shopping

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.

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.