Brick-and-Mortar 2.0: E-Commerce Disruptors Redefine Role of Stores

I recently attended a retail conference in New York City with a speaker list packed with executives from well-known, online D-to-C (direct-to-consumer) companies.

These are the “disruptors” shaking up their industries, many building vertically integrated brands that avoid unnecessary markups and give consumers a new way to buy products that would have traditionally had a more storied brand name on them.

Some of the more renowned D-to-C examples include the following: Warby Parker will fit you for glasses by helping you choose a pair from a tray of six; Quip will sell you new toothbrush heads on a recurring basis; and bed-in-a-box companies like Casper or Purple will help you sleep better. Each one of these items delivered to your doorstep in a snappy-looking box.

These companies are all creating buzz in their early stages through polished websites, targeted marketing and blow-up-the-retail-model messaging. In fact, some have disrupted their industries so much that industry leaders have bought them. Mail-order razor blades turned out to be a billion-dollar idea, as Unilever acquired Dollar Shave Club for that amount in 2016.

But for all of the bluster that online shopping brings to a D-to-C company, it can also constrict revenue. In 2017, e-commerce accounted for just 10 percent of retail sales in the U.S. When they’ve exhausted the early adopters most likely to pull the trigger on an online sale, these D-to-C companies have been lured into a space they had considered unnecessary: the brick-and-mortar retail store.

Don’t Call it a Comeback

Nearly every marketer I spoke to at the conference mentioned the physical retail location as a way to reach beyond early adopters. You would think this change of heart about brick-and-mortar would breed feelings of failure, but the marketers actually relished the opportunity to have a brick-and-mortar outlet. Here are a few of the reasons they cited:

• It’s a chance to grow the brand outside normal marketing channels: Online marketing will help reach a sizable audience, but having your products in the personal grooming section of every Walmart store in the U.S. increases the brand recognition of your mail-order razor company to a much larger swath of people, whether or not they have a computer or smartphone.
• It can disarm skeptical consumers and push new products: A retail location can help eliminate, or at least calm, feelings of “I want to touch it/use it before I buy it.” Opening up branded boutiques or partnering with established stores allow potential customers to experience the quality craftsmanship your marketing has been lauding. It can also lend your young brand credibility if your store (or product line) is next to established luxury retail brands. Furthermore, online shoppers typically make “safer” choices. A D-to-C shoe brand’s best-selling shoe online may be a traditional black flat. In a retail store, associates or mannequins wear trendy colors and styles, allowing consumers to see products “in the wild.” Best-selling in-store products may be quite different than online, which only propels a brand forward.
• It’s a place to hear and provide face-to-face feedback: Finally, a store helps an up-and-coming D-to-C company have a face. It’s a fallacy that email responses or website chats can satisfy a consumer’s need for feedback. A branded retail store in a high-traffic location gives an online company a place to get in-person high-fives when the product shines, or have face-to-face problem-solving sessions when something goes awry. Plus, a store is a great way for marketing teams to interact with consumers and get real insights to make better decisions. One D-to-C executive at the conference said she made all her new marketing hires work 40 hours a week in a store.

Physical Stores: The New Online Weapon?

It’s well known that omnichannel consumers (those who shop online and in-store) are the most valuable customers for any retailer. D-to-C brands are viewing stores as a shoppable billboard and an acquisition channel. The success of stores extends beyond sales that occur within the four walls. For instance, online brands that open a physical store tend to see online sales overperform in the market where the store opened. Marketers can then compare the lift in e-commerce sales to the sales before the store opened and attribute those sales to the physical store.

In the time of what I like to call “brick and mortar 2.0,” the retail store is still a means for hawking more products, but it’s also a means for feeding the online experience. Physical stores will keep flourishing as an acquisition channel for scaling D-to-C brands.

I had honestly thought the D-to-C movement was another sign that retail stores were on life support. However, I came away from this retail conference with the refreshing feeling that savvy companies are improving their products and increasing sales by reinventing a channel once thought to be extinct.

Erik Mansur is the vice president of product marketing at Nanigans, a company that arms in-house marketing teams with a complete software solution for measuring and optimizing cross-channel digital ad spend based on incremental revenue.