Retail Apocalypse? These Direct-to-Consumer Brands Are Betting on Stores
Contrary to ongoing reports that retail is dying eMarketer reported that the $5.5 trillion US retail sector is expected to have another strong year with growth of 3.3% in 2019. While there is no apocalypse the sector is changing. Changes in technology have made it easier to create new businesses and reach customers in ways that were not possible even 15 years ago. Savvy direct-to-consumer businesses like Everlane and Casper are making inroads in segments that were under the control of big retailers for many decades. More traditional retaiers are taking notice. According to an eMarketer report, when brands were asked what is their biggest eCommerce challenge number one on the list was direct-to-consumer competitors (27%), followed by shipping and storage costs (21%) and then Amazon’s growing influence (20%). Here are five direct-to-consumer brands that are opening stores that are providing glimpses into the future of retail.
1. Bonobos launched online in 2007 and sells a wide range of men’s clothing as well as a women’s capsule clothing collection. The retailer opened its first physical store location in 2011 which it calls a “guide shop”. Guideshops carry all sizes and colours offered within each style of merchandise sold by Bonobos. The store is essentially a clothing showroom where customers can look and try on merchandise for size and fit but they cannot walk out of the store with any purchases. Instead purchases are shipped for free to the customer. Bonobos decided to open stores after a launching a men’s shirt that wasn’t selling well online. To boost sales Bonobos decided to open a small fitting room within the lobby of its headquarters where customers could try on shirts. Sales picked up after customers were able to touch, feel and try on merchandise. Guide shops are staffed with stylists that are called “guides” who are there to help customers find exactly what they need.
Speaking about its guides shops, Andy Dunn, Co-Founder and CEO of Bonoboshas said: “you don’t have anyone manning a stockroom or playing defense against changing rooms where customers are dumping inventory in a corner. You don’t have the same folding nightmare or visual presentations nightmare.” Bonobos now has 62 guideshops.
2. Everlane is a clothing brand that mostly sells high quality basics (cashmere sweaters, cotton t-shirts and jeans) but at lower prices than retailers such as J.Crew or Banana Republic would sell similar items. One of Everlane’s core values is transparency. Customers shopping on everlane.com can see the difference in the markup for its products vs. a traditional retailer on its website.
The brand launched online in 2011 and then a year later the CEO, Michael Preysmanfamously told the New York Times: “we are going to shut the company down before we go to physical retail”. Five years Everlane back tracked and opened its first store in 2017. Speaking the change in direction Preysman said: “when you’re in the online-only world, you can’t bring people into your space and your brand the same way you can with a physical store, where it feels transparent, open, and honest. So we wanted to bring the brand to life and be part of people’s lives in a more meaningful way. People do want to try things on. Having them come in and touch the product and talk to employees makes such a difference. We started out with T-shirts, which are really easy to buy online, but denim in particular is really hard to shop for [without trying it on].” Preysman has also said that: a brand that has 500 stores no longer makes sense in today’s world, but having 20 to 50 key locations that help bring an expression of the brand to life is very relevant for the customer and we see people line up and come into the space and see it and part of it.” Everlane now has two stores where customers can book personal styling sessions to make sure they the pick out the right look.
3. Casper is a direct-to-consumer mattress company that launched in 2014. Having cute Instagram friendly packaging (a mattress that fits in a box the size of a mini fridge) which has been marketed by social media influencers like Kylie Jenner helped fuel the growth of this company. It opened its first permanent location early in 2018. Casper stores have cute little “homes” where customers can enter and try out a mattress they are interested in purchasing. Casper, similar to many retailers found that sales grew faster in areas in where its 19 popup stores are located, motivating the brand to open permanent store locations. After four years in business Casper announced plans to significantly increase its store count to 200 stores.
4. California based shoe company Allbirds started out with a wool sneaker in 2016. They became a Silicon Valley staple then Allbirds went on to sell one million pairs within two years. Its shoes are made of natural and environmentally friendly materials including eucalyptus tree fibre and merino wool. Its shoes are also comfortable with Time magazine calling them: "the world's most comfortable shoe." Last year Allbirds launched a flip flop called SweetFoam with soles that are made from sugar cane. Tim Brown, Allbird’s Co-Founder has said: “our thought is, if we can put a man on the moon, you should be able to make a T-shirt and a pair of sneakers that are carbon negative or carbon neutral”. Allbirds started outline in 2016 and a year later it opened its first bricks and mortar store in 2017. It now has six stores.
5. Amazon. It is hard to believe that Amazon has been in business for 25 years. While Amazon started as an online book retailer it opened its first physical book store in 2015, 20 years after first launching its eCommerce business. Amazon now has over 500 retail locations. 475 of those locations are Whole Foods stores and the remaining 38 stores are a combination of pop-up stores, convenience stores, bookstores and general merchandise stores. Clearly Amazon realizes that its future growth is dependent not only on eCommerce but on physical retail as well. It has also developed an impressive system of pickup locations to meet customers where they are. As Amazon continues to grow perhaps it will be remembered not only for how it revolutionized online shopping but retail in general.