A Blog by Jonathan Low


Dec 22, 2012

Web-Only Shopping Sites Now Opening Actual Stores

Convergence and convenience.

It's a mash-up and it's working.

The web-only concept was great. Until people discovered that for certain products that ol' touch and feel thing was important. So important that it's absence affected sales.

But what they discovered was that if you add the online feature in the store, combining the convenience of web-based search with the access of physical inventory that helps persuade the uncertain to buy, sales go up.

Mobile oriented app-based strategies have helped but as the following article explains, 90 percent of sales remain store-based and shopping continues to rank among the highest of leisure activities, providing compelling incentives for ecommerce enterprises to creatively combine the tangible and intangible. Translating the look and feel of the site into a physical presence can be challenging but some differentiation is probably expected and can enhance the purchase proclivity.

The larger point is that the convergence of the web-based world with the traditional retail experience has advantages across a range of platforms and channels that may, ironically, make the business model even more competitive. JL

Stephanie Clifford reports in the New York Times:
Andy Dunn was fierce about the Internet-only model of his apparel company, Bonobos, after helping to found it in 2007. He gave a speech, “The End of Apparel as We Know It,” arguing that stores were a bad economic decision. As he told a news channel in 2009: “We keep men out of retail stores when we know that men fundamentally don’t enjoy shopping.”

How times have changed. Recently, Mr. Dunn was looking with satisfaction around a Bonobos store in Manhattan, one of six the company opened this year. “I was pretty puritanical about e-commerce only,” he said, but found that about half of would-be customers would not order apparel online because they wanted to feel the merchandise. E-commerce is growing fast, he added, but “that doesn’t mean the offline world is going away — it just means it’s changing.”

After years of criticizing physical stores as relics, even e-commerce zealots are acknowledging there is something to a bricks-and-mortar location. EBay and Etsy are testing temporary stores, while Piperlime, the Gap Inc. unit that was online-only for six years, opened a SoHo store this fall. Bonobos plans to keep opening stores, and Warby Parker, the eyeglass brand, will soon open a physical location.

The companies say they are catering to customers who want to see what they are buying in person, and who see shopping as a social event. As they build the locations, though, the retailers are reimagining some long-established rules — carrying less inventory, having fewer staff members and embracing small and out-of-the-way locations. In the process, they are creating what could be a model for efficient in-store operations: the store as a showroom.

“Well over 90 percent of sales still happen in physical stores, so there is a huge, compelling reason to think about the physical store as a driver of sales,” said Sucharita Mulpuru, an analyst at Forrester Research. She said Web retailers had advantages over traditional ones: they are not stuck with old cash registers and sales software, and the weak commercial real estate environment combined with their Web sales history allow them to get leases on good terms.

Faith Hope Consolo, a Manhattan retail real estate broker, said she was seeing more inquiries from online-only retailers about opening shops, particularly in smaller spaces.

“They’ll show them a few products, lure them in and hopefully have them hooked,” she said. “They feel that, yes, people are online, people have apps, but there’s nothing like the spontaneous face-to-face.” Some stores take the revised model to an extreme. An eBay pop-up store in London that opened this holiday season has no actual merchandise, just scannable screens displaying gift suggestions.

Others try to give shoppers a semitraditional experience, but without all the costs. “If you build it backwards, you rethink it,” said Mr. Dunn, the Bonobos chief executive.

Mr. Dunn said the store idea stemmed from customers’ requests to try on items before a purchase.

Though Bonobos suggested that customers order multiple sizes, that didn’t fit with the ethos of good service he wanted. “Clicking on six sizes and having them shipped to me is not a great experience,” he said.

Also, he said, “the cost of marketing a Web site and the cost of free shipping both ways was approximating a store expense,” he said.

Bonobos added two sales representatives in the lobby of its Manhattan office last year to show clothes to customers, and Mr. Dunn said that within six months, each was on track to achieve more than $250,000 in sales. Based on that, this year, Bonobos struck a deal with Nordstrom to carry its clothes in its shop, and opened its first store.

For his own stores, Mr. Dunn did not want a typical retail model that required carrying a heavy inventory, staffing for heavy foot traffic and paying for prime real estate.

Instead, he took 700 square feet in Bonobos’s existing fifth-floor office and converted it into a store, called a Guideshop. Customers make appointments, which generally last 45 minutes, so one or two employees handle the entire store at once.

Most retail stores have to carry each item in a range of colors and sizes, a significant cost, but Bonobos does not, instead using the Web site as its virtual back room. Customers do not leave the store with merchandise; instead, the employees place an online order that is delivered to the customer, often the next day.

That means the stores carry only items for fit and looks. It has a dark-khaki chino in all 11 waist sizes and four inseam lengths, for instance, and employees use that to figure out what size a customer wears in other pants. But it does not carry, say, a red boot-cut chino in all sizes.

Clayton McGratty, 29, bought a golf outfit, a sweater and two pairs of pants after a Guideshop appointment. “It was a great way for me to introduce myself to their retail line without gambling on a particular style, or fit of pants, that I hadn’t tried on before,” he said.

Mr. Dunn said the average in-store transaction was $360, double what it is online, and first-time store visitors buy again in 58 days, versus waiting 85 days between Web site purchases. And, he said, he has cut Web marketing expenses in half as in-store purchases have increased.

One challenge for established e-commerce companies is how to translate the look of the Web site into a physical store. Piperlime, the six-year-old clothing and shoes site, opened its first store in September in SoHo.

Design was a focus, and white signs throughout the store give messages in the same fonts, color and language as the site’s: “Rachel Zoe’s Picks,” “Girl on a Budget.” Design details, like a pigeon eating birdseed, are rendered in the site’s signature lime green.

Unlike its corporate siblings at Gap Inc., Piperlime uses its e-commerce distribution centers to get products to stores. It also carries light inventory that is replenished frequently.

Jennifer Gosselin, general manager of Piperlime, said the company added a physical store because customers wanted to go somewhere and do something together.

“No matter how connected a consumer is, there is a part of shopping that involves the experience itself. Particularly with millennial consumers, shopping is a hobby,” she said. “The trend is, people are going online more and more for everything they do,” she said, but “they still want a haven.”


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