The Next Big Move for E-Commerce Brands: Brick-and-Mortar Retail

For several years, e-commerce retailers were blamed for causing the “retail apocalypse” by forcing big-box stores to compete with their lean business models and lack of physical retail outlets. But could e-commerce retailers be the ones to take over those vacancies? According to a recent report by JLL that looked at the expansion plans of 100 of the top digital retailers, digital-native brands like Casper and Allbirds have plans to open 850 brick-and-mortar stores over the next five years.

The retail sector that's frequently making the jump from digital to physical is apparel and accessories. The majority of clicks-to-bricks retailers fall into that category (74.3 percent), with furniture, home furnishings, and housewares brands coming in second with 11.4 percent. These sectors are capitalizing the desire of consumers to touch, feel and try products in person before purchasing.

Clicks-to-bricks retailers also focus on urban locations to test for the right market to open physical stores. More than half (59.5 percent) of JLL’s studied clicks-to-bricks retailers opened their first pop-up locations in New York City, with many brands opening stores in the popular neighborhood of SoHo due to its high foot traffic and global reputation as a retail destination. Similar large cities like Los Angeles, Toronto, San Francisco and Chicago are all popular destinations for digital-native retailers. Nearly 62 percent of permanent clicks-to-bricks stores open in the same city where the brand had its pop-up location. While most of these e-commerce retailers are targeting major retail markets initially, as they expand they may begin to move into secondary and tertiary markets.

Clicks-to-bricks brands are innovating the retail industry by testing new concepts and challenging the way retail businesses have traditionally operated. Through pop-ups and showrooms, clicks-to-bricks brands are testing ideas to determine the way customers want to interact with products. Showrooms — i.e., retail spaces that don’t have back-room inventory but just enough for customers to touch and try and then ship home — are more common among apparel brands like Bonobos, M.Gemi, and Universal Standard. These retailers can maximize the retail space without requiring large amounts of storage.

Despite the attention that showroom-style retail locations have received, only 15.1 percent of clicks-to-bricks physical stores use this model. Of that group, 69.2 percent are apparel and accessories retailers. The remaining 30.8 percent of showrooms are furniture, home furnishings and housewares retailers, like Casper, which already has 16 experience stores across the country after opening its SoHo location in early 2018.

As clicks-to-bricks brands continue to expand, we can expect to see further experimentation on how to best use retail spaces to interact with shoppers by capitalizing on the need and desire to have a hands-on experience before purchasing goods.

Taylor Coyne is a research manager at JLL, covering U.S. retail research. Taylor works on a team that creates industry-leading research and thought leadership for both owners and occupiers of retail developments.