“We have enjoyed a lot of success online, but nothing beats the feeling you get standing outside your own store watching excited customers walk out clutching their bags,” says James Gold, co-founder of fashion accessories brand Skinnydip.
Known for its funky mobile phone cases, Skinnydip started out in 2011 as an online business, but now has 10 stores and a pop-up in New York.
The brand has grown at an impressive rate, hitting the headlines after an appearance on the BBC’s Dragons’ Den and striking a particular chord with fashion-conscious 16- to 24-year-old women.
Going against the tide of physical retailers turning their focus to growth online, in 2013 Skinnydip opened a concession in Topshop stores and began building a physical presence. “We felt we needed a home,” says Gold. “We started out testing the concept with concessions and then wanted our own store to show off our personality in a more overt way.”
He adds: “It’s about increasing exposure and offering customers an experience they can’t get online. If it makes money, that’s a bonus – but the main focus is to build trust and a sense of excitement.”
As retailers start to appreciate the importance of allowing customers to interact with a brand across a variety of formats, the much-maligned high street store is being offered a lifeline.
Savills has been tracking the number of pure-play e-tailers making the leap to bricks and mortar.
Although the trend remains a trickle rather than a flood, it is gaining momentum. Four brands made the transition in 2016, including womenswear names Missguided (which opened a flagship store at Westfield Stratford City) and Finery (which has taken concessions in six John Lewis stores).
“Opening a store is a great way of improving brand profile and attracting more customers,” says Savills director Marie Hickey. “The likes of Tesla and Dyson have also recognised how presence on prime retail pitches can showcase the brand and give people the opportunity to touch, test and experience.”
Consumers still value that physical interaction – particularly millennials, who you might assume would prefer to do their shopping online, rather than in store.
A recent shopper survey undertaken by Verdict on behalf of Savills found that the 16 to 24 year old demographic (the target consumers for the likes of Skinnydip and Missguided) had the lowest penetration for online fashion shopping, preferring to visit a physical store.
E-tailers making the shift are driven by push as well as pull factors. They are having to compete in an increasingly crowded online marketplace where it can be difficult to sustain growth and differentiate your offer.
Lunson Mitchenall director Neil Hockin says: “Stores also help meet challenges, for example things like last-mile delivery and costly returns. If the consumer can be encouraged to collect and exchange items in store, it saves a lot of hassle and, as John Lewis has found, will lead to a boost in sales.”
From clicks to bricks – no mean feat
Furniture retailer sofa.com entered the physical arena in 2007, when it opened a showroom in Chelsea. The business has since built a portfolio of seven UK sites, although it has not been without its challenges.
“To outsiders, managing a store looks easy – but it really isn’t,” says chief executive Vince Gunn. “When you look at the escalating cost of rent and rates, it’s very challenging to make the model work.”
A business with impressive online credentials may lack many of the skills required to run a successful bricks and mortar store. Many e-tailers have the added cost of hiring experts or external advisers to maximise their chances of success.
How do you measure the success of a physical space when the actual sale might be transacted online?
Made.com embarked on its journey into the physical sphere in 2012, opening a showroom in Notting Hill. The homeware and furniture brand now has three UK showrooms, with another opening in the coming months.
Head of showrooms Rebecca Ruddle says: “It doesn’t matter where the sale is made. Many will complete the transaction at home, having been inspired by their visit.”
She adds: “On average, when a new showroom opens we see an associated boost in online sales of maybe 40%. There’s a significant halo effect.”
Whatever the potential benefits of bricks and mortar, e-tailers are faced with tough choices about where to locate their stores.
Some are prepared to open in quirky, slightly off-pitch locations that sit well with their brand; others, such as Missguided, take the bull by the horns and invest in prime flagship stores for ultimate exposure.
But regardless of the location, a store will only succeed if it can excite the consumer and deliver something above and beyond what can be achieved online.
That might mean grabbing the headlines with a huge pink dumper truck, as seen in Missguided’s new London store, entertaining shoppers with demonstrations, or maybe offering customers tablets with which to curate and personalise products as they walk around the store.
Touchy feely
A major driver for e-tailers to take physical space is to offer consumers the opportunity to touch and feel before they commit to buying.
According to Savills, 31% of e-tailers who have made the transition to bricks and mortar are furniture and homeware brands. Customers are much more comfortable purchasing a high-value sofa, table or bed if they can see it first.
“We started trading online seven years ago and were performing very well, but conversion rates were not as high as expected,” says Made.com’s Rebecca Ruddle. “We conducted customer surveys, which told us people want to touch and feel furniture before making a final decision and having physical stores seemed the best way of addressing this.”
Fellow furniture business sofa.com came to a similar conclusion and is now opening showrooms across the UK.
“If someone is going to spend £1,000-plus on a sofa, they naturally want to see and feel it in-store and our gradual transition to bricks and mortar has been driven by the need to engage with the consumer,” says chief executive Vince Gunn.
Yet neither retailer has chosen to go down the traditional route of opening on out-of-town parks, opting for character buildings in locations that are better aligned with their distinct brand personalities. Made.com chose to open its first showroom in a former bookshop on London’s Charing Cross Road, while sofa.com’s portfolio includes a converted warehouse in Chelsea and a former tram shed in Islington.
“Locations in higher footfall areas are often too generic and we wanted something a bit different,” says Ruddle. “At first it was difficult for the property industry to get its head around our model and we have had to work hard to drive traffic to our showrooms, but we had to stay true to the brand.”
Coveted occupiers
Pure-play e-tailers looking to take physical space will be welcomed by landlords keen to refresh the tenant mix and drive footfall.
Shopping centre operator intu has embraced the arrival of omni-channel retail and works closely with retailers selling on its intu.co.uk platform to explore opportunities to open stores and pop-ups.
Intu.co.uk managing director Karen Harris says: “A lot of people come to our shopping centres with money in their pockets and that’s hugely appealing to online brands wanting to drive traffic.”
Hammerson is also in discussions with online names about extending its offer through a digital platform.
“For us it has the advantage of offering shoppers variety and a point of difference,” says Hammerson’s UK commercial director, Iain Mitchell. “It’s a trend we very much welcome.”
If landlords are to maximise the opportunity they will need to shape their offer accordingly, whether that’s by offering shorter leases or providing temporary space in which they can test the market.
Skinnydip’s James Gold says: “Shaftesbury was willing to take a chance on us, providing a pop-up off Carnaby Street, which later became a proper store. If we had to commit to a costly conventional lease from the outset, it would have all been a lot harder.”
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