Are the days of pure play e-tail coming to an end?

Discussion
Source: Bonobos Guideshop YouTube video
Jan 24, 2017
George Anderson

Retailers of almost every kind are looking to find the right mix of touch and distribution points to satisfy the needs of customers. While brick and mortar retailers are pushing digital initiatives, news of pure play e-tailers opening physical shops is becoming familiar reading these days.

To the latter point come recent reports that Bonobos, the upscale online menswear brand, has chosen Detroit to open another “guideshop” later this year while Eloquii, an apparel site for women sizes 14 to 28, is planning to open its first “concept shop” inside a mall near the nation’s capital in Arlington, VA next month.

The Bonobos planned for the Motor City will be number 31 for the company, which first began opening physical locations in 2011. Each small shop, typically 1,500-square-feet or less, features a limited physical display of apparel along with a fitting room. Each store emphasizes personal service with Bonobos.com serving as the virtual stockroom. Items are ordered through the site and shipped directly to customers.

The guideshop concept “strips out all the hassles you typically get walking into a traditional store,” Erin Grant, a spokesperson for Bonobos, told Crain’s Detroit Business.

In the past, Bonobos has said that it acquires more new customers through its guideshops than anywhere else. First-time customers who come to the site through guideshops also spend more than those who initially shop on Bonobos.com.

Women’s Wear Daily reported that Eloquii, which was initially part of The Limited before being shuttered and later relaunched by an investor group, is opening its first standalone location. The online site generated $20 million in sales last year and expects the demand for fashionable women’s clothing in larger sizes to drive further gains.

Mariah Chase, CEO of Eloquii, told WWD that customers have been inquiring about physical locations since the company relaunched.

“D.C. is one of our best markets and we hope to become a worthy component of our D.C. customers’ offline lives, understand their omnichannel behavior as well as generate many new long-term Eloquii community members,” said Ms. Chase.

DISCUSSION QUESTIONS: Do you see physical locations becoming a business necessity for many, perhaps most, e-tailers in the future? Will these physical locations continue to remain on the small side operating primarily as showrooms for websites or will they become something different?

Braintrust
"For most of the pure-play online retailers, physical stores will continue to be a small play."
"Consumer shopping behavior is at a stage where they gravitate towards omnichannel retailers. For many e-tailers, physical stores make sense."
"Retail will ALWAYS be — mark my word — a mix of mediums to satisfy the many types of people that we all are."

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29 Comments on "Are the days of pure play e-tail coming to an end?"

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Chris Petersen, PhD.
BrainTrust

The question is not either/or, but one of how and where to engage the customer. With today’s omnichannel consumer, it’s all about THEIR experience. And that experience is situational. It depends upon the nature of the product and the context of the shopper’s purchase path across virtual and physical.

Yes, Bonobos is a great example of using “guide stores” to create a differentiated experience that builds the brand and acquires customers who purchase more online. Conversely, Lowe’s online planning and “room envisioning” tools are an engaging experience that Lowe’s uses to excite customers to visit stores.

Consumers no longer think about “channels” or stores. We have entered the age of omni-retail which transcends time and place.

Bob Phibbs
BrainTrust

As I wrote in this post last week, there are those who tout a coming retail world devoid of physical stores, associates and malls. Their bleak future is filled with gloves and glasses that let you immerse yourself in a virtual world while still within your own home. A retail world where most everything is fake, from the assistance you get via AI to the 3-D printed products delivered from autonomous vehicles.

But that flies in the face of a basic need of shoppers: human connection.

Own the brick-and-mortar experience as your greatest asset, not something to apologize for. If pure play e-tailers see it, why do so many brick-and-mortars seem to run from it?

Meaghan Brophy
BrainTrust

I completely agree. E-tail adds a convenience factor that is absolutely necessary for today’s consumers. However, brick-and-mortar stores provide the human aspect of a brand which is equally as necessary. I think the problem lies in making the transition from what brick-and-mortar stores currently are to what many consumers want them to be. It’s easier for e-tailers to start brick-and-mortar from scratch than for many larger brick-and-mortar stores to adjust their mindsets and undergo a complete overhaul.

Bob Phibbs
BrainTrust

The question becomes “what do consumers want them to be?” I believe they want them to be more human.

Ken Lonyai
BrainTrust

Bob — I read your post before responding. Clearly you are touting a very polarizing position whereby it’s black and white: extreme technology experiences or 1890s retailing. In reality, neither will fly except on the fringes. No nostalgic connection to the way things were or righteous stance on how things should be will change the realities of a rapidly changing world. In time people may crave more human contact and the pendulum will swing back in some ways in favor of brick-and-mortar, but right now it’s on arc with a long swing away from traditional retail, towards more digital commerce.

