Physical stores are a sprouting trend for digitally native direct-to-consumer brands
Leading retailers of all industries and sizes are continuing to seek innovative ways to bring exceptional consumer experiences to their customers in the midst of ever-evolving market competition. For direct-to-consumer (D2C) brands native to online environments, the most recent trend has been branching out into the real world and giving physical locations a shot with pop-up shops. Pop-up stores are short-term, experiential locations that are often used to test the waters around establishing long-term physical retail stores.
The Benefits of Establishing Short-Term Physical Locations
Many successful D2C brands are beginning to see the value in establishing a temporary physical presence, and it’s easy to see why. Transitioning from online to retail locations can help strengthen brands, build strong customer experiences, and improve retention and loyalty rates. Consumers love the convenience that they receive from D2C retailers online, but there’s something unique about being able to see, feel, touch, and experience a product and its brand in person.
Developing an omnichannel presence that includes physical locations is a savvy strategy; however, the world of physical retail is starkly different from that of online retail. As a result, many D2C companies are hesitant to commit without first testing the waters.
Temporary physical locations provide several benefits to D2C retailers who are considering establishing brick-and-mortar locations. For one, they provide them with the ability to see how customers will react to their products in person. They can also help influence key decisions on crafting the ideal in-store experience for future, permanent physical locations.
In this day and age, brands that embrace the reality of omnichannel will come out on top. Omnichannel shoppers have a 30% higher lifetime value, meaning they will spend 30% more over their entire relationship with a business.* To add to this, in a recent study by the ICSC, new store openings increased brands’ web traffic by an average of 27% and closing a store caused a drop in web traffic, something that retailers should be extremely wary of.**
D2C brands have the advantage of truly understanding their customers in such a way that traditional retailers may not, thus allowing them to provide their customers with the type of shopping experience that caters directly to them. And, for 73% of consumers, that experience stems from both online and in-store.***
Understanding Audience’s Real-World Behavior
Establishing a pop-up presence takes thought and a great deal of planning, especially when it comes to selecting a location. While brands know their target consumers, they likely don’t have the data and insight into their consumers’ competitive shopping behaviors or other real-world visitation patterns. This is where the value of location data comes into play.
By uncovering insights about customers’ real-world behavior, such as chains and categories they frequently visit, their length of stay, time of day they visit, and where they’re coming from, D2C retailers can begin to collect valuable information about customer’s preferences and patterns to analyze and use to develop future strategies.
Furthermore, many D2C companies who have established a strong online presence can use these temporary locations to spread awareness about their brand in the real world, which makes pop-up stores powerful brand activation tools. This is especially the case when the experience is exceptional — we are living in the social media age where experiences can be documented and shared extensively by customers and influencers. But in order to build that brand awareness, D2C’s should be looking into activating location-based targeting tactics to bring awareness to consumers when they are nearby stores, greatly increasing the likelihood of them stopping in.
From Clicks to Bricks – Who’s Popping Up?
Companies of all shapes and sizes are beginning to see the value in establishing temporary pop-up shops, from the Dollar Shave Club to Warby Parker. Handbag company Dagne Dover announced the opening of a pop-up shop in NYC’s chic SOHO area in June 2018 to see how much space they would need in the event they were to open up a permanent location.
Online bra manufacturer, ThirdLove, also opened up a concept store in the same area this past summer in an effort to meet the demands of customers looking to connect with the brand face-to-face. Even meal kit service company Blue Apron opened up a location for one month in New York City, where they provided customers with cooking classes and the ability to purchase “grab-and-go” products.
Outside of opening up their own stores, several brands are bringing the brand experience to already established chains such as Target and Walmart. Building relationships outside of an online environment is not a thing of the past, and the successful brands are recognizing the value.
“Consumers are looking for a lot more from brands now than ever before—you have to engage them at multiple touchpoints.” – Andrea Hippeau, principal at venture capital firm, Lerer Hippeau****
Hippeau’s firm won’t even consider funding D2C startups that don’t have a plan to move into offline retail operations.
A Location Strategy Can Serve As a Permanent Solution
The key to success in building a physical retail presence, whether temporary or permanent, lies in a solid location strategy. With the help of location data, companies can analyze foot traffic trends to compare the density patterns of various sites and make the most optimal choice. Location data can also be used to target consumers based on population demographics and identify the most ideal locations for temporary pop-up stores or permanent locations. It can further be leveraged to assess competing locations within a potential site’s area and used to craft forecasts for redirecting business from such competitors.
Direct-to-consumer companies are increasingly turning to the physical world to further strengthen their brands and provide exceptional real-life experiences for their customers. These companies are realizing the importance of establishing an omnichannel presence for their consumers and are beginning to tackle offline retail head-on. But will they be able to master the art of click-to-brick in the long run? Only time will tell.
* Brands Are Winning Thanks To An Omnichannel Approach To E-Commerce. Forbes. August 2018.
** The Halo Effect: Can Online Experiences Make or Break Your In-Store Potential?. RIS. November 2019.
*** A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works. Harvard Business Review. January 2017.
**** The Blurring of D-To-C and Established Brands. AdAge. October 2, 2019.