Pureplays Reinvent the Store
Originally published November 2018 Inside Retail Australia
Guest writer: Pippa Kulmar: Co-Director Retail Oasis, Australia
At the moment, retail really is the tale of two types of retailers: traditional and pure play. Let's start with traditional retailers, those who started pre-internet in the bricks-and-mortar stores. This group is currently experiencing maturing sales. Their dominant growth strategy is shifting from opening more stores, which traditionally drove growth, to investing into online, including omni-channel and frictionless initiatives.
Image: Glossier's newest bricks-and-mortar store in Los Angeles. Source: Glossier.
Thanks to increased competition and more progressive consumers, many traditional retailers are being forced to take a hard look at whether their offer is truly compelling to customers, which goes well beyond ticking the boxes on brand tracking or NPS. In essence traditional retailers are being asked to re-evaluate and evolve their offer to work in a new time.
Then there's the story of pure play retail, which were born without the legacy of bricks-and-mortar, but ultimately are limited in their growth by being single channel. This group is made up of retailers which are truly experiencing "the best of times" with high growth rates, though they are often underpinned by issues with profitability.
Image: The Dreamery by Casper, NYC
What is interesting ad maybe even ironic, is that in their search to keep growth high (over 10 percent per year) they are looking offline. This is bigger than the occasional marketing pop-up they are going permanent. For example, optical retailer Warby Parker is due to have a 100 store network in the US by the end of this year.
This raised the question: Are pure plays they future of physical retail?
Based on what I'm seeing (and maybe controversially), yes. Of course, they are in their infancy with physical retail, but these signs suggest to me that their approach will create and disrupt physical retail's future.
1. Their offer is already customer-centric.
While traditional retailers work out how to put the customer back into the heart of their business - particularly if the current generation of consumers wasn't their core when they started, or the business isn't representative of their customer - more pure play businesses were set up this way from the start. Many founders started their business because of a fundamental dissatisfaction with the way the category operated. In the most successful examples, the founder is representative of the customer.
Take the cult beauty brand Glossier, founded by millennial blogger Emily Weiss for example. In 2010, Weiss started a blog called Into the Gloss, where she fostered a community of beauty lovers. She then used her fans to develop a range of beauty products under the brand Glossier. The result, a business that designs directly for their customers, valued at US$390 million with three stores (as of this writing).
According to New York Magazine, Glossier's NYC flagship on the sixth for of an office tower - meaning it's not even street front - drives higher sales per square foot than the average Apple store (approximately US$5546 per square foot).
2. The store is about more than the sale, it's an acquisition channel.
In traditional retail, we often measure the success of a store by its productivity - that is sales per square metre. This measurement actually limits the purpose of the store to purely being about commerce. However, pure play retailers see the store as more of a marketing vehicle. The hypothetical question they are asking themselves is, can the store do more with our marketing money than advertising?
To quote Scott Tannen, the founder of US online bedding business Bol & Branch, which just went offline with its first store: "Advertising...might get you a million customers, but the long-term value on those customers is low - all you're doing is buying one-time revenue. Not long-term affinity."
The stores they are creating are a hybrid of commerce and channel.
3. The store is a live experiment.
One of the core attributes of the pure play culture is agility. Most pure plays have embedded a customer experience (CX) design process in the business and nurture an appetite for experimentation. As such they see physical retail as a journey, not a destination.
Just take the mattress pure play Casper, which has sales of more than US$600 million and 20 stores around the US with plans to reach 200 in the next three years. Casper has spent a lot of time testing its bricks-and-mortar presence through the use of pop-ups, from partnering with Nordstrom on a range of pop-in experiences through to branded temporary stores. Treating retail as an experiment, not a destination, has allowed Casper to create a pretty stellar flagship experience in NYC called The Dreamery, where customers pay US$25 to have a 45 minute sleep. Genius!
There is no doubt we are at the beginning of a tipping point, where physical retail is being revolutionised by those without bricks-and-mortar baggage - the pure plays. Although most of this shake-up is happening offshore, it will hit us soon enough as our very own pure plays look for growth outside of their single channel.