Retail

Should brands shift to pop-ups and showrooms over traditional stores?

 Pop-up shops can be just as effective as permanent stores.

In a previous post, we highlighted five reasons why e-commerce brands still need a physical presence, but we don’t think that that physical presence needs to be traditional store. Two new models, the showroom and the pop-up have emerged, and we think they can be just as effective if not more so than a traditional physical store.

According to Pop-Up Republic, pop-ups have driven $10 bn of sales annually and are continuing to grow. Even big brands like Nordstroms have created in-store pop-ups embracing the trend. Why are pop-ups so popular? And how can they be effective for growing brands over having their own retail store? And where do showrooms fit in?

Pop-ups provide flexibility

As a temporary location, a pop-up can provide ample flexibility for experimentation. As a brand, you can lease different size spaces in different locations at different times of year to figure out what works for your brand and resonates with your customers. The inherent transience of a pop-up allows you to A/B test different concepts, something that e-commerce brands are already doing all the time on their websites. Think of a pop-up as an opportunity to A/B test key variables like size, location, layout and assortment of your physical stores. In addition to these benefits, pop-ups are also a temporary expense thereby minimizing the risk of making a bad, long-term financial decision.

Pop-ups create a sense of urgency

The great thing about a pop-up is that it’s something new and temporary. These two elements can combine to encourage customers to buy now and to buy more than they otherwise would. Because they know your store won’t be there forever, customers are encouraged to make their purchase right when they see something they like rather than waiting until the next time they come back. While a physical lease runs 5 - 10 years, most pop-ups won’t be in a single location for more than three months.

Pop-ups can support your e-commerce business

For many emerging brands, the goal of their physical presence (whether wholesale or other), is ultimately to drive traffic to their higher margin direct to consumer business. Not only do pop-ups help you maintain your margin, but they accomplish a similar objective. If the customer was curious about your store, they’ll search for you online and be more likely to buy something than had they not walked by your pop-up. In a lot of ways, you can think of pop-ups as more like event marketing rather than a distribution channel.

Social media creates great marketing reach

In a world of social media, pop-ups become even more attractive because there’s an easy and convenient way to share the fact that you’re opening a pop-up with consumers. What’s more, it creates an opportunity for a conversation with your customers over social media in which you invite your loyal followers to come visit you in person. In the pre-social media days, it would have been very difficult to actually attract customers to your temporary location.

Showrooms are a natural extension of the pop-up

Most showrooms tend to be permanent and have been used successfully by brands like Warby Parker. While traditional stores hold inventory, pop-up shops often do not. Instead, they give the customer an opportunity to experience the product, decide what he or she likes and then place the order. Instead of walking out with the item, the customer gets the exact product they picked out delivered to their home. 

In a world in which physical retail stores are closing left and right, brands are searching for a great way to connect with customers and own the customer experience without taking on the liability that a physical retail store often comes with. The great thing about both pop ups and showrooms is that they derisk the financial investment required in creating your own physical space. In the case of the pop-up, the fact that it’s a temporary space limits the financial risk. In the case of a showroom, the fact that there’s little to no inventory investment is a different way to minimize that same financial risk. 

Regardless of whether you choose to keep your business e-commerce only or open a pop-up, we’re here to help you focus on your business, not your inventory.

Our 5 question guide to choosing the right e-commerce platform

 Our 5 question guide to choosing the right e-commerce platform for your business

Your e-commerce platform will probably be one of the most critical pieces of software you select for your business. In recent months, we’ve observed that a lot of companies end up switching platforms. This is extremely painful and costly - you have to divert your team's energy away from running your business to switching. We’ve boiled it down to the five key questions you need to ask yourself to help you avoid this expense and choose the right platform for you:

1. How big do I expect my business to be?

If you think that you’re starting a really big business, this might be the only time it’s worthwhile to invest in a custom or highly customizable platform, like Spree. If you’re a large brand, you’ll inevitably want to fully control the customer experience and come up with innovative offerings for your customer base. This will be hard to achieve without investing tech resources. On the other hand, if you think your brand might stay relatively small, you can probably get away with using a basic, user friendly tool like Shopify or BigCommerce. They don’t enable a lot of customization, but you can create a really beautiful e-commerce site in a short time. That being said, ShopifyPlus does cater towards larger brands. 

2. How unique is my business model?

If you’re selling a product a la carte to an end consumer without a ton of complexity, a simple platform like Shopify could serve you really well. However, if you’re starting a business with a rent-to-own model or a subscription model, you’ll definitely want something more customizable like Spree or Magento. Both platforms are open source, so you can hire a development team to help you craft the nuances you need. We always encourage new businesses to keep it simple and avoid inserting needless complexity into their model. To start, keep your SKU count low and your model straightforward. 

