keep in mind. Emerging digitally native brands are looking to be in prime locations where they’re surrounded by their target demographic, just like any other retailer. It is up to the e-tailer and its leasing agent to identify locations that can be configured specifically for the brand. To help, some shopping center owners are making it easier for emerging digitally native brands to test out spaces in new markets with flexible leases and personalized space. For example, Macerich introduced a new concept called BrandBox. BrandBox differs from a pop-up store in that the retailer is provided with a store space that is specifically designed to support the brand’s “aesthetic and ethos.” Leases can be short or long term and adjusted according to the retailer’s performance. Mall operator Simon released a similar concept called Launchpad that showcases new products and trends. Located at six of their U.S. malls, Launchpad incorporates virtual reality and technology elements to create new excitement for mall customers and give shoppers the opportunity to try something new.
Site requirements can vary depending on the retailer and its retail category. Some digitally native brands like Indochino only have showrooms in addition to their online channel, therefore their space requirements may differ. For Indochino’s showroom concept, customers make a one-hour appointment to come in and meet with personal stylists. The stylists assist the customers in designing their suit or shirt and help them choose from a variety of top-of-the-line fabrics and personalization options. Garments are then made and shipped directly to their door. It is a very personalized experience that resonates with consumers and sets the brand apart from other e-tailers and retailers.
The future of clicks-to-bricks
Big-box retail is on the decline making room for new, innovative concepts to move in. Many landlords are breathing a sigh of relief now that they have the opportunity to backfill ‘dinosaur’ retail concepts with digitally native brands that provide a more interactive and immersive shopping experience. Locally, we have e-tailers like Bonobos, Warby Parker, Marine Layer, UNTUCKit, and Brandy Melville moving into Center City, Philadelphia. These concepts add to the city’s traditional retail mix and appeal to Philadelphia’s large millennial and Gen Z population. Moving forward, we will see retailers sign shorter-term leases in vacant, well-positioned malls and shopping centers in prominent urban locations. Tech-based digitally native giants like Amazon and Google will continue to expand their physical footprints and utilize their unlimited data to optimize and monetize omnichannel retail. Whether it be a pop-up shop, showroom, or fulfillment center, these multi-channel retailers will revolutionize retail and become the biggest industry drivers.
For digitally native brands that want to truly become vertically integrated, the progression from digital to physical is natural. Etail executives that once vowed they would never open physical stores have recognized the opportunity to drive both top-line and bottom-line revenue by operating in multiple channels. E-tailers that take advantage of omnichannel retailing and have both a digital and physical presence will stay relevant, build long-term loyalty, and remain competitive.