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11/01/2014

Bonobos, Rent the Runway Navigate Clicks-to-Bricks Evolution

If Bonobos is the original darling of online-only commerce, then Rent the Runway has stolen a bit of its thunder lately, with Forbes recently projecting the e-commerce fashion-rental site could be the tech world’s next $1 billion valuation.

But despite their considerable combined success as web-only brands, both Bonobos and Rent the Runway are expanding their horizons and transitioning to web-first — not web-only — companies, debuting bricks-and-mortar storefronts both to expand their reach to new audiences and extend their relationships with loyal existing customers. The two companies, along with beauty and grooming products retailer Birchbox, shared their experiences at a September American Express Small Business event, Online’s Day Off, in New York City that was capped off by a shopping day in each participant’s stores.

Rent the Runway collaborates
and listens

Boasting more than 5 million members and scores of designer dresses renting for 10 percent of the retail price, RTR opened its first physical store in early September in New York after launching two successful NYC popups and another in Las Vegas. The company looked for geographies with a high concentration of existing members who could fuel excitement about a bricks-and-mortar location.  Because certain elements of RTR’s business are based on convenience, the company shopped around for the right storefront in the right location close to other businesses and services that a woman renting a special-occasion LBD (little black dress) might also be interested in. That’s partly why the inaugural store on West 18th St. in the Flatiron district is a stone’s throw from a Drybar (in case she needs a blowout to go with that dress), a SoulCycle (tone up those trouble spots!), and Victoria’s Secret (to look good after the dress comes off).

Really, though, RTR has always operated with this value-added mentality. “Partnerships are the hallmark of online behavior,” co-founder and CEO Jennifer Hyman notes. “A lot of our marketing is around other brands we can collaborate with.”

Even though RTR ships garments to customers with a complementary second size option to “eliminate some of the guesswork,” many shoppers sign up as members but hold back from actually renting a dress or accessories. Offering a physical store — equipped with nine fitting rooms that take up half the space —helps to ameliorate these pesky conversion issues, according to Hyman. “A lot of the in-store customers are members on our site who haven’t transacted yet,” she explains. “They’re intrigued but they haven’t gotten over the hump of being concerned over fit or getting the item on time.”

And with the convenience of picking up an online rental in store, a customer can have greater confidence that a late-arriving dress won’t ruin an important social event such as her best friend’s wedding, adds Hyman.

RTR’s initial concerns over operating a physical store gave way to pleasant surprises. Instead of the expected lower profits and margins in-store relative to online, the company is seeing both higher conversion rates and average order sizes in its Flatiron location, driven by associates’ high-touch “hand-holding” as they guide shoppers through the rental process and encourage them to accessorize their outfit of choice.  

Still in the very early stages of physical retailing, RTR is learning a lot, Hyman admits, especially how to manage volume. While e-commerce draws a lot of casual browsers, women who come into the store are very much interested in actively trying on potential rentals. What’s more, RTR is considering the right balance of technology to feature in store because when a consumer chooses to shop in store, she probably wants to interact with a human and not just a touchscreen, notes Hyman.

Bonobos bets on 60/40 split
Any retailer that draws 20 percent of its total business from e-commerce today is held up as a stunning success. That all is likely to change in the next several years, says Bonobos CEO Andy Dunn. “We don’t know what the steady-state mix of e-commerce and offline is going to be,” he explains. “If I had to wager, I’d say . . . the core of the business is going to be e-commerce and the minority will be these great customer experiences we’re creating in store.”

The companies chasing 20 percent today as the holy grail will say it’s 40 percent a few years down the road, he adds, while for Bonobos, 60 percent e-commerce/40 percent physical store might be the most realistic balance.
When Bonobos explored the idea of its Guideshop stores, Dunn says the company wanted to “innovate” by forgoing a tried-and-true ground-floor store. But when the brand shifted the Guideshop to street level and removed inventory from the store so that male shoppers could focus on the highly personalized service, new customers skyrocketed. “People like to discover stores,” Dunn says of the ground-floor success. On Bonobos.com, two-thirds of business comes from repeat customers, while the Guideshop stats are the polar opposite.

Bonobos also experimented with selling other labels on its website, a move which prompted some passionate customers to urge the men’s wear merchant not to “become some multibrand retailer” like so many other companies, according to Dunn.  Reevaluating its approach, Bonobos now is “fired up about being a men’s wear brand” that is known for more than just great chinos and office-friendly shirts. While many men’s wear brands are pigeonholed as the go-to for either office apparel or weekend gear, the ones that become the biggest players are relevant in both areas, explains Dunn.

“To do both is a chance to be a really sticky part of a guy’s life,” he says.
Like Rent the Runway, Bonobos is convinced that offering offline channels — via Guideshops, its Nordstrom partnership, and a burgeoning catalogue business — helps to attract a segment of customers that otherwise is hesitant to take the online plunge.

Bonobos waded into women’s wear in late 2014 with the low-key online launch of its AYR brand, a collection of high-quality investment basics that customers can now experience in a dedicated Guideshop on West 25th Street in New York. As of mid-September, AYR is also now included on Shopbop, which provides “amazing discovery for brands,” Dunn says, when a woman is shopping for whatever’s fresh and new.   

Same-day Shutl service
A number of startups are eager to get in on the online-to-offline action, and Shutl, an eBay company, aims to unite shoppers with their online purchases in an hour or less. The delivery service company, which launched in the UK two years ago and expanded across the pond last year, connects a network of thousands of point-to-point couriers (who typically ferry time-sensitive documents and medical supplies) to interested retailers who want to offer same-day, or even same-hour, delivery to customers who want control over when their purchase arrives. Part of the impetus for Shutl, says general manager Steve Chien, came from a meeting with shopping mall owners whose overarching concern was that the explosive growth and popularity of e-commerce was poised to decimate traditional retail.

Shutl can be useful in helping brands and retailers test demand for a physical store in a new market by stockpiling inventory in a local warehouse and offering same-day delivery for purchases from its e-commerce site, notes Chien.

Kate Spade famously launched a similar experiment in 2013 with a trio of shoppable windows installed around New York City offering 30 curated items from its Saturday collection. In one particular location, one in every eight individuals who tapped on the digital panels got all the way to the checkout process  — though it goes without saying that entering credit card information on a giant public digital display is not everyone’s cup of tea. Shutl managed purchase deliveries, either within one hour from the transaction time or a window of one hour from a time of the buyer’s choosing. Kate Spade used the data collected from the shoppable windows to determine locations for fully staffed future pop-ups.

To date Shutl’s record for fastest delivery was notched in just 14 minutes, (i.e., just 17 seconds longer than Michael Jackson’s epic “Thriller” video). That should satisfy even the most impatient of modern shoppers.
    
Jessica Binns is a Washington, DC-based Apparel contributing writer.