As for me, I mostly know what I’m after when shopping and rarely get value-added support from store associates, so I prefer they leave me to do my shopping in peace. I get my socialization from family and friends.

Bob Phibbs
BrainTrust

I hardly am touting 1890s retailing and I’m not some Luddite. The breathless cheerleading of “making stores like the web” as “what shoppers want” because some pundits personally shop without wanting to talk or engage another human being doesn’t mean their positions are the only ones. I work with some of the best brands in the world working to make human connections between their products and consumers. I think that’s very cutting edge.

Jeff Sward
Guest

Thank you for the exchange. Good points all, but I’m going to come down on the side of humans and touchable product as having a role for a long, long time. A huge mistake continually made in the apparel business is fashion for fashion’s sake. That’s the sexy conversation. More is more. Except at some point it goes beyond what the shopper can take in and process. More fashion is more risk and that kind of risk can get very expensive. Same with technology. It’s a great solution for a lot of shopping. But more technology for technology’s sake is dangerous. Human and product interaction = emotion. I would argue that emotion is as powerful a driver as price. Emotion assigns the value. And I think those are still humans at the Apple Genius Bar.

Bob Phibbs
BrainTrust

Good point Jeff. You need to be brilliant on the basics in every way to be remarkably human — that may not be as sexy as bots and AI, but it has a much greater return in a brick and mortar store for the foreseeable future.

Sterling Hawkins
BrainTrust

Brick-and-mortar isn’t going away any time soon, but it certainly has to change. Physical locations represent not only an opportunity for a human connection, but also a physical space to get familiar with a brand. Many traditional brick-and-mortar stores are (and should be) running from their store models of the past. eCommerce players seem to be on the right track with smaller stores more integrated with the digital world.

Mark Ryski
BrainTrust

While pure play e-tailers will continue to dip their toes in brick-and-mortar waters, I’m skeptical that opening lots of stores is in the cards for very many of these players, with the exception of Amazon. While being a pure-play online retailer has distinct operating cost advantages, what the best online retailers are realizing is that consumers do still like to see and touch merchandise and experience the retailers’ brand in ways that an online experience cannot provide. The fact is, running brick-and-mortar stores is expensive and hard, and so for most of the pure-play online retailers, physical stores will continue to be a small play.

Phil Masiello
BrainTrust

Consumer shopping behavior is at a stage where they gravitate towards omnichannel retailers. For many e-tailers, physical stores make sense. Fashion and technology e-tailers, for example, certainly can benefit from the ability to have the customer touch and feel their product. It also enhances their legitimacy to the consumer.

The other benefit is that retailers can logistically get closer and deliver faster to the customer if they choose to offer store pickup for online sales. Or, as Amazon is going to do with its stores, use these as mini fulfillment centers to deliver to the consumer from the store.

I think we will see more of this approach moving forward from some select e-tailers, but it is also a wake up call for retailers to re-think their e-commerce efforts and change how they view and use their stores.

Ken Lonyai
BrainTrust
Whether an e-tailer needs a physical location to boost sales or not is a function of what their product category is and the uniqueness of the items they offer. Bonobos is an example of a high-touch product line. Some customers are OK with the ease of online-only shopping but others want to be certain of the fit and finish of what they are buying. For commodity sellers, say vitamins/supplements, immediacy is about the only thing that a physical location can offer but, given the number of SKUs that might require, being a pure-play e-tailer with a great logistics model likely makes more sense. Additionally, I do not believe the nostalgic view that this is going to all wash-out over time with physical retail being redeemed, whereby the remaining merchants will all be a relatively standard blend of physical/virtual selling. It’s very unlikely that any e-tailer will open a sizable number of stores (i.e., a chain) other than possibly Amazon. Their economics would likely go away and the Walmarts of their category would again dominate. So digital commerce is still going to trounce a huge swath of physical retail over the next couple of decades. And let’s wait and see what… Read more »
Ori Marom
Guest

The advantage of visiting a physical shop is greatly eroded when the store does not provide an immediate delivery option, as in the cases of Bonobos in the U.S. or Sneakerboy in Australia. Therefore, this is NOT the way to go.

It is important to understand that the concept of a PURE brick-and-mortar store has never failed or diminished. What has apparently failed is the business model of traditional stores foolishly trying to provide costly services such as immediate delivery while competing on price with online retailers. Any logical line of reason would indicate that brick-and-mortar stores must be able to charge for SERVICES rather than profit primarily by selling products. It is a simple choice between deep change and death. So why choose the latter?!

In any case, in my opinion Bonobos’ concept is not useful and will not prevail. I put my money on the marketplace concept of Amazon Go and its future followers.