3. How tech savvy am I?

You have to be really honest with yourself. Can you actually build a website? It’s OK if you can’t, but if that’s the case, even with a do-it-yourself platform like Shopify, you’ll probably need some tech support. If you’re pretty tech savvy; however, you can get yourself up and running quickly. If you’re not tech savvy and wind up choosing a more customized platform that requires heavy development investment, you might really struggle to supervise a dev team without someone technical on your team. 

4. How quickly do I need to be up and running?

In some cases, time may be the biggest constraint. If it’s extremely urgent for you to start your business, then you definitely want a platform like Shopify or BigCommerce that requires relatively few development resources and can get you to market quickly. On the other hand, if you have time to diligence, onboard a dev team and spec out the product, then spending the time to create something that really represents your brand and is unique to your business might be worthwhile.

5. Do I have capital to invest in tech resources?

Shopify and BigCommerce will be more cost effective than any tools that require development like Magento, Spree or a custom platform. That being said, what companies don’t often anticipate is that once you’ve built out your website, the investment has just begun. Anytime you want to make a change, you’ll need to spend capital on your development team. Further, as you build out your business and incorporate additional tools and systems like an accounting system, an ERP system or an inventory management system like Fuse, you’ll find that with customized platforms, you'll need at least some dev resources for these integrations. The more customization you’ve done, the more development work will be required on your side to make the platform work. These costs are often unanticipated. Shopify is at an advantage on this dimension because it has the most robust app marketplace with tons of vendors to choose from

To help you make this critical decision or to help you switch if you need to, we’ve created a pro and con cheat sheet:

 

Pros

Cons

 
  • Easy to use
  • Increasingly nicer and nicer templates
  • Robust 3rd party marketplace
  • Possibility of Shopify Plus upgrade
  • Cheap
  • Core product does not support multiple currencies
  • Not very customizable
     

  • Open source
  • Highly customizable
  • Solid 3rd party marketplace
  • Somewhat old school
  • Requires a lot of development resources

  • Open source
  • Highly customizable
  • Commonly used by e-commerce start-ups
  • Great for subscriptions
  • No 3rd party marketplace
  • Requires a lot of customization and development resources
     

 
  • Integrates e-commerce store with 3PL
  • Omnichannel focus with some inventory management capabilities
  • 3PL is not very good
  • Does require custom dev work

 
  • Easy to use
  • Slightly slower load times vs. Shopify
  • Great how to content
  • Cheap
  • Small third party ecosystem relative to Shopify

 
  • Generally lower quality design than Shopify and BigCommerce
  • Customization can be costly and require dev work
  • Easy to use
  • Wordpress plugin
  • Free

No matter which platform you end up choosing (or switching to), Fuse is here to help you focus on your business, not your inventory.

5 reasons you need a physical store and how to hack it if you can't afford one

 Physical retail stores are still important in an e-commerce world

It seems like everywhere these days all you read about is doom and gloom for physical retail. Same store sales are declining, foot traffic is decreasing and brick and mortar is struggling as Amazon continues to take over the world. While we can’t deny the facts, we do think that there is a compelling case for new brands to create some sort of physical presence:

(1) It’s hard to be a big business without a physical presence

As evidenced by the recent troubles at JackThreads and Nasty Gal, e-commerce pure plays are very vulnerable. While each of these companies had their own unique problems, the attractiveness of the e-commerce model can only take a company so far. Compare JackThreads and Nasty Gal to Bonobos and Warby Parker. The latter two are both e-commerce darlings which have started focusing on creating physical showrooms. These showrooms don’t hold inventory, but they create a physical presence where customers can come in and experience the product. Warby Parker understood the importance of the physical experience from the beginning and created its home try-on program as a way to compensate for a lack of physical stores. JackThreads attempted to create a try-on program, but it was ultimately too little too late. Of course, there are some shining examples of success like Dollar Shave Club, but so far, these are the exception and not the rule.

(2) Most shopping is still done in person

We all know the stats. E-commerce is growing rapidly at a rate of 15-17% year over year. Yet, despite this incredible growth, e-commerce (excluding big ticket items like cars), still only represents 10% of retail sales. Of course, this is huge compared to just a few years ago and the growth rates speak for themselves. That being said, as a brand, you want to be where your customers are and at least 90% of their dollars are currently spent in store. It’s important to maintain your e-commerce business and prioritize it as the wave of the future, but completely ignoring the channel in which customers currently spend most of their dollars just isn’t smart business.

