Complacency and Debt
Why have traditional brick-and-mortar retailers fought?
Complacency. Too many retailers believed their background and sheer size would protect them from ecommerce competitors. They were late in creating an online presence and frequently did a bad job when they established one.
Excessive debt has also donated. Over the last ten years, private equity companies purchased several big-box retailers in leveraged buyouts that saddled the firms with an amount of debt that was impossible to cover. Debt payments took away money from shop and technology upgrades.
Toys”R” Us, Gymboree, and Payless ShoeSource are some retailers who filed for bankruptcy because they couldn’t pay the debt in their leveraged buyouts.
How can clicks-to-bricks businesses establish a physical presence? With caution. Digitally native companies usually begin with a temporary pop-up store or a temporary store-within-a-store. Most often, this happens in major cities. Many traditional retailers welcome a store-within-a-store as a way to boost revenue from both lease and attracting new shoppers.
Real estate firm JLL discovered that New York remains the top city for the two pop-ups and first permanent places. Over half of clicks-to-bricks retailers opened their first pop-up places in new york, and about a third opened a first permanent location there also. Almost 62 percent of permanent clicks-to-bricks shops have opened in exactly the same city where they started their first pop-up store.
If the temporary shops are successful, some ecommerce merchants have started a couple of permanent stores in major cities like New York, Los Angeles, and San Francisco. These are typically standalone storefronts. If those stores attract shoppers, more places in other cities follow. The final phase is a nationwide rollout in malls and storefronts, but few electronic native retailers are prepared for this. A few that have probably reached this stage are Warby Parker, Athleta, and Bonobos.
Sometimes these shops are strictly showrooms.
Eyeglass frame purveyor Warby Parker was among the first digitally native organizations to open in the SoHo area of Manhattan in 2013. The business has since expanded to over 75 physical shops throughout the country. Since eyeglass frames are things that people typically like to try on before buying, physical shops are a natural next step for Warby Parker.
Other retailers who have opened permanent locations in SoHo comprise sneaker manufacturer Allbirds, jewelry firm BaubleBar, beauty product manufacturer Glossier, men’s clothing seller Indochino, and men’s shirt vendor UNTUCKit. SoHo is now something of a hub for native merchants. In a one-mile radius, shoppers can find Bonobos, Outdoor Voices, Everlane, Off, and M.Gemi, along with the other aforementioned retailers.
Seventy-four percentage of clicks-to-bricks retailers sell apparel and accessories, based on JLL. Additionally, clicks-to-brick merchants prefer smaller storefronts, with an average store size of 2,808 square feet.
Some clicks-to-bricks retailers run physical shops only as showrooms. They supply samples of goods for clients to test out and then send actual purchases to shoppers’ houses.
Men’s clothing supplier Bonobos, which was bought by Walmart in 2017, has over 50″guideshops” across the country where guys can try on clothes, get fashion information from workers, and have their buy shipped to their houses. Likewise Indochino has appointment-only showrooms across the USA and Canada for fittings of the custom-made clothing.
Men’s clothing retailer Indochino has appointment-only showrooms across the USA and Canada.
The Mattress Battle
Until five years ago, selling mattresses was a dull endeavor. Then online direct-to-consumer mattress makers like Casper, Leesa, and Tuft & Needle emerged. With the high cost of transport (both to the customer and back to the vendor if the consumer returns it), mattresses would appear to be an improbable success story for internet sales because people want to check the sense of the mattress.
Yet with innovative”foam mattress in a box” solutions and free shipping both ways, mattress vendors have enticed customers to buy mattresses online. Casper, which had $200 million in sales in 2016, allows a 100-day test drive of mattresses, as does Leesa. Casper will pick up the mattress if the customer isn’t happy with it. Both Casper and Tuft & Needle mattresses can also be sold by Target.
All these companies have been so successful that Mattress Company — the biggest brick-and-mortar mattress retailer in the country — filed for Chapter 11 bankruptcy in early October. The company said that it would shut 700 shops — 200 of them almost immediately — leaving 2,800. Mattress Company failed to take its online contest seriously.
By comparison, Casper will be launching a total of 200 stores throughout the country in the next 3 decades. It has 19 shops and this summer it debuted an experiential showroom in SoHo called The Dreamery. It costs $25 for a 45-minute rest together with pajamas and other pampering accouterments.
Alarmed by the internet trend, among the biggest mattress makers, Serta Simmons Bedding, bought Tuft & Needle in August. Walmart has come out with its own mattress manufacturer, Allswell. Amazon rolled out its foam mattress variant under its Amazon Basics line.
Purchasing a mattress is no longer dull.