April 14, 2022
Long before the pandemic forced the slow-moving giants of retail to fast-track their online operations—or risk going out of business—a growing number of online companies, including Everlane, Burrow ,and Allbirds, were catering to shoppers who preferred to scroll social media rather than roam their local malls.
Now, as the pandemic moves into its third year, many of those Millennial shoppers have traded in city life for the suburbs, where they can work remotely. And as many of those online brands open their first stores or add new ones as in-store shopping returns, they’re meeting their customers where they are—close to home.
The result is a “tapestry of stores,” which are narrowly targeted toward specific but often different types of customers, said Ethan Chernofsky, vice president of Marketing with the retail location analytics company Placer.ai. He points out that, as more of these digitally native companies expand into brick-and-mortar, they are starting to reshape shopping districts across the country.
“Pre-pandemic, the predominant store growth plan for more traditional store openings was starting with the A malls in the country and then street retail,” said Vince Tibone, a senior analyst with the commercial real estate research and advisory firm Green Street.
“Post-pandemic,” Tibone says, “you’re still seeing them open in those two venues, but also more suburban locations that are closer to people’s homes.”
That expansion comes on the heels of a boom in e-commerce during the past two years that shows no signs of letting up, despite the full reopening of the economy. Online sales now make up 14% of retail sales overall, and are expected to top $1 trillion this year, compared to just over $760 billion in 2020, according to the Adobe Digital Economy Index.
Still, brick-and-mortar remains the most powerful part of the equation. A recent report from Deloitte InsightQ found that 55% of shoppers who began their product search online made the purchase in a store. That trend is fueling a growing recognition that the combination of stores and websites produces the biggest payoff.
“Retail was always part of the strategy,” said Ariel Kaye, founder and CEO of Parachute Home, which began in 2014 as a direct-to-consumer company selling bedding products and grew into a high-end boutique retailer selling a curated collection of furniture, mattresses, and home goods.
Parachute has opened 15 stores since 2016 and plans to add another 15 this year. Unlike traditional furniture stores, with their expansive showrooms of products, Parachute Home’s stores are Instagram perfect, with an abundance of natural light, bleached wood, and minimalist furniture arrangements. Kaye said that in markets where the company has stores, she’s seen traffic to the website climb by 50%.
Like the vast majority of online retailers, Parachute Home has collected mountains of data on its customers, which it relies on to shape decisions about where to locate new stores. “We look to see where they [shoppers] are located and use proprietary data about their shopping behavior ” she said, adding, “We do love being in neighborhoods because a lot of people work from home. They step out on their lunch break and shop, and being close makes it easy to have that access.”
Being close is still a challenge for bigger retailers, which are only beginning to find their footing with smaller, more-targeted stores. Nordstrom has opened seven Nordstrom Local stores since 2017 that focus on services rather than just shopping. Customers can pick up and return online orders or arrange for alterations.
Macy’s new Market by Macy’s stores are less than one-quarter the size of a traditional Macy’s and offer personalized styling services along with a collection of products popular with shoppers.
Indeed, today’s retail landscape is no longer dominated by a few companies with hundreds of copy-and-paste stores across the country. It’s driven by a broader group of companies, often with online roots, that plan to open only a few dozen to a couple hundred shops nationwide, said Chernofsky with Placer.ai.
Allbirds, whose sustainable wool shoes became popular in Silicon Valley and quickly caught on nationwide, opened its first store in 2017. By the end of last year, it had 35 locations worldwide. Travis Boyce, Allbird’s vice president of Business Development, said that people who shop with the company both in-store and online for at least a year spend 1.5 times more than shoppers who buy through a single channel.
“Brick-and-mortar retail has been central to our growth as a brand,” Boyce said.
“Online-only doesn’t work,” Chernofsky agrees. “You still need stores. I think that’s why they [internet retailers] generate so much excitement,” he added. “Because they’re this kind of amazing testament to the power of physical retail.”
Research contact: @NBCNews