NEW YORK, United States — With digital commerce attracting a lot of attention, it’s sometimes easy to forget just how valuable physical retail remains. While tech gurus like Silicon Valley entrepreneur and venture capitalist Marc Andreessen may predict the impending doom of offline stores, there’s no evidence that, in the highly tactile fashion industry, sales at physical retail stores will not continue to dominate as a proportion of total sales volume. In fact, while Emarketer predicts that e-commerce in the apparel and accessories market will grow at an astounding 17.2 percent annually between now and 2017, one would be hard-pressed to find reliable projections that show offline sales accounting for less than 75 percent of total apparel and accessories sales for the foreseeable future.
With that said, the lines between online and offline retail are blurring faster than ever. Forrester predicts that by 2017, 60 percent of all retail transactions in the United States “will involve the Internet in some way.” What’s more, many of today’s most successful fashion companies, from Burberry to Nordstrom, are already blending their online and offline channel strategies to deliver a seamlessly integrated, “omnichannel” retail experience with shared inventories, stronger customer service tools and more immersive brand touchpoints.
Yet, for most companies, dedicated physical space continues to be one of the most effective means of connecting with customers, allowing them to interact in a highly sensory way with the purest representation of a brand. As Jamie Gufruend at the Intelligence Group recently pointed out, “consumers don’t buy products, they buy experiences.” And while advances in web technology are enabling companies to better conjur and communicate their brands and products, the physical, sensory experience of touching, trying on and truly inhabiting a brand’s space and its products is something that simply cannot be duplicated online. This is likely one of the key reasons why many top fashion retailers have in-store conversion rates that are over five times higher than those on their websites, where, most agree, the industry average is still around 3 percent.
Lately, a number of leading “digital first” brands like Warby Parker have recognised the importance of physical stores. Warby Parker co-founder Neil Blumenthal noted way back in a 2011 that “although we created Warby Parker as a brand to be predominately sold online, we quickly learned that customers wanted physical contact.” Since then, the company has opened a variety of permanent and temporary retail concepts, supplementing their online business with low-to-no inventory physical touchpoints, which are said to generate sales productivity per square foot on par with best-in-class retailers like Michael Kors and Tiffany & Co. (In contrast to traditional stores, which devote around 50 percent of their square footage to storing inventory, an expensive proposition, no-to-low inventory stores, which ship purchases to customers much like online stores, are able to offer a product assortment that would normally occupy far more space, at a fraction of the cost).
Results like this should intrigue both digital and traditional retail companies alike. While it’s true that eyewear is a very specific product category that lends itself well to cost-effective inventory management, companies focused on other fashion categories should take a page from companies like Warby Parker and consider how to more efficiently utilise their retail square footage. Most apparel retailers are wise to continue stocking inventory to deliver on the immediate gratification that many of today’s fashion customers still demand. But as consumers grow increasingly used to direct ship models, getting their purchases sent to their homes or offices, it’s quite likely that low-to-no inventory stores will soon become the norm. This should allow for smaller footprints, lower capital investment and, theoretically, less risk in opening retail stores. Today’s easy to install, advanced point-of-sale (POS) systems, in-store analytics software and fit guidance solutions can also help to reduce friction further.
Regardless of the product category, offline retail will continue to remain relevant in fashion, even for brands that launch or concentrate their businesses online. When e-commerce first came about, many traditional retailers were resistant, or put few resources into building meaningful online businesses. As history shows, this was a tremendous error and a major missed opportunity. Now, the pendulum has swung in the other direction. In the same way that offline brands resisted the first wave of e-commerce, many digital brands are now mistakenly ignoring the unique benefits of the offline retail channel. This is also a mistake.
Offline retail remains a fantastic opportunity for fashion brands, while offering features that digital channels will simply never be able to duplicate. Ultimately, fashion brands, whether they are born online or offline, should harness and integrate the strengths of both channels to create a better consumer experience and build more effective businesses.
Ari Bloom is the founder of A2B Ventures. He has worked with numerous fashion and retail brands as an investor, advisor and entrepreneur.
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