(3) As consumers shift spend from goods to experiences, a store can be a great way to create a compelling experience with your brand

If you think about some of the most successful retailers in the world, like Apple, the thing that makes them so successful is that the store is a unique experience that helps the customer connect with the brand. When you walk into Apple, you might not necessarily be looking to buy, but you certainly are looking to explore and discover new things.

Physical stores, by creating a branded experience, can have a similar impact for your business. They are a great place for customers to discover new products that they wouldn’t otherwise have seen or evaluate more expensive purchases, like jewelry. In many ways, the physical store can act like a marketing channel by putting your brand, products and the experience it stands for front and center with consumers.

(4) If you can’t afford your own stores or showrooms, take advantage of pop-ups

Several of our customers, including Aella, have been extremely successful with lower cost, temporary pop-up shops. The next one includes a partnership with several other brands and starts on March 1st. While pop-up shops are of course, temporary, they still create tremendous brand awareness in critical markets. The goal of these stores is ultimately to drive e-commerce traffic, so by being strategic about the location and timing, you can achieve that objective without committing to a full fledged store. 

Pop ups are great because in expensive markets like NYC, there are plenty of landlords who are receptive to the concept. Their rent is high, so finding a long-term tenant can be difficult. Thus, this leaves plenty of open space for your pop-up. 

(5) Being strategic about wholesale can have a similar impact as having your own showroom or pop up

Wholesale is a tough channel. Not only does it eat into margins, but it’s hard to control how your product is merchandised. That being said, picking a few strategic partners and specific locations that align with your brand can be tremendously helpful in reaching your ultimate objective: driving traffic back to your e-commerce site. 

However, the challenge really comes into play on the margin side. A lot of e-commerce companies have lower prices because they can - they can still have attractive margins by disintermediating the middle man. Many e-commerce companies pride themselves on replicating the Warby Parker model - finding inefficiencies in the supply chain which allow them to have lower prices than more established competitors. However, before setting your prices, brands need to keep in mind that price is an important indicator of quality to consumers. Further, if you want to maintain the flexibility to enter the wholesale channel, having slightly higher prices will create a bit of cushion for you on the margin side.

At Fuse, we're dedicated to supporting your business, whether it's an e-commerce pure play or a combination of e-commerce, retail and wholesale. We're here to help you focus on your business, not your inventory.

Can luxury go digitally native?

 Can digitally native luxury brands succeed? We think so, but e-commerce brands will need to work hard to exceed the traditional luxury experience.

A few months ago, we published a post on why we believe that digitally native brands can and will be successful. First, they are well positioned to completely own the customer experience. Second, it’s easier to find and target the brand’s ideal customer online. Finally, there are many storefronts (like Shopify and Big Commerce) to choose from that look great and don’t require a team of engineers.

How do consumers feel about luxury e-commerce?

But, can the same logic be applied to luxury items? According to Bain’s Spring 2016 Global Luxury outlook, growth of luxury goods has slowed to 1%. In the US, specifically, the luxury market is in decline due to limited domestic spending and no support from tourism. However, amidst this grim outlook, e-commerce is gaining ground on traditional channels and is expected to grow by 15% per year through 2020. 

We ran a survey to understand how consumers feel about purchasing luxury items online. An overwhelming majority (90%) of our respondents said that they would buy a luxury item online, which is great news for brands. But, many of them caveat that there are only certain kinds of luxury items that they feel comfortable purchasing. First, they prefer purchasing from brands they already know. Second, they prefer to have interacted with the brand first in store. Finally, if it’s an item with a very specific fit, they want to have tried it on in advance.

Customer experience is key to success in luxury

We asked two up and coming brands, Floravere and SENREVE, in two very different industries (wedding gowns and handbags, respectively) to share how they tackle these customer needs.

According to Emily Ambrose at Floravere, “There is nothing more luxurious than serving the customer on her terms.  We deliver wedding dresses directly to the customer, so she doesn't need to hunt down the one dress. Instead, she can try-on in the comfort of home with her loved ones and no pushy sales people. Going digitally native gives us the opportunity to offer unprecedented customer service in our space.” 

Julia Mehra at SENREVE shared a similar perspective: “Luxury purchasers are increasingly turning to online retailers to satisfy their wants and needs. Our SENREVE woman is very busy, so shopping online suits her lifestyle. We’re seeing shopping behavior on our site indicating that the online model fits well with the modern woman’s schedule. We serve these women by delivering a beautiful, timeless, elegant bag for the modern, successful, on-the-go woman.”

Interestingly, both brands defined luxury not simply based on the nature of the good, but also based on convenience of the experience. Recognizing that fit is important, Floravere creatively opted to ship samples in multiple sizes and supplements the experience with a personal stylist. 

