by Taylor Brookhouse, Contributing Writer
3 Ways Physical Retailers Can Keep Up with Direct-to-Consumer Monsters
Taylor Brookhouse June 5th, 2019
I recently ambled into an all-too-familiar clothing store—one that most Millennials like me haven’t frequented this decade—on a mad hunt for a cheap sundress. Immediately, an over-enthused sales associate greeted me at a pitch and volume that would make a dumpster cat find the belly of a street-parked car: “HI! WELCOME TO [store-that-shall-not-be-named]!” Ears ringing, I returned her attention with a polite grimace and began browsing.
As I sifted through overstuffed and unimpressive racks of clothes, her so-called jolly jolt of enthusiasm radiated throughout the store with every entry of a new customer. So, knowing I could fill a cart in less than five minutes from my couch, I accepted the letdown of low-value products and decided to save myself from one more impersonal proclamation of welcome and walked out.
Now I can’t say that every one of today’s shoppers has had a similar experience that drove them to the exit, but I can call attention to a fact that’s been well known for years: retail stores are in trouble. This so-called retail apocalypse spawns headlines and headaches that drive CMOs nuts. Already in 2019 already, Business Insider has reported bankruptcies from Beauty Brands, Gymboree, Innovative Mattress Solutions among others. So it’s fair to expect continued closures from stores like this, right?
Not so fast. According to Wells Fargo analysts Jeffrey Donnely and Tamar Fique, the brick-and-mortar shrink may have bottomed out: “[S]tore closure activity feels like it has peaked. Physical retailers are fighting back by reinvesting in their stores and some are curtailing store closures.” And now, direct-to-consumer brands have started taking hints from successful physical retailers. These DTC brands have recognized that “brick-and-mortar stores have become a necessity for growth and brands within the [DTC] category are slated to open nearly 850 physical stores over the next five years,” according to Retail Dive reporter Daphne Howland and research from commercial real estate firm JLL. The result? A reverse trend back to physical storefronts.
But this transition from online to a physical space is not an easy one. With DTC brands moving into brick-and-mortar, “there’s a shift to smaller footprints and really niche product offerings,” which, Katy Hornaday, executive creative director of Barkley, claims could be an advantage over traditional retailers. “The [DTC] brands that are doing it well are using their store as the IRL [in-real-life] extension of the brand they have built online versus the archaic model which was: build a store and then use online content to drive consumers there.” But with DTC brands infiltrating the physical retail space, we now see a striking contradiction in the model of retail success.
Why do some stores continue to decline in popularity and creep closer to foreclosure while DTC brands become powerhouses of retail overnight? We’ve uncovered a few trends in these DTC brands killing the brick-and-mortar game that most traditionally successful retail stores don’t seem to be catching onto.
1. It’s all about the experience.
Today’s IRL shoppers aren’t perusing with a purpose. Online shopping is usually driven by a checklist or an immediate need. Often the gut instinct is taking our thumbs directly to Amazon without even getting off the couch or leaving the house. To “go shopping” is no longer a necessity, it’s an experience, and consumers are looking for just that. Stores that lack the experience factor are losing to brands that interact with, and entertain, their customers.
Take Glossier for example, a people-powered beauty ecosystem and DTC brand making cosmetics inspired by real life. It brought its online presence to brick-and-mortar in a big way with the opening of their flagship store in New York City. Imagine if an Apple Store applied a little lip gloss: it’s inviting, sleek, and to top it off, the associates invite visitors to change out of their street clothes and into a spa robe for a truly pampered experience. Think attraction over transaction—the focus is not product-pushing but providing an experience for shoppers.
Casper is another young brand disrupting its category with an exciting retail experience. Though it once focused purely on its DTC mattress inventory, it’s now giving busy bodies in New York the opportunity to take a noontime nap. When you walk into the SoHo pop-up, you’re not bombarded with over-eager sales associates and best features for a great price but instead, the offer of escaping to a nap pod for a midday snooze. Casper and Glossier are seeing past the opportunity of a sale to make a real impact on the experience for the modern shopper . . . and their retail success is making headlines across the country.
2. The people want personalization.
Experience can’t be generic—modern shoppers want it to be about them. Research shows that today’s consumer isn't afraid to give stores personal information if it will result in a more personalized shopping experience. According to a survey by Accenture and the Retail Industry Leaders Association, 63 percent of consumers surveyed indicated they were interested in personal recommendations, while 64 percent revealed they were willing to share personal data in exchange for benefits. The modern consumer wants to walk into a store and feel like the brand knows who they are and what they’re looking for. They don’t want to hear the same canned greeting repeated to every shopper who walks in. With every audible announcement of a new customer, the degree of personalization diminishes.
Nike is testing a tailored approach with a completely new and personalized shopping experience in LA, Nike by Melrose. According to the National Retail Federation, Nike by Melrose is “blend[ing] the company’s online retail with unique, personalized services that can only be delivered in store . . . combin[ing] data analytics with in-store digital to experiment with brickand mortar’s future.” They use community consumer data to offer city-specific styles, based on what their consumers want. In addition to customizing product selection, they have lockers to pick up online orders, a vending machine fully stocked with product, mobile ordering, reserve pick-up, and curbside returns and exchanges. It’s not the first or the last time this will be said, but any brand trying to keep up shouldn’t Just Do It without taking a hint from Nike.
3. Gimme, gimme reward.
Stores need to reward their consumers for choosing them, or else shoppers will move on to another brand that will. But we’re beyond $10 off for every $100 spent. $100 spent, it’s about access. Consumers want inclusion and privilege. Carbon 38 ambassadors earn a commission for apparel they sell through their social media feeds, and then offer their friends and clients a 20 percent off discount. Strategies like this not only create give exclusive access and a feeling of direct importance to the brand, but account for 20 percent of the company’s profit, which CEO Katie Warner Johnson says is set to exceed $1B in the next several years.
Shoppers are looking for rewards like this to keep them interested in the brand. Retailers like Sephora, Nordstrom, Target and Macy’s have made strides to update their loyalty programs for a more modern shopper, including exclusive members-only social platforms and priority access to style events. It's brands like these that recognize the interests of their consumers, and make the adjustments that will help them survive, in a sea of modern shoppers weeding through their plethora of brands to pledge their loyalty.
So retailers, don’t jump ship, adjust. Modern shoppers want experience, personalization and reward, and if they get it, will pledge their loyalty to your brand. To keep up with what DTC brands are already doing, as they come into a brick-and-mortar space, the time is now to change for a more modern consumer, and it starts with the greeting at the door.
Jun 05, 2019
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