Lyle Bunn (Ph.D. Hon)
BrainTrust

While legacy locations of retailers can be their Achilles’ heel, opening physical stores offers the benefit of right-sizing and building to fit the customer base. I was intrigued that the term showrooming was hardly used during NRF2017, as if it is only a threat where it does deepen brand/product discovery and offer the conversion, upset and cross-selling opportunity. Pop-up, store-within-a-store and new establishments allow brands to configure the shopper experience to best serve customer engagement. The in-store media that is so easy in a new build will offer examples of digital experience that other retailers can retrofit.

Jeff Sward
Guest

E-tail has proven to be an amazing incubator for different businesses. A good idea and minimal capital gets you started. Bonobos started with a very simple brand promise. “Superior fit” in guys’ pants. And the rest is history. It’s a great modern day story of an idea realized and adulthood achieved. But adulthood meant brick-and-mortar, re-invented their way. Amazon starts in books and and is now the all-seeing, all-providing modern day department store. What will their brick-and-mortar presence look like? Can you imagine if Jeff Bezos and Eddie Lampert collaborated on a new concept? The name over the door is now Amazon. Think people would walk in? Sears maintains some shops (if they stop selling off their brands) and Amazon populates the rest of the space with their own stores-within-stores, or kiosks, or … brands that had no current mall presence are now given that opportunity. Amazon would figure out how to manage the space to create a “treasure hunt” persona. OK, so I exaggerate a little. But the opportunity to create total linkage from the web to physical plant is there. There is a vacuum in parts of the mall. Nature will fill it.

Charles Dimov
BrainTrust

We all seem to agree that there is a definite trend that pure-play online retailers have been opening up brick-and-mortar stores. For most retailers, a solid way to compete with Amazon (the big online gorilla), is to differentiate with your additional in-person services and instant gratification capabilities. These are made possible with physical locations.

There is a good balance to be struck between online and physical retailing. Omnichannel retailers are starting to win. As such, it seems that the online operations opening new physical locations will find that an increasing volume of sales will come from the fact that they have a physical location where customers can browse, pickup orders, ask questions, interact with associates and even be entertained. The future is solidly in the omnichannel retailers’ favor!

Ben Zifkin
BrainTrust
4 months 30 days ago

Both approaches are important and necessary, however, it depends on the business and the model. There will always be room for pure-play e-commerce. It is a different type of DNA. Much like technology companies, you have those that service users anywhere like Airbnb which is present on mobile, on the web, and even has real life events. Then you have pureplay mobiles like Uber.

Adrian Weidmann
BrainTrust
Three years ago I purchased a snowblower online. It was delivered to my home within 24 hours free of charge. I’m in this business and yet this personal experience proved that the world has indeed changed. While the physical store won’t go away, it will — and needs to — become a very different place. The physical store must become a destination and an experience where a community comes together to share and meet. The roles and responsibilities of the new physical store must include being the crossroads of all the different marketing and merchandising channels used by the brand(s) it serves. The store cannot simply be the old “green grocer” shop where items are placed on shelves waiting for someone to pick them up and place them into a basket. The store will include a place where new technologies and small start-ups can showcase their product and its merits. It will be up to those brands to spark the shopper’s imagination and purchase. Stores will become active, experiential museums of the future — not the past. Those retailers and individual brands that figure that out will thrive while the others become walking dinosaurs. History will say that the digitally-empowered… Read more »
Doug Garnett
BrainTrust

Coincidentally, there was an excellent blog post by Steve Dennis today on this topic. What strikes me is that the economics and the business structure are upside down with e-commerce.

The profit fundamentals of e-commerce as it is executed today are bad. In part, it has set itself up generally to deliver more for less cost. But the economics of e-commerce suggest it should be a premium channel — where consumers pay a premium for values like convenience, assortment and other qualities they prefer.

However, investors have bought the theory of more for less so strongly that they underwrote years of losing operations and now consumers are convinced it must be true. So I can’t imagine it changing.

And that leads to … Yes. Brick-and-mortar is a must for anyone who wants to succeed as a retailer in the e-commerce world. How many stores? That’s yet to be determined but I expect e-commerce operations (like Amazon) are going to find it difficult to step away from the growing reality that brick-and-mortar is the only way to make profit on retail-like sales.

