What Digital Brands Need to Know When Getting Physical

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As the convergence of digital and physical retailing gains momentum, direct-to-consumer brands, as well as some traditional retailers, are rethinking what it takes to succeed in today’s market. For DTC brands in particular, entering the physical store realm can be fraught with challenges.

Which is why Cushman & Wakefield is hosting an “Online to Inline Summit” Sept. 17 in New York. Confirmed speakers include Stephen Birkhold, executive director of retail at Cushman & Wakefield; Francis Pierrel, chief executive officer of Club Monaco; Joanne Podell, executive vice chairman of Cushman & Wakefield; Eric Hellman, president of Acadaca; Gabriel Hernandez, principal at Design Republic; Felix Gernburd, director at KKR; David Margolius of Shawmut Design and Construction, and Anthony Lupo of Arent Fox.

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Podell said the event “presents an incredible learning opportunity for e-commerce and digitally native companies that are looking to move to bricks-and-mortar. She said the panelists of experts “will discuss how to integrate an online brand to off-line, how to use technology to build smarter stores, key metrics for funding and other important topics fundamental to having a successful physical retail store.”

“As the retail world evolves, it’s more important than ever to provide the consumer with a fully integrated experience both online and off-line,” noted Birkhold. Here, Podell and Birkhold share their insights into the retail industry and the key role physical stores play as consumer demands evolve.

WWD: How would you describe the current state of the retail and retail real estate market? What’s behind its transformation?

Joanne Podell and Stephen Birkhold: Over the past few decades, the retail industry has undergone a massive shift. While critics claim a retail apocalypse is upon us, the underlying fundamentals of the industry have steadily been positive. With low unemployment levels, a positive economic outlook and the highest consumer confidence in 17 years, industry players have quickly learned how to adapt to the ever-changing market.

It is not surprising that e-commerce has changed the traditional “brick” segment of the commercial real estate world. But at the same time, e-commerce has actually helped boost retail real estate, as a growing number of digitally native players have started to realize the substantive value of offering goods both online and in a physical store.

WWD: What role do physical stores play in today’s market? What drives consumers to stores?

J.P. and S.B.: The rise of e-commerce has caused widespread misconception regarding the value of having a physical store. The National Retail Federation has reported that 78 percent of consumers “are shopping at brick-and-mortar stores just as much as or more than they did a year ago.” Many shoppers enjoy the palpable experience of going to a store to see and compare goods prior to making purchases, which has kept in-store sales steady. Additionally, when a brand opens a physical location, web traffic and online sales in that area can increase by 30 to 50 percent, as shoppers who visit stores often follow-up with online purchases.

This phenomenon, referred to as the “Halo Effect,” has given rise to the growing number of digitally native brands focusing their attention on brick-and-mortar. Furthermore, adding a physical location can have an impactful value as brands seek to build deeper relationships with customers. Physical stores allow for a clear and measurable visual aid to a customer’s presence and engagement in-store, enabling brands to use customer profiles to personalize the experience for customers, which can lead to increased brand loyalty and sales.

The key drivers to stores today are its value, experience and connectivity to online channels. Brands that provide value through convenience, such as in-store returns or offering unique products, can drive more customers to stores. The experience a customer has in-store is also important as brands find new ways to pull customers into stores through additional amenities, such as coffee bars and coworking, as well as through enhanced in-store experiences like high-quality customer service.

Another essential driver to a store is the brand’s connectivity to its online channel. It is not enough to simply have a strong online presence. Brands that are able to seamlessly integrate their online and off-line channels through new technologies have an increased likelihood of pulling customers into stores.

WWD: For digitally native brands looking to enter the physical store world, what should be considered?

J.P. and S.B.: The most successful digitally native brands have likely focused on expanding brand presence into physical bricks-and-mortar spaces at some point. To have continued success with a physical store, brands need to have a solid understanding of their customers.

Demographic and geological location of the store are critical, so it is important that brands understand which market they belong in and therefore where to position a store to be successful. Luckily, innovative tech, such as predictive analytics, can help identify key market opportunities for any brand.

It is also important to have strong connectivity between online and off-line channels. Every aspect from branding, marketing, software systems and merchandising must be firmly integrated to provide a seamless experience in a physical store. Many retailers, such as Amazon, Nike and the new Cover Girl store, have done an exceptional job at this by enabling innovative technologies to properly understand their customers and making their stores and online channels more personalized to connect with customers.

Lastly, now more than ever has it become crucial to not only provide the right product, but also the right experience in-store. Millennials and Gen Zers prefer to spend money on experiences and are more likely to make purchases when they are entertained and pleased while in stores. Creating a lasting impression through physical location can drive sales in all channels, as well as increase brand recognition and loyalty which are essential for the success and longevity of a brand.

WWD: What are the challenges and opportunities for direct-to-consumer brands to go physical? Do certain digital brand categories work better than others in the brick-and-mortar world? Why or why not?

J.P. and S.B.: Direct-to-consumer brands are far more prepared than traditional retailers in marketing and brand awareness. Most lack the knowledge of fundamentals for the brick-and-mortar business. The lack of knowledge in site location, market rents, lease negotiations, construction costs, merchandising, building and designing unique and smart stores, recruiting and training in-store staff and integrating digital systems can all be roadblocks for direct-to-consumer brands.

There is increasingly more data and technology in today’s retail world to help guide these brands through the process.

WWD: How can physical stores inform online strategies and vice versa?

J.P. and S.B.: One of the most important things for brands to remember is that to be successful, retailers must see the internet as an opportunity to be collaborative, not competitive. The added value in offering both an in-store experience and an online presence is massive and could be the difference between brands that are successful and those that fail.

While the rise of e-commerce has made it easier to reach customers through targeted digital ads and social media impressions, the impact of these digital marketing strategies can fall flat. There is not yet a way to know if someone simply glances over a 30-second ad or if an Instagram “like” was truly meaningful.

By that standard, creating an experience in a physical location and watching how a customer interacts with the brand face-to-face is far more measurable and impactful. Brands that open physical locations have a deeper insight into their customers profile and can thus use this to better inform their online strategies.

WWD: What roles does storytelling play in today’s physical retail market?

J.P. and S.B.: Storytelling is important for the physical retail market and is used to consistently bring consumers into the store. Whether we like to admit it or not, consumers like to feel like we are a part of something greater than just ourselves. Therefore, curating a story that allows consumers to buy into products that are elements of a larger story is critical.

For instance, many fitness boutiques know that convincing individuals that they are a part of a bigger movement than just personal weight loss can help drive more group-class sales, while some beauty brands allow consumers to create custom-ingredient face washes in-store because every consumer’s needs are different. Storytelling will continue to be important for merchandisers for years to come.

WWD: What does it mean to offer more experiences for today’s shoppers?

J.P. and S.B.: The emphasis on experience is part of the constant effort to provide a more enhanced in-store value to the customer. Experiences have traditionally been used to gain more foot traffic in stores to increase sales. Tactics such as offering in-store coffee shops or “Instagramable” showrooms increase the time a customer spends in a store and therefore the likelihood of a purchase.

This enhanced experience can also create a deep connection to a brand through superb customer service, personalized products, unique storytelling and other impressionable acts that increase customer loyalty, which is vital for a brands success and longevity.

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