…and What You Can Learn from Them
Is everything moving online now? With ecommerce, subscriptions, delivery services — not to mention free shipping being more popular than ever — one might wonder if consumers still have the need to go out and shop.
The short answer is yes. Consumers are continuing to flock to physical stores, and the majority of purchases take place offline. According to the U.S Census Bureau, online sales in the first quarter of 2017 accounted for just 8.4% of total sales.
CPGs that don’t have a brick-and-mortar presence could be missing out on revenue opportunities. That’s why if you’re a brand that’s been doing business primarily online, it may be time to explore opportunities in the brick-and-mortar realm.
To help you accomplish this, here is a roundup of digital-first brands that have successfully launched offline initiatives.
1. Honest partners with Target to gain additional distribution
Teaming up with existing retailers can help CPGs widen their distribution. One example of a brand that did this Honest, a CPG company founded by Jessica Alba that sells baby products, personal care items, and household goods. In 2014, Honest partnered with Target to launch its products across the retailer’s locations nationwide.
The team-up was a success. Honest products are still being sold at Target, and the brand’s assortment has nearly doubled since 2014. Earlier this year, the two companies announced that Honest Beauty, Alba’s line of skin care and makeup products, are also coming to Target. According to the LA Times, this partnership has “the potential to double the brand’s volume by adding at least another $8 million to $10 million through Target exposure.”
Key takeaway: See if getting distribution through established retailers would work for your brand. If you decide to go this route, though, you need to work closely with your retail partner. Include them in the planning process and establish shared goals.
Another tip? Don’t make it difficult for the retailer to carry your brand.
“If you want to make the transition to retail, make sure that you make it easy for retailers to take a chance on your brand. Keep minimums low to encourage them to take a chance on you.” – Kat Rosati, Brand Manager at Apparel Booster
Here’s one more pointer: make a splash around your partnership. Announce it to the press and share significant milestones. On the first anniversary of Target and Honest, Alba threw a party complete with co-branded decorations. When Honest Beauty launched in March 2017, Target dedicated a blog post to the announcement and conducted an interview with Alba.
These shared initiatives between Target and Honest are a testament to how great a CPG and retailer partnership can be! If you ever decide to go into retail, strive to have that same type of relationship with your partners.
2. Harry’s launches a branded corner shop
If you’re a brand that prefers to completely own your brick-and-mortar presence and control the shopping experience, then establishing a physical store under your name may be a better option. This allows you to showcase your brand without sharing the spotlight (read: shelf space) with other CPGs. It also gives you more control over the journey of your customers.
Harry’s is one example of a digital-first brand that decided to launch a brick-and-mortar shop. After building a loyal following online, the company opened “Harry’s Corner Shop” in New York. A modern but intimate space, in which men can purchase grooming products as well as get a haircut and shave from knowledgeable and seasoned barbers.
Key takeaway: If you decide to set up a branded shop, take a leaf out of Harry’s playbook and offer services (or experiences) alongside your products.
Remember, the bar for physical retail success is set really high these days. You need to give shoppers a compelling reason to forgo online ordering for your physical shop. Having the right product assortment is good, but it’s not enough. You need to figure out how you can take the physical retail experience to the next level for your customers.
3. Indochino sets up showrooms across North America
Launching a branded brick-and-mortar store can certainly be rewarding, and it can enable your customers to experience your brand in new ways. It does, however, come with a big challenge: inventory management.
Ensuring that you have the right products at the right time can be a tricky balance. If your operations aren’t equipped to handle brick-and-mortar stock control, you may want to hold off on launching a fully-fledged physical store.
Consider setting up a showroom instead. This will allow you to showcase your entire product line (or most of it at least) without having to stock up on too much merchandise.
Here’s how it works: customers come into the showroom to browse and try on your products. They may even get advice and personalized tips from an on-site expert. But rather than taking home the items they’ve tried on, a staff member orders the product for customer and ships it to them.
Indochino, a company that offers tailor-made suits at a fraction of the cost, has done a great job with its brick-and-mortar showrooms. Customers who want to have tailored suits but aren’t keen on purchasing online can book an appointment at an Indochino showroom near them (there are now 17 locations across North America).
Once there, a Style Guide will take their measurements, walk them through the choices of fabrics, and provide personalized advice on styling.
