As it gets harder and more expensive to attract new customers online, some online brands are taking a bold step into the real world—opening physical stores they hope will draw in new shoppers. In a recent profile of a handful of such businesses, Another Tomorrow—a women’s clothing company that focuses on sustainability and uses “fashion as a pathway to activism”—explains how, after its initial foray as a digital-only business, just before the pandemic, the founders quickly saw opportunity and developed a sense of responsibility when they encountered a glut of empty retail spaces in New York’s Greenwich Village. “I felt a gravitational pull toward a more residential space,” founder Vanessa Barboni Hallik explained. “And it felt meaningful to make an investment in an area that needed a shot in the arm.”

The brand strategy firm King Retail Solutions offers a half-dozen reasons direct-to-consumer (DTC) brands—which sell directly to consumers, not through third parties, usually over the internet—might want to consider expanding beyond online sales and open brick-and-mortar stores. The increased difficulty and costs associated with acquiring new online customers, who already have experience, savvy, and skepticism toward new online retailers, is one such reason. Others include the possibility of building a deeper emotional connection with consumers; achieving an omnichannel retailing offering to reflect growing trends and consumer preferences; and giving pandemic-weary customers an enjoyable place to go when they are ready to visit stores and get out of their houses.

Landlords, faced with empty storefronts, also are offering some novel incentives to attract these types of businesses, including more flexible leases and alternatives to traditional rent payments, such as taking shares of store revenue. In another innovation, some creative companies saw a gap in existing markets and began renting out large retail spaces, which they then subdivide and sublease in parts to the DTC businesses, often with short-term leases, similar to pop-up stores. In turn, the DTC businesses can expand their footprint into the brick-and-mortar world with relatively lower risk.

Of course, not everyone is jumping on this trend, especially as rents begin rising. Furthermore, skills that make for a good internet marketer do not necessarily translate into strong skills in physical retailing. They demand different insights, talents, and approaches. Finally, even with creative options for minimizing the risk, shifting from a digital-only to an omnichannel presence inevitably creates economic risks that may threaten the firm’s survival.

But at least one business is finding the rewards are worth the risk. Coming to the end of her first 18-month lease for the Greenwich Village store, Another Tomorrow’s Barboni Hallik is now negotiating a new lease, with plans to stay for a while.

Discussion Questions:

  1. Why would an online business decide to open a brick-and-mortar retail space?
  2. Is opening a physical store is a good way to attract new customers?
  3. Must all digital retailers pursue an omnichannel strategy today? Why or why not?
  4. What are some risks a company assumes when opening a physical store?

Source: Ellen Rosen, “Online Brands Try a Traditional Marketing Strategy: Physical Stores,” The New York Times, March 23, 2022; “6 Reasons DTC Brands Are Opening Brick & Mortar Stores,” King Retail Solutions, April 14, 2022; Saqib Shah, “Data Is Telling DTC Brands to Open Stores In Emerging Cities,” Modern Retail, November 15, 2021