Other companies making this back-to-the-future play include Bonobos, a men’s clothier, Warby Parker, an eyeglass seller, Renttherunway, which rents designer dresses and Birchbox, a subscription service for beauty and grooming products.
And there are some big benefits that can come when a company opens a physical location, says Wendy Liebmann CEO of consultancy WSL Strategic Retail in New York City.
Companies are realizing that they “can’t totally ignore people who want to touch and feel the merchandise,” she says.
Physical stores also make for an excellent marketing and advertising vehicles, said Leibmann. “It’s a way to differentiate from the plethora of virtual stores online today.”
A physical location can be a place for customers to check out merchandise first hand, but not necessarily walk out with it. That’s partly Amazon Books’ plan. Customers can buy books there, but are also encouraged to check out other products that Amazon sells online, such as a Kindle or Fire Tablet.
Amazon experts will also be on hand to answer questions and show the products in action.
In a letter posted on its website, Vice President for Amazon Books Jennifer Cast called the store a physical extension of Amazon.com, and noted that consumers can “lighten your load” by checking out products at the store and purchasing them online.
This strategy can reduce the cost of running a retail store, since a company doesn’t have to keep as much in stock as an ordinary brick-and-mortar retailer would.
For instance, New York-based Bonobos offers four styles of men’s pants , 20 color options and about 30 sizes in its clothing mix. That’s over 2,400 different possibilities.
“If you were actually to stock that in inventory, the amount of space you would need would be exorbitant,” said Erin Ersenkal, the New York-based company’s chief revenue officer.
Customers leaving its stores “walk out hands-free” as the Bonobos website says, their order shipped directly to their home or office.
By only stocking clothes that customers can try on for fit, and then shipping them, “we’re able to take all the energy that would have been focused on inventory management and shift it to our customers,” he said.
The advent of rapid delivery has played an important role in this retail evolution, says John Talbott, associate director of the Center for Retailing at Indiana University’s Kelley School of Business in Bloomington, Ind.
“If I’m interacting with something today and I can have it at home tomorrow, I don’t need to drag a huge shopping bag around all day,” he said.
The model has been used by other retailers, such as sellers of large-size products. “How often do you go into a furniture store and walk out immediately with a couch?” says Bonobos’ Ersenkal.
Free study subjects
One reason online markers like real-world stores is because they are full of real-world customers that they can observe in order to gain valuable insight into shopper likes and dislikes.
“If you look at it from a market research standpoint, [a store] pays for itself,” said Sucharita Mulpuru, a senior analyst with Forrester Research.
“It costs $10,000 to pull a focus group together,” she said. “If you look at how much it would cost you to do market research, and the amount of market research you gain just by observing people, it’s the equivalent of 100 focus groups.”
Even if a store made little money on its own, and most make a lot, they’d still be worth opening just for the chance to watch customers in action, Mulpuru said.
For ModCloth, having a store near San Francisco’s Union Square shopping district, right around the corner from its corporate offices, gave it a natural place to experiment and learn from its customer base.
The original plan was to create a three-week pop-up store, but the location proved so popular with shoppers — and so useful for the company — that they’ve renewed the lease multiple times. Now ModCloth is looking to open multiple new shops in the next year.
The question of where won’t be hard to answer. Their mountains of online sales data tells them exactly where “the most engaged segments of our customer base reside,” said Kaness.
The wave of the future
Warby Parker sees itself as “medium agnostic,” says co-CEO Neil Blumenthal.
“In five years, I’m not sure what other channels will exist,” he says. “The key is to stay flexible and follow the customers,” he said.
The Center for Retailing’s Talbott thinks the few online businesses now moving into brick and mortar is just the beginning of a larger evolution.
“Increasingly you’re going to see a blended environment” in which each business will have to find an equilibrium where there’s an ideal balance of e-commerce and a physical presence, he says.
That will vary by category and by geography, he adds.
“The bifurcation between e-commerce and traditional retail is gone,” Talbott says. “Retail is always evolving and it’s always changing. At the end of the day they’re trying to figure out what consumers want and provide it for them, wherever that is.”