Mike Goefft
Chief Marketing Officer

O2O: It is time for e-tailers to embrace retail.

09/27

More ecommerce brands are embracing and integrating physical bricks-and-mortar retail experiences into their multi-channel strategies. In a recent article in Forbes “New Rules for eCommerce”, Will Hsu, co-founder of MuckerLab, a start-up accelerator consultancy, points out several factors behind the trend.

On the product side, the new generation of e-commerce companies typically sells one of the following:

  • Highly designed and one of a kind products (Fab) either curated by an expert/influencer (JustFab, ShoeDazzle) or crowd-sourced through the community (or both).
  • Own branded items (thus not sold on Amazon/Walmart).
  • Off-season goods (vintage, collectibles, used goods) often in limited quantity (1stDibs).
  • Local product inventory offered online for a multi-channel experience typically as a “marketplace” (Shoptique).
  • On the user experience side, (aligned with the product itself) the emphasis is on creating a curated (often personalized), discovery focused, serendipitous shopping experience. It is no longer about search, recall, and relevancy – it is about appealing to the emotional side of the shopping and buying experience.”

 

On-line eyeglass retailer Warby Parker is a great example of this.

In fashion, seeing, touching and trying on products before buying is important to consumers. And while better online merchandising and product visualizations have undoubtedly enhanced the e-commerce experience in recent years, it’s still very far from replicating the feeling of interacting with products in a physical store. Online, finding the right fit also remains a significant problem. “People will always want to touch, feel and try on certain items and it is impossible to replicate that online,” Dave Gilboa, co-founder of online prescription eyeglasses brand Warby Parker. “When we launched Warby Parker, we intended to be a purely online business but we realized the biggest challenge to selling glasses online is getting the fit right,” he continued.

The company has since launched a number of “showroom” spaces, first in a portion of their New York offices and later within existing retail spaces, hotels and even cyclists motoring around special events like Design Miami. “It is a very capital efficient way for us to have a physical presence where people can try on glasses. Customers still order online so we keep minimal inventory in our showrooms and can maintain the efficiencies of running a centralized operation,” Gilboa added.

In the Forbes article, Will Hsu goes on to say to ecommerce brands:

“Brick and mortar isn’t going away after all. It is time for e-tailers to embrace retail. Don’t get too religious about building a “virtual” company. Go multi-channel. Use incremental margins to build up inventory to test offline channels – everything from traditional department stores (Toms), pop-up shops (Fab), multi-level sales forces (Stella and Dot), embedded showrooms (Warby Parker), and offline service networks (J. Hillburn). Go where customers are (offline!) and find ways to get around the choke hold Google has on online shopping traffic.  If you do a good job on using online as a retention channel, you can afford the lower margins for going offline and write it off as customer acquisition cost (Amazon did it for free shipping).”

Pop-up stores have become a key component to many on-line retailer strategies.  Set up in a high traffic area such as a mall, a subway station or a popular urban shopping area for a few days or weeks, the goal is to drive traffic to it’s new temporary store giving existing customers an outlet to connect with the brand in a more personal way.

For the launch of its exclusive partnership with Karl Lagerfeld on the designers new affordable womenswear collection, KARL, luxury fashion e-tailer Net-a-Porter staged an innovative shopping and browsing experience that bridged the divide between traditional and on-line retail. 

Net-a-Porter built five pop-up “window shops” in Paris, London, New York, Berlin and Sydney, which let consumers shop the collection by scanning products with iPads or iPhones, in addition to a 650-square-foot temporary store in New York’s West Village featuring mannequins and iPad kiosks where customers could view and purchase items via the site. “We were aiming for a thoroughly modern, cross-platform initiative and were delighted with the results,” according to Alison Loehnis, managing director of Net-a-Porter, citing strong foot traffic and sell-through.

And let's not forget Amazon who is buiding a physical store in its home town of Seattle to showcase and sell its growing line of gadgets, including the Kindle Fire tablet. 

Why are they doing this?  Clearly the success of the Apple Store has something to do with it. But it's also because on-line brands are recognizing that there's still no better way to build strong emotional connections with customers than through the physical connections that can be made in a retail store environment.

At Hood, we design and build physical spaces that bring brands to life in ways that deepen engagement with customers.  Find out more at www.hoodbe.com.  And if you would like to talk further about O2O, please contact us.

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