Erica Mazzucato senior product marketing manager, Corra

Digitally native brands are opening more and more physical stores, and retailers with a brick-and-mortar presence can learn from their strategies. From merging online and offline journeys to adopting retail-as-a-service models, this article covers the top tactics merchants can leverage to prove that the “retail apocalypse” doesn’t affect everyone.

In February 2019, commercial real-estate firm CoStar Group predicted the high rate of store closures in 2017 and 2018 continue through 2019. Brands, including Gap, Victoria’s Secret, and Forever 21, eventually realized the predicted performance decline and closed more than 9,000 stores.

For years, news headlines have been portraying ecommerce retailers as committed to wiping out stores one by one. But aren’t online experiences an integral part of successful retail strategies? And what do consumers prefer? Recent stats from Digital Commerce 360 suggest people are still enjoying shopping in-store, with 83.6% of retail sales happening at physical locations where 71% of consumers spend more than when they buy online. And if you think that only older shoppers like driving to the mall, think twice. Teens may spend a lot of time online, but they are also enjoying shopping in physical shops, now more than ever.

Digitally native brands are building physical communities

So, how can struggling merchants gain back the foot traffic they need? Digitally native brands are setting the example. According to JLL, more than 850 digitally native brands will open stores before 2023, following the lead of ThirdLove, Warby Parker, Casper, Allbirds, and Away, among many others. “It has never, ever, ever been easier to start a business than it is right now,” said Ben Fischman, CEO at M.Gemi at a Klarna’s Smoooth Sessions: Trailblazers event in New York City. “By default, that means that it has never, ever, ever been harder to build a brand; a brand and a business are completely different things,” he said.

Brands that were born online with an obsessive focus on customer experience have long understood that physical stores are a secret weapon when it comes to bringing customers together to establish genuine brand communities. Not surprisingly, Forrester predicted that, in 2020, consumers would begin perceiving brands as vehicles to develop meaningful interpersonal relationships and new belief systems.

Glossier is one of the best examples of a direct-to-consumer brand that capitalized on this need. Its two retail shops and pop-ups brought its combined online and offline sales to $109.2 million, according to Digital Commerce 360.

Other success stories include:

• Shoe, apparel and accessories brand Soludos, which offers “customization stations” where customers can personalize shoes with embroidered patches,
• Apparel brand Ministry of Supply, which installed a 3D-printing machine in one of their stores and uses it to make garments on the spot.
• Cuyana, a handbag, clothing jewelry brand, has nine showrooms that double as event spaces for customers and the community.

Data silos are channel silos

Smart merchants that have traditionally played in the brick-and-mortar space are learning that online and offline journeys are tightly coupled. “The customer wants to be inspired and informed. Reaching them high in the funnel is a priority for us,” said Lisa Fortuna, ecommerce director at True Value, who attended Magento Imagine 2019 as a panelist. “In the home improvement, the customer path to purchase often starts with a lot of research online. Projects have long lead times. And it’s important for us to entice customers with DIY content before they decide to visit our stores.”

Many digitally native brands, including cashmere clothing brand Nadaam Inc. and clothing rental company Rent The Runway, are pushing the envelope even further and experimenting with physical space to integrate online and offline data seamlessly. New technologies are helping them build a 360-degree view of their consumers, promising comprehensive analytics that utilizes both in-store and online behavioral data. Soon, more and more retailers will be able to use WiFi sensors and beacons to study which items are generating more attention. In the meantime, point-of-sale data is still a mostly untapped opportunity for brands to access insights into customer preferences and demographics.

Bridging data flow gaps between online and offline checkout will allow retailers to shift from reporting (what happened) to predictive analytics (what will happen) and inform future product strategies.

It’s the end of paying rent as we know it

Agility and supply-chain flexibility are another reason behind the success of digital-first brands that are getting physical. Inspired by the concept of software-as-a-service, the new RaaS (retail-as-a-service) model is solving the problem of unutilized space in malls and other commercial properties.

Real estate companies are happily matching with brands that are looking for flexible formats such as turnkey pop-up stores and short-term rentals. It’s a win-win scenario in which the outcome is surprisingly bright. The RaaS business model is empowering retailers with physical spaces where they can nurture their customer relationships without the substantial investment traditionally required. No need to contract firms, setup basic fixtures, sign long-term leases, invest in expensive point-of-sale technology, nor even hire personnel.

Retailers turn stores into living websites where shoppers can enjoy museum-worthy installations, post stories on Instagram stories, smell fragrances, feel textures, and last (and very much least) buy products. Purchases are typically processed through the brand’s site via tablet computers and shipped to the customers’ homes for added convenience.

If the brand is offering a flexible payment method such as Klarna, shoppers can pay later or break up a potentially daunting purchase into installments without even needing a credit card. Considering that 67% of millennials don’t own a credit card, this point is quite relevant.

Not all experiential strategies are suitable for all traditional brick-and-mortar retailers. However, paying attention to these emerging models is essential. It can help retailers choose the right channels to engage with their customers, provide the insights needed to remain relevant, and effectively blur the lines between online and offline experiences.

Ultimately, in 2020, what will determine the success or failure of any retail strategy won’t be a differentiation between digital and in-store, but between transactional experiences and thoughtful brand experiences.

Corra provides commerce design, development, strategy and support services.