Why DTC Brands Are Loving Real-World Retail

We have all seen the pictures of malls where tumbleweeds roll past the food court and heard about the shuttering of large numbers of retailers.  But at the same time, direct to consumer (DTC) brands are popping up in retail locations and luring people in with chic design, enthusiastic salespeople and exciting products. This new wave has seen Warby Parker, Peloton, Casper, Everlane, Glossier, Rent the Runway, Bonobos, Modcloth and Allbirds join the “In Real Life” (IRL) world of retail.  And even Toys ‘R Us was said to be killed by online, yet here they are planning to launch stores again this year.

As a part of the latest Analytic Partners ROI Genome report, we analyzed data from our clients that attested to the omnichannel nature of retail.  With consumers often being exposed to media in one channel but buying the product in another we know that you need to measure holistically.  But many tend to believe that the direction of omnichannel is away from “bricks” towards “clicks.”  Why ever would so many brands decide to go IRL?

Here are a few things to consider:

• Real world stores can boost business. New locations can help drive incremental sales both offline AND online. What we saw in the ROI Genome is that consumers are more likely to purchase a product or service if they can experience the brand.  Brick & mortar presence also serves as branding in and of itself, particularly when supported with forms of PR, marketing and promotions.  The benefits of having a physical presence tend to outweigh any potential cannibalization of online sales for many growing brands. We have seen this phenomenon across a variety of clients, with a few examples of brands benefiting from a lift in online sales following the opening of a physical store shown below.

Lift in Online Sales from Physical Store Openings

• You get to demonstrate and sell complex products: A category that I never thought people would buy online are mattresses: they are too complex, too personal, and just too big.  Of course, I was wrong given how companies like Casper have approached the category.  They got consumers over the “I need to try it” hurdle.   Why does Casper need a store now?  Likely they are finding that it may be easier to sell the pricier models, but most importantly get shoppers to buy into the Casper lifestyle including sheets and other home goods. Online is notoriously bad with product upsell while real world stores excel.
• To the point about complex products, it is worthwhile going into an Amazon Bookstore to see how they merchandise.  There is always coffee, books are all face out for the best chance of selling and, most importantly, the selection is driven by data culled from the website. Want to understand what the latest device you can chat to is?  Perhaps the real reason for those stores is to demonstrate and sell Echos and their kin: Amazon’s household Trojan horse for the future of voice commerce.
• Customer research comes with the territory: The National Retail Foundation said that using a retail store for customer research is the number one trend of 2019 in retail.  The very idea of a “concept store” is about being able to interact with customers and capture every bit of the in store journey with data to potential optimize in all of your retail channels.  With an IRL store, you can not only assess how merchandizing drives sales, you can actual talk to people about their experience.  It is an ongoing retail focus group that has the benefit of real product interactions – not moderated discussions in a conference room.
• AI amps up inventory management: There has been a lot of press about Amazon’s Go concept which uses scanners to create “frictionless commerce” and thus increase sell through because you don’t have to queue up to buy. Walmart is wiring the store of the future for a different reason: inventory management.  One of the great challenges all stores have is determining quickly what you do and don’t have in stock as customers walk out if they don’t find what they want.  Walmart needed data in which to train new AI models and created a whole lab within an existing store.  It’s even called “IRL”.  They are also using this real-time inventory functionality to update their website and app accurately, which helps with quick shipping for ecommerce orders or in-store pickups (for click and collect).
• Experiential retailing: Despite how virtual our lives may have become – or perhaps because of it, stores provide a human touch element of the real world marketplace.  Apple stores are all about connecting people to the brand and now offer classes in photography and even serve as places for political gatherings.  And no one beats Supreme for encouraging its fans to live its lifestyle though in store skate ramps and demos with international champions. I personally want to check into a Lululemon for a yoga class followed by a glass of rose – and yes, I do want those swirl pattern leggings.

While so much of retail is different from the world many of us grew up with, I fundamentally believe that people do want experiences away from their phones.  We do love to see and touch beautiful and intriguing things.  DTC brands understand all of this.  Real world retail may never be as big as it once was, but it will certainly be more interesting.