Key takeaway: When it comes to showrooms, you may be carrying less inventory, but you’ll need to double down on the experience. Again, think about the unique things and services that you can offer in your store. Aside from showing off your products, what else can you do to deliver value?
You could offer your expertise or provide a sense of community. Perhaps you could provide in-store entertainment. Or why not all of the above?
Consider what Indochino is doing. Aside from personalized style advice, Indochino showrooms are furnished with comfortable couches and even foosball tables where clients (particular grooms and their groomsmen) can hang out and pass the time while their peers are getting their measurements.
4. ModCloth tests the waters using pop-up shops
If you’re just dabbling in offline retail, then having a pop-up shop is a good way to go. Pop-ups allow you to foray into brick-and-mortar without the large investments that come with real estate, inventory, and permanent staffing. Pop-ups also allow you to launch into physical retail without going all in (yet).
ModCloth, a digital-first apparel brand, decided to take the pop-up route before taking the plunge with brick-and-mortar. Before opening a permanent location in 2016, ModCloth held an “IRL Tour” in which it launched pop up stores all over the US.
As Refinery 29 reports, “These pop-ups allowed ModCloth employees and decision-makers to interact directly with their current and potential customer base, see the things she liked or abhorred, and gather intimate feedback in a personal setting.”
In other words, ModCloth used their pop-up stores to do market research and test their ideas, so when it was time to open up a permanent branch, the company knew exactly what to do.
Key takeaway: Pop-up stores are great for testing concepts, products, and locations. If you’re not sure whether a store would fit well in a particular area — for example, if you’d like to experiment with a certain store format or product, consider setting up a pop-up store to test the waters.
More pointers for digital-first CPGs venturing into brick-and-mortar
Hopefully, the examples above gave you a solid idea of how digital brands can venture into physical retail. Here are additional best practices to keep in mind if you’re looking to set up shop offline.
Going the brick-and-mortar route is a significant endeavor, and you need solid numbers and insights to back up your decision. How do you do that? Look at your data.
Study the behaviors of your customers as they browse your site. What do they look at? What do they end up buying? What questions do they ask? Looking into these things will help you find trends and insights that you can use when making merchandising, marketing, and sales decisions.
“Online brands have certain visibility benefits through digital interactions with customers,” says Chris Allen, the Founder of Firmtree, Inc.
“Their web and mobile analytics tool sets help them see what customers are interested in, where they live, and how much they’re willing to pay for certain within product categories. Deep analysis of this data can uncover certain trends leading to opportunities that may payoff through in-person interactions.”
Rosati offers similar advice and says that CPGs should pay attention to what the data is telling them.
“The biggest thing in going into retail that I see for digital-first brands is making sure there is enough of a market to support the efforts of going into retail. Brands need to be strategic about who their customer is and where they are located.
What does the data say? Is there a concentration of customers in a particular area that would make it worth it to try out retail?” – Kat Rosati, Brand Manager at Apparel Booster
These are just some of the questions you should address when cooking up an offline strategy. Iron them out before launching your brick-and-mortar initiatives.
See to it that your offline and online systems are connected
Being an omnichannel brand — i.e. allowing shoppers to shop across physical and digital channels — is critical especially if you’re an online-first CPG. Your customers (particularly those who have bought from your ecommerce site in the past) will want to connect your online and offline stores, so you need to find a way to let them do that.
The answer lies in your technology. Your online and offline systems must be tightly integrated to allow you to sell and serve customers across physical and digital channels. You should also have systems in place that will enable you to gain visibility into the shopping behaviors of your customers as they move from one channel to the next. This will allow you to gain the necessary information to make smarter decisions going forward.
Audit your brick-and-mortar stores
Whether you’re partnering with a retailer or are running a branded store, showroom, or pop-up, you need to ensure that your initiatives are being carried out correctly. Before you launch your brick-and-mortar efforts, ask yourself: what does success look like?
Establish your objectives and key performance indicators, and then conduct store audits to see if your goals are being met.
Audits must be completed and reviewed quickly. The key to physical retail success is being able to rapidly execute and adapt. Plus, brick-and-mortar retail requires a sizeable investment, and you can’t afford to deal with prolonged compliance issues.
That’s why it’s highly recommended that you use a cloud-based audit software. Such solutions allow you and your team to view audit data in real-time, so in the event that compliance concerns arise, you can immediately take corrective action.
Now we’d like to hear from you. What’s your take on digital-first brands that are moving into physical retail? Let us know in the comments.
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