Technology & Science

Online retailers open physical stores to boost business

With brick-and-mortar locations being more expensive than online marketplaces, it's counterintuitive that a number of online retailers have opened physical stores in North America. But one researcher says the shift is critical to sustain business.

Online-only business model is unsustainable, expert says

Frank & Oak once only sold its clothes online. But the company has since opened six locations in Canada and has plans to open six more in the U.S. (Frank & Oak)

With brick-and-mortar locations being more expensive than online marketplaces, it's counterintuitive that a number of online retailers have opened physical stores in North America. But one researcher says the shift is critical to sustain business.

"Brands are increasingly starting to think of how brick and mortar can be a part of their strategy to be a little bit more on the defensive," Claude de Jocas, a research director at digital think-tank L2 Inc., tells Spark's Nora Young in an upcoming interview.

"When you're looking at apparel, where fit and trying on that product is so important to the consumer, it becomes crucial to have an environment where the consumer can actually do that," she says of online clothing retailers. "Also, [with] items that are priced at a little bit of a higher price point, the consumer really is looking to physically interact with that item before they commit to the online purchase."

Some online-only apparel retailers, like footwear company Piperline, did not survive with a sole digital presence.

Frank & Oak, a previously online-only clothing company, has opened six locations in Canada. The company plans to open six more in the U.S.

Co-founder Ethan Song says the physical and digital are combining into one, and physical stores have several advantages over their online counterparts.

"A physical space ... is real life," he says. "It's not the world seen through a screen."

Physical stores have sales staff that can help customers choose the right product, he says.

Toronto's Frank & Oak location includes an in-store barbershop and cafe. The stores are designed as "a space where you feel like you can hang out," Song says, with cash registers and other transactional elements hidden to lower purchasing pressure.

Consumers research online, shop in stores

Other stores that have traditionally been grouped as pure-play digital retailers, meaning stores with only an online presence, are opening storefronts.

  • Eyewear retailer Warby Parker now has nine stores and five showrooms in the United States.
  • Men's clothing retailer Bonobos has more than a dozen "guideshops" where customers can try on clothes. Any purchased items are delivered within a few days.
  • Rent the Runway now has five shops in the U.S.
It's not the world seen through a screen.- Ethan Song, Frank & Oak co-founder

All three of those retailers were once very vocal about never incorporating physical stores into their business plans, says de Jocas. They all shifted their strategy after recognizing that brick-and-mortar stores present a huge opportunity, she says.

There was once a growing fear that consumers would only use physical retailers as showrooms — that they would go and test products they liked and then buy them from an online retailer at a lower price.

"The reverse is starting to become true," she says. "Consumers are more likely to do what we call webrooming, which is to research a product online and then go in store to make that final purchase."

Listen to the full interview on Spark to hear more about the benefits of brick-and-mortar stores.


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