From Clicks to Bricks: Why Direct-to-Consumer Brands Are Opening Retail Spaces
After transforming the world of ecommerce, DTC brands are making the leap to the physical store. But why would digital native companies want to enter the complex world of real estate and zoning, store design and merchandising, operations, sales, and more? Because in the right situations, it makes fiscal sense. Though these brands are taking a different approach, many have a common mentality behind the decision—something we hope to explain in part two of our clicks-to-bricks series.
Following our last article exploring the ways that direct to consumer (DTC) brands have evolved—and their early steps into the physical world, we’re today going to ask why?
Note: This is part of our much larger clicks-to-bricks series. Be sure to check out the rest of our posts on moving a DTC brand from digital to physical:
- The Rise of DTC and the Path to the Storefront
- Top Reasons DTC Brands are Opening Retail Spaces
- What Makes for a Successful DTC Retail Space?
- Clicks to Bricks: An Introduction to Flagships
- Pop-Up Shops and Why They Matter
- Keys to a Successful Pop-Up
And stay tuned for the rest of our series by signing up for our email list!
Top Reasons DTC Brands Are Moving In Store
According to Parcel Monitor, there are four main reasons that digital native brands are making the move to the physical space: Reducing customer acquisition cost, taking control of the buying experience, creating a new connection, and building a community.
Reduced Customer Acquisition Cost
DTC brands were built on the web—and they made the most of their time online. Live reads in podcasts, banners, search, and social advertising were the name of the game. Awareness and sales came easy. But then things got a bit more complicated.
One brand’s success in a market spurred others to get on board. Competition ramped up. Instead of one brand selling mattresses, engagement rings, home goods, or the like, customers had more options. While options drive innovation, there’s only so much ad space to share.
And this caused ad rates to skyrocket. Harder yet, many products sold by DTC brands are either slower moving or subscription based. Both great ways to make money, but not as great when you only have one opportunity to convert a specific customer every few years.
Customer acquisition is everything, and the additional competition made acquisition cost more expensive. In turn, brands in the space did what they do best—they followed the data. Instead of trying to open a hundred stores, brands opened a few, choosing their locations based on current shipping data and real estate choices. Paired with the idea of opening a ghost-retailer, this tempered approach has kept things affordable and driven customer acquisition cost down.
The Ability to Control the Buying Experience
One of the hardest things for an ecommerce brand to do is to manage the shopping experience. Guarantees and no-questions-asked return policies can only do so much to sell a customer on a product. Abandoned cart emails work, but often get ignored. Great navigation and user experience can encourage a purchase, but don’t close the sale.
Even in the metaverse, shopping will still feel more like an ecommerce transaction than an in-store one. Guests want to feel, see, and experience products, and the in-store experience can reinforce confidence in a buying decision.
The decision to open an in-store experience comes down to conversion rates and retention rates. Anyone can click an ad or browse a website, but conversions rarely exceed 5 or even 10 percent. In fact, in Q2 2021, US ecommerce shoppers converted to customers on their mobile phones at 2.2 percent, slightly higher at 3.9 percent on desktop. Alternatively, an in-store shopping experience can keep customers coming back, satisfy the need for instant gratification, and make customer referrals more valuable.
Visiting a store is a much better sign that a shopper is willing to purchase than visiting a site. First, they have to go into a store. Second, they get to experience products. Third, they get to ask questions.
Store design can entice a shopper to browse (more on that below). Then, they get to feel or try on products. Then, they get to talk with staff about products if they want. For apparel brands, the fitting room will be critical to the experience. For home goods brands, the displays and hands-on experiences will be key. Pair this with knowledgeable and helpful staff, and customers will make the trip.
The Power of Community
You might not be creating a club, but you are building a community. Loyalty is key for brands, and being able to experience the people and products that make a brand will go a long way in building loyalty. Not only are your current web shoppers going to want to see what else the store has to offer, they are going to get to see other people like them shopping when they visit.
Parcel Monitor puts it perfectly.
“[…] the impactful advantage that comes with opening physical stores is that it allows brands to create a community. Having a place where people can gather, connect, and feel comfortable would surely build up customer relationships and loyalty.”
A Real, Tangible Brand Experience
You’ve probably heard that your website is a reflection of your brand. Now, imagine what a physical manifestation will bring. In this case, it’s not just the ability to experience products—trying them on, feeling them, or the like—it’s the ability to experience you as a brand.
Store design is essential for DTC brands entering the retail space. From the entrance to the cash wrap, shoppers get to know who you are. Are you wood or metal? Pine or oak? Veneer or paint? Industrial, rustic, or modern? How are you going to incorporate the colors of your website into your space? Heck, what smells do you want customers to experience when they think of your brand?
These are all things that brands need to think about when opening a physical retail space—because they’re creating a home for their products.
How Different DTC Brands Created Different Experiences
The Sill wanted to demystify the experience of plant ownership and create an inclusive space to shop. Away wanted to inspire people to travel, tying in local inspiration with displays built to simplify the shopping experience. Brooklinen wanted to combine warmth with luxury. Using fixtures and displays that match your brand mission, values, and vision is key. And these two brands got spaces built to match the way they think and operate.