“Stores aren’t going away,” says Adam Goldenberg, co-CEO of digitally native retailer TechStyle Fashion Group, the parent company of fashion brand JustFab, athleisure brand Fabletics, shoe brand ShoeDazzle and children’s apparel brand FabKids. These brands started as web-only retailers, but that is slowly changing. “Retail [stores] have a place, but to succeed we need a different approach to building them out.”

He should know.

Goldenberg opened a JustFab store in Los Angeles in 2013 that offered a stark lesson in the need for retailers to understand both the mechanics of store-based retailing and the expectations of consumers accustomed to shopping online. The store sought to link the retailer’s online and offline operations by catering to the retailer’s VIP members (consumers who pay a $39.95 per month subscription fee in exchange for credits they can spend on discounted items on the site) by allowing them to pay discounted online prices in the store if they registered at the store before purchasing. At the same time, JustFab created a mobile app for its in-store “stylists” to find inventory, create wish lists for shoppers and check on customer requests. The omnichannel efforts were promising, Goldenberg says, but the execution was clunky.

While the store offered some fresh takes on the retail experience, it lacked the polish that comes from having staff who understood the logistics involved in operating a physical store, such as training staff, signing a lease and budgeting. “We opened the store without a retail experience team,” he says. “Without that expertise, it was really hard. And it was a bad experience for our customers.”

The JustFab store closed within a year, but the failure didn’t deter TechStyle from eyeing physical stores as a way to extend the reach of the company’s brands. The retailer analyzed its online customer data to determine where its most valuable customers live to help it decide where to open five Fabletics stores in 2015. It has since added 17 more in areas where it has a dense, engaged customer base. This time, TechStyle sought to balance its desire to rethink the in-store experience with the need to effectively operate its stores by hiring an experienced team to handle its store operations while also building technology to take advantage of shoppers’ actions. For instance, it tracks the items that consumers try on and the in-store conversion rate for each of those items down to the size. That data then influences the items it puts in stores, as well as the items it highlights on its site and in its personalized marketing emails.

The retailer’s stores, which feature a point-of-sale system built in-house that connects with the e-commerce site’s back-end systems, enable Fabletics to capitalize on the roughly $4 out of every $5 consumers spend on fashion that takes place offline, Goldenberg says. While he anticipates a marked shift in where consumers shop—he believes half of fashion spending will occur online within the next 10 years—that still leaves stores with a significant place within the retail landscape. Moreover, the stores help Fabletics develop deeper relationships with customers, which results in more valuable customers. Consumers who shop at Fabletics.com and in its stores spend roughly three times more than those who only shop the retailer’s website.

Fabletics is one of a growing number of retailers that have built their businesses online and now find themselves scraping up against the limits of online growth. That realization is leading many of these merchants to broaden their reach by venturing offline. For many, the shift reflects the current reality: While e-commerce is growing significantly faster than offline sales, it still only accounts for a little more than 12% of U.S. retail sales. And as many retailers find it increasingly difficult and costly….

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