Tom Redd
Guest
Let’s just pretend all the VR/XR/ZR and AI are flashes in a pan — which to me they are. Retail is about a relationship and a deal. In the old days you built relationships with people that had stores and stuff. When you needed certain stuff to live you went to them and cut deals. Today we have a layer of technology-driven people who seem to want to cut out the human element and have deals for things they need, and many times do not even need, created by machines or just “available” to them. Well, this is fine. But in reality, today, real customers are not fitting into the mold created by these tech people and magazine articles that preach no stores and no clerks — Comic Con retail. Yes, today we have people seeking people. They want to build relationships with people like the Bonobos’ professionals and try on the famous Monday slacks for men and Joe’s great shirts. They want to have someone help them match clothes to look good and get the most bang for the buck. Retail will ALWAYS be — mark my word — a mix of mediums to satisfy the many types of… Read more »
Shep Hyken
BrainTrust

Smart retailers — and that includes online and brick-and-mortar — know what they are best at, who their customers are, when they like to buy and how they like to buy. Any retailer that stays in one channel must do so decisively and with reason. Recognizing when it makes sense to move to online or from online to traditional brick-and-mortar is defined by the customer, not by the retailer. The retailer can test and suggest, but the decision will be made by the customer. The best retailers are in sync with their customers and know when to move and shift.

Craig Sundstrom
Guest

No. There’ve always been plenty of mail-order firms — and, after all, that’s what e-commerce is — that have been storeless, and I don’t see that changing. Of course that doesn’t preclude “many” — as in a large absolute, but small relative, number — from having them.

Ralph Jacobson
BrainTrust

This article reminds me of two opposing trends, or at least two things we see a lot of in the news these days. The first is the demise of the physical stores, with so many retailers closing doors. The second, is online retailers oping stores. I still think there is enough market in the U.S. to supply both smart, innovative physical retailers’ growth, as well as the far more pervasive number of online merchants that will most likely not be building physical stores anytime soon. There’s plenty for both.

Larry Negrich
BrainTrust

Continuous convenience is the model that all retailers should strive to offer to their customers. This will be in many formats depending on the merchandise, customers, and locality. Bonobos seems to have identified the model that works for them and which may be the desirable model for new brands coming onto the apparel arena.

Kenneth Leung
BrainTrust

Just like pure brick and mortar stores going online, for some pure play retailers it makes sense to open stores. It all depends on the customer base. There are always some pure play retailers (I am thinking specialty items that is too difficult to stock in stores, or haven’t made a big enough market impact to be carried by retailers) but most will benefit from physical stores to showroom and build mind share around special events.

Min-Jee Hwang
BrainTrust

In order to provide an omnichannel experience, having a physical location is a future necessity for most e-tailers. But what they choose to do with a physical presence is entirely up to them. There’s nothing forcing them to stick with traditional brick and mortar stores. Their usage can range from a pickup location to a fully stocked showroom, or even something nobody has even thought of yet. E-tailers currently have the advantage over brick and mortar by offering convenience and lower prices because of lower to no overhead. With that advantage and knowledge, they can transition into the physical realm while maintaining their lead.

Ken Morris
BrainTrust

Retailers are understanding that the customer shopping journey is rarely confined to one channel and consumers often browse in two to three channels before they make their purchase.

According to Nielsen reports, 60% of consumers shop online before buying in the store (webrooming) and more than 50% of consumers browse in a store before making a purchase online (showrooming). Another impact on total sales is catalog shopping or catalogrooming — consumers shopping in a catalog and then purchasing online or in the store. This realization has prompted leading pure play online retailers to follow Amazon’s lead to augment their e-commerce business with physical stores.

While the sales from physical stores may never exceed e-commerce sales for these traditional online retailers, the value of the theater of shopping is too important for retailers to ignore. The store isn’t dead it just needs to innovation like Apple and Wegmans have done … Let’s go shopping!

Vahe Katros
BrainTrust

She has told me that things need to be seen or tried before purchased — but — not everything on the web is in the store.
She tells me that when it finally came, the color or texture or something was different.
She says: I miss going to the store and coming home with a prize.
She says she hates all the packing materials and the hassles with returns.

She never says anything about long tails or pure plays or omnichannel or virtual showrooms — she just emotes a feeling of sadness.

Ricardo Belmar
BrainTrust

In the end, it comes down to execution — whether online or physical store. Shoppers just want to buy. And when they decide they want to buy, they don’t want obstacles. They want ease. And above all, they want the right merchandise. Depending on the category segment, that shopper will either go online or go to a store with the intent to purchase. Smart retailers will be there — whichever it is — to make that purchase easy.

For some categories and product types there may still be online pure plays. And that’s OK if that’s where the customer wants to shop! That’s what defines an omnichannel retailer.

wpDiscuz
Braintrust
"For most of the pure-play online retailers, physical stores will continue to be a small play."
"Consumer shopping behavior is at a stage where they gravitate towards omnichannel retailers. For many e-tailers, physical stores make sense."
"Retail will ALWAYS be — mark my word — a mix of mediums to satisfy the many types of people that we all are."

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