All three e-businesses are based in different countries and target very different markets yet have one big thing in common: They’re transforming the retail industry one brick-and-mortar store at a time.
For a long time e-commerce was seen as the more attractive option for businesses selling consumer goods. These internet-first companies favoured the internet because it was cheaper than physical spaces that often came with high overhead costs (think: expensive leases, paid on-site staff and more).
But, that’s all changing now. The biggest trend in the tech e-retail space is now offline stores. Big names that cut their teeth online are opening up flagship locations. What started as test pop-up shops lead to an unprecedented surge in physical stores.
For example, in 2017 womenswear e-retailer Everlane launched its first store despite for years vehemently claiming it would never open one. Meanwhile, last year bed-in-a-box startup Casper unveiled its first retail outlet with plans for more to come. More impressively last month Chinese e-giant Alibaba announced a $2.6 billion plan to open a series of brick-and-mortar stores across China.
So why are so many internet-first companies suddenly pursuing offline spaces? Easy: Experts are finding for the few that run physical stores right there’s a lot of money to be made.
The death of (offline) retail has been greatly exaggerated
Amazon first started the offline trend back in 2015 when it opened its first bookstore. Since then the internet juggernaut has made $1.3 billion from its in-person stores. It makes sense considering a majority of retail spending still takes place in brick-and-mortar stores.
A 2017 study by the Retail Council of Canada, Microsoft and research tool WisePlum found that shoppers prefer physical retail store experiences. Why? Offline stores offer instant gratification, the ability to compare prices and inspect products up close all at once.
These facts don’t surprise Jen Koss, co-founder of Brika — a retail store that sells artisan crafts from indie designers. The company launched its first brick-and-mortar store on Queen Street West five years ago and hasn’t looked back.
“I was surprised by how a physical store can have a very deep connection with the customer,” she explains. “[My co-founder and I] have seen how customers will remember the smell of candle, how the store is organized, the people working when they walk in,” she explains about how the little things often to bigger sales and create long-term customers.
Entrepreneurs should also understand is that customer service really matters with physical stores, she says. “A lot of it comes down to investing in the best quality store staff,” the Harvard graduate explains. “It comes down to personal relationships that you create in the store. Focus on who you hire, how you train your ambassadors and how they become part of the brand.”
IRL: Location, location, location
Another critical point to remember is to always choose the right location. Physical spaces can easily be judged based on their surroundings and how accessible it is for customers. If you have the best products, but it’s incredibly hard for the public to get to your store you’re doing your company a disservice.
One popular way for startups to dip their toe in the real-to-touch store market is to experiment with pop-up shops. This allows companies to visit unique locations and get to know their customers before signing anything long-term. This middle-of-the-road approach can also help generate brand awareness, take entrepreneurs to where their customers often work or live and a simple way to reach a whole new demographic. For looking for on-the-ground advice Shopify has created a guide that outlines everything from location to pricing includes everything an entrepreneur needs to know.
Choose your own adventure
Of course, e-stores don’t always need to invest in the physical real estate to stay profitable. Companies like Etsy rely solely on partnering with existing space-focused companies like Hudson’s Bay or Macy’s for short-term leases or “stores within stores.” These special arrangements can end up lowering the financial burden for emerging entrepreneurs while providing a lot of the same retail benefits.
Another unexpected bonus of this approach is that it can easily position an e-commerce company among other quality brands. For retailers looking to emulate an offline store success they should focus on finding one location (i.e. a store) that customers can associate with their brand, but for everyone else complementary company to work with can work just as well.
The DMZ is a leading business incubator for tech startups in Canada. They help startups build great businesses by connecting them with customers, capital, experts and a community of entrepreneurs and influencers.
The DMZ is a partner in StartUp Here Toronto.