Over the past two years, the trend of digital-native brands opening physical retail locations has accelerated—and for good reason. While digitally conceived, direct-to-consumer brands have dominated the retail success story over the past decade, and the value of multichannel shoppers is undeniable.
Research has shown that customers who engage with brands across physical as well as digital shopping experiences are more valuable than those who shop online or in-store alone. They spend more, they spend more frequently, and they demonstrate greater brand loyalty over the long haul.
It’s natural that DTC brands want to cultivate these desirable customer behaviors by extending their operations into physical stores. However, making the leap from online to brick-and-mortar sales is not for the faint of heart, nor is such a leap to be taken lightly. For a brand to successfully branch out into the physical retail space, some important precursors must be in place. Let’s take a look at some of these key considerations.
One of the most powerful assets a retailer has when transitioning from online to physical sales is the momentum that it’s already built behind its brand. However, brand awareness shouldn’t be gauged as a gut feeling. It’s easy to feel like your brand is taking the world by storm when you’re on the inside and hearing daily from your biggest fans and supporters.
Brand awareness—the kind that translates digital success into brick-and-mortar success—needs to be bigger than a company’s existing customer base. Retailers shouldn’t open physical locations when they’re still in their “best kept secret” phase of growth. Before expanding beyond an online footprint, retailers need to ascertain a true understanding, based on objective research, of their brand’s awareness and opportunity in the marketplace, particularly as it relates to geography.
A robust customer file
In addition to having established brand awareness, retailers also need to take stock of their existing data assets when considering how they’ll promote their new physical location. As a best practice, a digital retailer should have a customer file that’s at least 50,000 strong before considering stores. These customer records represent a key foundation for building prospecting models and driving in-store traffic, and they’re also going to be the starting point for formulating a cross-channel acquisition and retention strategy.
For many digital-only brands, expanding into physical retail also means deepening their investment in offline marketing collateral. Special regionally targeted mailers can be exceptionally effective in driving traffic to a store. These pieces are typically smaller formats than a catalog and more promotional and event-focused (e.g., a Memorial Day sale). Including coupon cards that customers can redeem in-store is an especially powerful traffic driver for new locations.
An expanding product assortment
When expanding into physical retail, it also makes sense for retailers to time their opening with a larger business expansion in terms of product assortment. Remember: Opening a brick-and-mortar location represents an opportunity to both appeal to new customers and to deepen your relationship with existing ones.
One of the best ways to achieve the latter goal is to draw loyal customers to your new retail establishment as a way to see and touch new products that they haven’t yet explored via their digital relationship with your brand.
A plan for multichannel connections
Assuming a digital brand is meeting other basic prerequisites for opening a physical location, it’s also imperative that the retailer be prepared—prior to cutting the ribbon on the first location—for proper first-party data capture in stores. This process is crucial to the success of your venture and to optimizing the value from your investment as part of your overall customer strategy.
Your customers want to hear from you, so give them an opportunity to share their names, addresses and email addresses with you while in-store—and then respect their gift of this information by ensuring your communications with them reflect an understanding of their cross-channel interactions with your brand.
And above all…
When considering whether the time is right to move a digital-native brand into the physical retail realm, don’t underestimate the enormity of the investment. Brick-and-mortar stores are expensive to open and maintain, and any company opening one needs to be sitting on a solid foundation. In other words, if you’re going to open a store, your brand needs to already be profitable, or at least on a clear path to profitability.
There’s a definite risk for retailers in moving to physical locations too quickly. So above all, be patient and painfully honest about where your brand sits in its growth cycle. There’s a lot to be gained by a retailer through an expansion into the brick-and-mortar world—but only if the timing is right.
Belardi Wong is a digital and direct marketing agency based in New York City.Favorite