You hear stories about retailers closing physical storefronts and you wonder what’s going on.
While there may be some trepidation when it comes to the viability of running a brick-and-mortar store, it seems like more and more online-only businesses are now making the leap into physical stores. Amazon, for instance, has opened half a dozen bookstores in the past couple years.
Why would an e-commerce company that practically sets the bar for all other e-commerce companies make a move into physical retail? Miriam Sontz, CEO of Powell’s Books, said this is Amazon’s “acknowledgment of the inability of the internet to provide a certain retail experience that book buyers enjoy.”
There are other reasons why previously online-only businesses have ventured into in-person retail opportunities. A physical storefront:
- Increases brand awareness for people who have not otherwise encountered a business online.
- Gives customers the ability to physically interact with merchandise.
- Cuts down on the numbers of unnecessary returns online businesses process.
- Provides more opportunities for data collection, which is specifically why Fabletics chose to open retail outlets.
- Creates a true omnichannel experience.
While there are many benefits that come with opening physical locations, that does not make this a universally appropriate decision for every online retailer.
There are many reasons you might want to think about opening a brick-and-mortar business, but there are a number of things you should consider before doing so. Here are six that are vitally important.
1. Demand
Ask yourself why this is the right move for you. Have your customers asked for it?
“Our customers for years have been asking for us to have some sort of a brick-and-mortar expression of our brand,” said Heather Craig of thredUP. “We really thought there was a huge opportunity for our customer as well as for growth to be able to go into this brick-and-mortar segment of the business.”
If there is a demand, but you are wary of whether or not this is the smartest business move, consider starting with a pop-up to test the waters while building brand recognition. Birchbox is just one example of an online-only company that launched its first physical location after first trying pop-ups.
2. Location
Have you thought about location? Different cities, neighborhoods, and demographics may be more appealing for your particular business model. This is where customer data can help you—take a look at the habits and locations of your online shoppers to determine buyer trends and how you can capitalize on that with a physical store.
3. Use of Space
Since you are already running a successful online business, you likely have the inventory aspect down pat. However, if you are planning to expand your sales opportunities, you need to rethink your inventory strategy:
- Will all products available online be available in store as well so customers can browse online and then get them in person?
- Will new products be exclusive to the physical shopping experience?
- What will you do about overflow storage?
Another approach some online retailers are trying? Showrooms. Bonobos, for example, operates Guideshops where customers can try on clothing and place an order with a Guide, which will then be shipped to the customer. No physical merchandise is sold on site.
4. Costs
It is important that you assess the true cost of opening a storefront before making this move. Financial considerations include:
- Staff
- Operating hours
- Local zoning permits
- Taxes
- Insurance
- Rent
- Utilities
5. Unique Selling Proposition
What can a physical storefront do for your customers that your online shopping experience cannot? If your answer is “I don’t know,” then this venture might not make sense for you.
On a very basic level, opening a physical location gives customers the opportunity to check out your merchandise—62 percent of consumers say the top reason they still prefer to shop in brick-and-mortar stores is “to see, touch, feel and try out items.”
Beyond providing a hands-on shopping opportunity, what else would your brick-and-mortar store do to stand apart?
Otter Products, known for its OtterBox phone cases and other products, recently opened The Otter Shop, its first retail location in its hometown of Fort Collins, Colorado. The Otter Shop features exclusive product lines, including items carrying Colorado State University logos, and also offers exclusive in-store customization—products and services that an online customer wouldn’t necessarily be able to access.
6. Omnichannel Opportunities
Something else to keep in mind when considering opening a brick-and-mortar location is what it does for the online-to-physical store connection. Will your two “stores” sync up?
- Would a physical store allow you to sell items online and offer in-store pickup?
- Would you be willing to offer ship-from-store capabilities?
- Could customers use your mobile app or online store to research items while they are interacting with them in the store?
“More than anything we just want to give customers options,” said Dave Gilboa, Warby Parker started out selling eyeglasses online but now also operates more than 50 physical stores. “We don’t care if customers are engaging with us through a physical store, online, through their phones, or through channels like Twitter or Instagram.”
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