And so is building your brand over time

We believe that digitally native brands can be successful in the luxury goods market, but to do so, they’ll need to recognize that the experience of luxury has changed. Retailers must deliver on a customized experience that sacrifices none of the quality and achieves all of the service. Like with anything that is new, it takes time. Time to change generations of retail experience. It takes good word of mouth. It takes a dedicated set of initial customers who are willing to try it out.  And, then, your brand, your product, your service has to speak for itself.

Whether you’re a luxury e-commerce brand or not, Fuse is here to help you focus on your business, not your inventory.

What can you expect this Black Friday and Cyber Monday?

 What can retailers expect this Black Friday and Cyber Monday? While physical retail is expected to under perform again, it's going to be a record breaking year for e-commerce.

As we gear up for Thanksgiving, we think of turkey, pumpkin pie, time with family and of course, shopping. Black Friday is crucial because it kicks off the critical holiday shopping season during which almost one third of annual retail sales occur. 

Black Friday has under-performed expectations

Despite retailers' emphasis on Black Friday, consumer participation and spend have been declining for the past several years. According to the National Retail Federation’s annual survey, last year there were just over 100 million in-store shoppers on Thanksgiving weekend (compared to a forecast of 135 million). These figures represented a decline of over 20% relative to 2014. 2014, by the way, also significantly underperformed the forecast. 

But Cyber Monday will be record breaking

On the e-commerce side; however, the picture is much rosier. According to Adobe Digital Insight’s Holiday Prediction, Cyber Monday will be the largest online shopping day in history, well exceeding $3 bn. Mobile is expected to continue to represent an increasing share of Cyber Monday Visits (nearly 50% or 25% growth relative to 2015). However, this increase might be a double edged sword given that desktop conversion rates are nearly 3x that of mobile conversion rates. Two potential remedies to address this gap are mobile retargeting to reach the mobile cart abandoner and improved checkout flow to make it easier for mobile shoppers to purchase in the first place. 

Consumers choose e-commerce for convenience

The underlying drivers of increased e-commerce spend are factors related to convenience, with over 50% of consumers citing free shipping as a reason for preferring to shop online. We asked our advisor, Robert Escobar, an operations executive with experience at brands like Bare Escentuals, Stella & Dot, Ipsy and Gwynnie Bee for his thoughts on how e-commerce retailers could tackle shipping this holiday season and beyond:

“Given the volume surge between Cyber Monday and Christmas, all ecommerce retailers should be thinking about how to reduce customer delivery jitters. Its awesome to offer great product, but not great to miss the expected delivery date. First, think through your own ability to process orders out of your warehouse and hand-off to the shipping company. Understand how long it takes for your shipping company to deliver. Always allow for 1-2 extra shipping days beyond the quoted date, unless its an overnight or two day guarantee shipping service. Second, if you charge for shipping, make sure to have an accurate cost calculator to ensure the customer knows the exact cost before they checkout. Lastly, make sure your consumers can track their shipment by providing them with a direct link email.”

As hectic as the holiday season might get, Fuse is here to help you focus on your business, not your inventory. 

Are millennial men better e-commerce shoppers than women?

 Our study shows that men are better e-commerce shoppers than women. Although they spend less, they also make fewer returns and visit sites with the intent of purchasing.

Over the past several years, we’ve seen a proliferation of successful men’s e-commerce brands in a wide variety of categories. In grooming, there’s Dollar Shave Club and Harry’s. In clothing, Bonobos and Trunkclub. More recently, we’ve seen athletic wear enter the mix with brands like Rhone gaining traction. 

Men's e-commerce is under-penetrated

Despite all of this growth, we still think that men’s e-commerce is relatively under-penetrated compared to women’s e-commerce. Let’s take a look at athletic wear as an example. Our post from a few weeks ago on athleisure cited half a dozen new womenswear brands in the category. In menswear, we were hardpressed to think of more than a couple. Going into this post, our hypothesis was that not only are men underserved relative to women, but that on top of that, they’re actually better e-commerce consumers than women are.

To test this hypothesis, we ran a survey seeking responses from Millennial men and women on their e-commerce buying behavior. We got over 80 responses and the results were quite dramatic. 

Men are better e-commerce consumers than women

The story they tell us in favor of targeting men over women goes something like this. When men shop, they typically shop online more than women (80% vs. 64%). What’s more, when they do turn to online shopping, almost 90% of them are looking for something specific. Women, on the other hand, are are just browsing almost 50% of the time. Further, when men do buy something, almost 25% of them say that they don’t make any returns compared to none of the women we surveyed. 

