Why E-Commerce Companies are Adding Retail Stores

You may be surprised to learn that the internet is becoming a hot place for online shopping. A report from real estate services firm JLL revealed a common clicks-to-bricks strategy featuring more than 100 of the top digital retailers who were opting for--or, likely, experimenting with--brick-and-mortar initiatives. These companies stated that they plan to open an additional 850 physical locations in the next five years.

The report shows that apparel and accessory brands are the biggest clicks-to–bricks market. Houseware brands come in second. Consumers like to see the products before purchasing, which is why Warby Parker, an online retailer of eyeglasses, does well with a physical location. It is cited in the JLL report as one of the most successful implementers of this strategy.

Warby Parker has been expanding rapidly since opening its first brick-and-mortar location in New York City's SoHo district in 2013. Nearly 100 retail locations were open as of June 2019.

Here are some reasons why Warby Parker and other e-commerce brands are seeing success with brick-and-mortar moves.

Customers Can Try Before They Buy

JLL found that about three-quarters of clicks to bricks stores have inventory. Another option is a showroom-only model, where customers can view, purchase, and have shipped to them.

Sixpenny, a furniture designer and e-tailer, launched his website after a RoadSHOP tour of two cities. The concept featured "a shiny batch" of Sixpenny products. It allowed customers to touch and feel the solid wood-framed, handcrafted furniture in order to compare it with other offerings. In addition, Sixpenny added another stop to its tour.

Engagement Opportunities Abound

Physical stores can offer fun experiences. Glossier, a beauty and skincare e-tailer. Its pop-ups were decorated in millennial pink with dedicated selfie spots. This resonated with customers.

StockX connects buyers with sellers of sneakers, handbags, and watches. The pop-ups were created to allow sellers to drop off their items and receive payment for authenticated items. Tom Woodger, vice president of brand activation at StockX, says that the pop-ups quickly attracted window buyers.

That changed us to think this should be as much a brand space than an intake space." "Now, we immerse them into stories to instill that feeling of who we are.

StockX authentication is used to identify fake products and reject them. Exhibitors have shared their experiences. The company's first permanent space will open in New York's SoHo later in the year. It will include similar exhibits and help people to experience New York culture through showcasing future product trends.

StockX sellers can get merchandise via the website from the Nike Lab, which is located within walking distance.

Temporary Locations Allow For Testing

Brands often test clicks-to bricks strategies through low-risk temporary locations, which can help to inform larger openings.

StockX's initial pop-up was only a few years old when the company launched. The first pop-up was only open for the day of the Supreme final new product lines season's December release.

"The audience was very open to our ideas. We already planned another one in a bigger space, and for a longer duration the second we closed it."

Quick Launches = Quicker ROI

Also, pop-ups can be set up in a short time. StockX's initial one was launched in just days. It involved leaders selecting a spot they were comfortable with and existing staff from operations, quality assurance, authentication, and operations. Future pop-ups will allow for additional features such as easy parking and separate entrances for customers. UPS stops can also be provided for merchandise pickups.

E-Commerce businesses might need to be flexible about renting terms. For example, some spaces take only rent, while others take product sponsorship and rent. Others take commission and rent.

Analysts see landlords offering greater flexibility in terms of lease term lengths for permanent locations. Some of the newer brands will not be able to sign without this flexibility.

Landlords also recognize the potential for trending brands to draw attention to their retail spaces.

Better Understanding Customers

In StockX's case, pop-ups inexpensively taught executives what they needed to know before opening a permanent location--particularly that pop-up visitors are attracted to them.

StockX metrics include the number of people who come in, new members, and trades per day. The company has also conducted a comparison of holiday pop-ups vs. low season pop-ups and is currently testing different promotion methods, including posting on social media and sending promotional emails to geo-targeted audiences.

The physical location can also help expand the business beyond core customers. For example, Allen says Sixpenny's Denver RoadSHOP tracked sales both on-site as well as via online codes that were given out to visitors. As a result, the shop doubled the company's return on assets in the first three months it was opened.

Clicking-to-bricks can achieve increased product offerings. For example, Away luggage, a lifestyle brand after introducing weekend bags and toiletry sets. Customers trust the product and are more likely to purchase other products.

It is expected that clicks-to bricks will continue, especially for established businesses who have mastered the logistics of ecommerce. In addition, tenants and landlords alike will reap the benefits of a well-planned search for physical retail space. This is a growing trend that has more and more stakeholders.