I read two pieces of news last week about brands began online who are now opening physical stores. Piperlime announced they are opening their first physical store in New York City this fall, and I received an email from Athleta that they’re opening a store (I think their ~15th) in Woodcliff Lake, New Jersey.
I started contemplating when and why online retailers choose to open a brick and mortar presence, and I came up with 2 main hypotheses.
They open these stores to either:
2) reach target customers in unsaturated markets where there is strong immediate revenue opportunity and the ability to build a loyal following*
In terms of last week’s news, I believe that Piperlime is a solid example of reason #1 and Athleta’s expansion an example of #2. Let’s examine each:
Piperlime’s 2011 Pop-up store (Image via NY Spender)
Piperlime – opening a physical store in NYC is about bringing the online experience to life, PR exposure, and branding. Overall, it’s more of a “show” move with long-term benefits than an immediate revenue play. The real estate costs for a NYC store are likely exorbitant, but they probably selected this market because of access to influencers and to increase their coolness/top-of-mind factor among fashion’s editorial community. I’m guessing they hope that the press and coverage they will get out of it will trickle to other markets, building the awareness of Piperlime for online shoppers nationwide. Seems that a pop-up shop could accomplish much of this though, so they must believe this endeavor will have the ability to continually drive buzz and do so profitably. (Piperlime did create a pop-up store timed with Fashion Week last year; seems that was a test-run).
Athleta new store announcement
As for Athleta – they probably are identifying markets where opportunity exists to be the first mover, establish customer relationships and build loyalty. For their store locations, they’ve opted for less urban, more suburban markets — places where lululemon hasn’t yet taken over, or may be out of range price-wise for consumers. It’s important to select locations that will be excited about a fitness-focused store (cities were health is a priority) but where shoppers may not yet be obsessed with/have access to lulu (the leader). Opening a physical store is more likely focused on immediate sales in these markets. Athleta has probably learned who their avid online shoppers are and selected markets accordingly that could be profitable both from the get-go and in the long-term.
The fact that both Piperlime and Atheta are owned by Gap Inc does provide advantages for each them when opening a physical store. They can likely leverage the corporate expertise in all of the related store operations – leasing, hiring and training employees, procuring the necessary technology to process payments, tacking on to warehouse/delivery routes of nearby Gap Inc stores, and more. This knowledge and infrastructure is a huge luxury that any online brand considering opening a brick and mortar wouldn’t necessarily have.
For instance, I’m not sure that Warby Parker, ASOS, Zappos, or Bonobos are itching to open their own stores given all the overhead compared to operating solely online. If they did, I’d be curious which approach they’d take. There have apparently been rumors that Amazon and Net-a-porter have considered physical stores, but I haven’t heard a peep recently – also curious how that pans out.
*Note: A third reason is to simply have a presence in/near their corporate HQ (ie. Zappos corporate store, Threadless Chicago store near their HQ, Chrome Bags store in SF).
Special thanks to my brother (who also has forged a career in retail), for being my sounding board on this post.