This last data point is really stunning, particularly given how big of a problem returns are for retailers. We’ve seen this play out within our own customer base - menswear brands have returns of 10-15% and don’t flag them as a big concern. For womenswear brands, returns are a huge concern and can be over 2x more frequent. Why are returns such a problem? This is a whole separate topic altogether, but the short answer is because most brands aren’t set up to process returns efficiently and it can take as long as three weeks to get an item back into circulation.

However, our survey also shows that there are some drawbacks to targeting men over women. Although men are more likely to make a purchase and less likely to return it, they also tend to shop less and according to our results, they also spend less than women (50% say they spend less than $100 when they shop compared to 35% of women). The data shows that most of the high value consumers (over $250 / order) are women.

Men's e-commerce needs to precisely target customers

We asked one of our pilot customers, Chip Malt at Rhone for his perspective on the results: 

"We've seen great traction as a men's only direct-to-consumer e-commerce brand.  Our main challenge is finding the target customer looking for our product. However, once we find him, he is a great customer and shops with us often.  We also see very low return rates (75% below the industry average) as well as high repeat purchase rates (about 2-3x industry average), all resulting in a high customer lifetime value.  We also find our male shoppers to be less adventurous than women, sticking mainly to core colors and styles, so seasonal and 'pop-colors' are mainly window dressing for us."

So what’s our conclusion? Well, we still think that menswear is underpenetrated from the direct to consumer brand side in relation to womenswear. That being said, as with everything in life, there are trade-offs. Brands that target men might have an easier time getting men to actually purchase and not return their orders, but the tradeoff is that men shop less frequently and spend less.

Generation athleisure – what’s next for retail’s fastest growing categories?

 Athleisure is one of the fastest growing categories in inventory and e-commerce, but can this trend last?

As we survey the retail ecosystem, we, like the rest of women in America, are thrilled by the boom in athleisure. Vogue published an article earlier this year highlighting the many ways that one can wear and style athletic wear, even giving us permission to wear athletic clothes all day. If Anna Wintour says it’s OK, who are we to argue?

What caused the athleisure boom?

Out of a combination of curiosity, a passion for retail and of course, self-interest, we asked ourselves, “Is athleisure here to stay?” But before we look to the future, let’s first attempt to diagnose where the trend started. We credit Lululemon (which was started almost 20 years ago) with driving the trend forward by showing us not only how comfortable we can be, but also how good we can look in their yoga pants. The Juicy Couture tracksuit took the trend to a new level over a decade ago by demonstrating how athletic wear can not only be comfortable, but that it can also be a symbol of style and status. As the clothing got more stylish - think cool wrap sweaters and criss-crossed tops - it became even more acceptable to wear athletic wear outside of the yoga studio and a proliferation of brands (like Alo Yoga, Rhone and others) flourished. 

Athleisure will evolve as a category

But can this really last forever? Our answer is yes and no. On the one hand, we don’t think that Athleisure in the way it’s known today - primarily intended as athletic wear but loosely interpreted as work and casual wear - will continue. Instead, as fabric technology improves, we think that athletic wear will slowly make its way back into the gym while new brands rise to take its place. 

We’re talking about brands that take the best of athleisure - comfort, ease of care, durability, functionality - and translate it into more stylish ensembles that are actually intended to be worn to work. Two great examples are Pivotte and Aella. Aella’s clothes are stylishly tailored, machine washable and the fabric makes the clothes feel like something you could wear to the gym with an important difference - it looks like something you should distinctly be wearing to the office. 

Comfort isn't just for the gym anymore

We sat down with Eunice Cho, the CEO of Aella, to ask her what inspired her to start the brand. When she first started working on Aella, “...there weren’t brands like ADAY, or other athleisure concepts that bridged the gap between activewear and ready-to-wear. Fashionable activewear started pushing the envelope, but everything still very much had a gym aesthetic. However, brands were popping up in menswear that were focused on comfort and versatility. Finally, the activewear sector was just growing and growing. I knew it was just a matter of time that this trend would bleed into other categories. We see Aella as the workhorse of the modern woman’s wardrobe: it’s the trusty essential that you can go back to, again and again.”

We’ve also seen this desire for comfort seep into other areas of women’s fashion, namely, lingerie. Several up and coming brands like AdoreMe and True & Co strive to disrupt Victoria’s Secret by providing a comfortable alternative that allows women to look and feel great. 

All in all, we think there is a lot to look forward to. While we might miss wearing our Lululemon pants everywhere, we’re excited to have a more stylish and equally functional alternative. Most importantly, we’re here to support all types of businesses, whether you’re an athleisure brand or not. At Fuse, we want to help you focus on your business, not your inventory.