5 Things Retail 2.0 Can Teach Brick and Mortar

A new brand of retail companies has been popping up in recent years. Call it Retail 2.0. Many of them started out with e-commerce, focusing on delivering tailored, unique offerings within stagnant industries such as eyeglasses and jewelry.

Now many are moving to open brick-and-mortar stores as well, but they aren't doing it the traditional way. Instead they are redefining what retail means, by thinking about the customer experience holistically and not just stopping at the storefronts they occupy.

For example, many of these storefronts are pop-up shops -- showrooms that turn the concept of showrooming on its head. They actually encourage shoppers to check out the goods in their stores and then, often, to purchase online (or order in-store for home delivery). It might seem like a simple tactic on the surface, but it's completely disrupting consumers' expectations of what they think a retail experience should be.

As the creative strategies of today's e-commerce startups shake up how Americans view retail, traditional brick-and- mortar companies have a lot to learn. Here are a few examples of lessons from the trenches of the Retail 2.0 revolution:

1. Don't go against the grain
Example: Warby Parker
People often like to shop online for convenience. They also know it's easier to shop around and make sure they get the best deal. But there are certain things we still prefer to shop for in person. Many consumers want to touch fabrics, try on clothing, examine jewelry, see colors in person, etc. It's silly to try to prevent people from showrooming (as some big-box stores have done) - instead, recognize why they do it and think about how you can use it to your advantage. Warby Parker realized long ago that people will happily buy glasses online (especially for $100 a pop), but they prefer to be able to try their frames on first. That's why they offer at-home try-ons. But they've also taken it a step further, opening showrooms in Boston, New York, Los Angeles and beyond. Some of the more traditional big-box stores, such as Best Buy, have similarly found that trying to defeat showrooming isn't going to work. As senior vice president of marketing Scott Moore explained, "The thing about showrooming is it's not the ideal experience to do research at home, go to the store, do more research, then hit pause, go home and order and hope it arrives on time," he said. "There's a better way." In other words, if you can't beat ‘em, join ‘em.

2. Maximize space, minimize investment
Example: Bonobos
Bonobos's CEO has said that, "Brick and mortar isn't going away but it is evolving into something more exciting." Bonobos Guideshops have no inventory. The company doesn't have to deal with carrying costs or buy a "scale" of different sizes and colors, some of which inevitably end up being marked down and sent to the outlets at traditional retail stores. Additionally, Bonobos' employee costs are lower than traditional retail stores because there's no need for a huge staff to interact with everyone who's browsing, manage all the inventory and run to the back room to retrieve stocked merchandise. Without the need for a store room, Bonobos uses less real estate (its stores max out at 1,500 square feet) and its overall costs are lower. Sound like something that can only apply to this special scenario? In fact, brick-and-mortar stores can try many of these tactics. For example, look for ways to minimize costs by keeping samples in the store and storing inventory in less expensive warehouse space. Then offer cheap or free shipping right to customers' doorsteps. If you make it easy for them to get the best of both worlds, you can save costs while delivering a better customer experience.

3. Take customer engagement seriously
Example: Blank Label
Blank Label, a Boston-based men's custom clothing retailer, knows that happy, engaged customers buy more clothes. The company started out with an online shop where men could purchase bespoke shirts, suits and more. Using a simple online tool that collects information such as height, weight and typical clothing sizes, Blank Label has been able to offer customized fits without the need for measuring. This type of personalized, high-quality service is not only engaging for the customer but highly scalable. Recently, the etailer opened up two Pattern Shops in its native city where customers can get the tactile experience that many of them crave when it comes to purchasing clothing, especially high-end goods such as dress shirts and suits. Of course, it makes a lot of sense for a bespoke fashion retailer to take this approach, but brick-and-mortar stores of all types can learn from it. They should focus on
how they can increase engagement and provide a more personalized experience to a wider range of consumers. Today's shoppers expect attentive service, personalized marketing and a seamless online to offline experience, and Blank Label provides a pattern for how to make this work in the current climate.

4. Test the waters without diving in
Example: Gemvara
Gemvara tested out a pop-up shop on Newbury Street in Boston from November 2013 to February 2014. Ultimately, the shop didn't get much foot traffic, so the company decided not to open a full-time brick-and-mortar shop. Although this type of "failure" may seem like a bummer on the surface, it was a smart, low-investment way to test out the concept without committing to a full-year lease in an expensive area. Ultimately, Gemvara elected to open two appointment-only stores in Boston and New York, allowing their customers to get the hands-on experience without hiring round-the-clock staff. Many restaurants are trying out similar tactics today as well -- testing concepts via pop-ups or food trucks before they open actual brick-and-mortar spaces. Trying out your ideas at a market, opening a limited-time storefront or testing a pop-up in someone else's retail space can be a worthwhile experiment even for more traditional types of businesses. Ideally, lessons learned can be translated into a better customer experience, whether that ultimately lives online or offline.

5. Use real estate for marketing (and market research)
Example: Ministry of Supply
Some companies get caught up in thinking of their storefronts as simply a place to sell things. But it's important to recognize that physical retail locations are also (perhaps more importantly) a way of marketing your company -- getting the word out and letting people experience your brand in a visual, tangible way. Boston's Ministry of Supply recently opened a pop-up to help get the word out in the city about its futuristic, space-age men's wear for commuters and professionals with an active lifestyle. The brand picked Newbury Street, a popular shopping avenue in Boston, to get in front of the right customers at the right time, in a way that's hard to do while you're growing your business online. Traditional brick-and-mortar companies should also think creatively and look at real estate as an opportunity to find new markets, test new products and develop a coherent brand over time. 

Technology is changing the way we shop and shifting the relationship we have with brands. The five Retail 2.0 companies mentioned above have some valuable lessons that more traditional brick-and-mortar companies can learn from and put to work improving their businesses.

What is your company doing to stay competitive in the age of Retail 2.0?

Henry Helgeson is CEO of Cayan.
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