“Stores aren’t going away,” said Adam Goldenberg, co-CEO of Fabletics’ parent company TechStyle Fashion Group, at Shop.org in Los Angeles on Tuesday. “Retail [stores] have a place but to succeed they need a different approach to building them out.”
For athleisure retailer Fabletics, No. 75 in the Internet Retailer 2017 Top 500, that means using its 22 stores to gather data. It tracks the items that consumers are trying on, as well as the in-store conversion rate for each of those items down to the size. That data then influences which items it places in the storefronts and which items to highlight on its site and in its personalized marketing emails to shoppers.
Information gathered in stores also can alert the retailer to potential problems. For instance, it recently found its Salar Capri pants had a conversion rate that ranged between 23% and 29% for every size except XXS, which was significantly lower. Feeding that data to the retailer’s technical designer, Fabletics discovered a size and fit issue in the calf area on the XXS pants. After making the change, the XXS now has a 26% in-store conversion rate.
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 offline, Goldenberg said.
While Goldenberg anticipates a dramatic shift in where consumers shop—he believes online will account for half of fashion spending within the next 10 years—stores provide a different experience for shoppers.
The stores are paying off for Fabletics, a retailer that generated an Internet Retailer-estimated $650 million online last year (Goldenberg says the retailer’s 2016 revenue was $700 million, which would suggest Fabletics’ 22 stores generated $50 million last year). Consumers who shop at Fabletics online and in store spend roughly three times more than those who only shop the retailer’s website.
The stores benefit from the $125 million that the retailer spends on advertising each year, he said. “We’re spending that regardless of whether we have stores,” he tells Internet Retailer. “We figured that if we opened the doors to stores, we could leverage our brand awareness.”
It took about two years before Fabletics’ brand awareness reached 50% among its target demographic, Goldenberg says. That’s a higher brand awareness than Athleta (owned by Gap Inc., No. 24 in the Top 500) and Lululemon (No. 83), he say.
Stores make sense for Fabletics because it is in a category, athleisure, that has relatively few physical stores. Lululemon has 245 U.S. stores and Athleta has 133. Fabletics is placing its stores in areas where it already had a large number of dedicated customers.
On the other hand, the retailer’s two other main brands, shoe retailers JustFab and Shoedazzle (the retailer also owns FabKids, which Goldenberg says is a “work in progress”), would require larger storefronts to hold more inventory.
“It would take two to three times the real estate than Fabletics,” he says. “We don’t think that makes sense.”
Despite Fabletics’ belief in stores’ ability to bolster its customers’ lifetime value, Goldenberg is careful to keep the brand’s leases short.
“We can imagine what retail will look like in three to four years,” he says. “But no one knows what we’ll be looking at 10 years from now.”
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