Hip E-Commerce Sites Reimagine the Brick-and-Mortar Store

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Matt Brownell, DailyFinance
In April 2011, men's apparel company Bonobos made a big announcement on its Facebook page: After years of only selling its clothes online, it would soon begin opening its first physical stores.

The Bonobos page was flooded with questions about the planned stores, prompting the company to acknowledge what some observant Facebook fans had already figured out: The date was April 1, and the announcement was just an April Fool's prank.

"Seems we created more confusion than intended," the company said in a follow-up post. "In the spirit of clarity, risking disappointment, we must say once and for all: We have no plans to open stores."

But plans change. Inspired in part by the big response to its April Fool's joke, Bonobos opened its first retail location in New York City later that year. "A lot of people were really excited [by the fake announcement]," recalls Bonobos CFO Bryan Wolff. "That wasn't lost on us."

'It's a Touch, See, Feel Thing'

The enthusiastic response to its posting shouldn't have come as a surprise to Bonobos. After a sizing snafu in 2009, management did some damage control by inviting a few aggrieved shoppers to visit its corporate headquarters in New York and try on some clothes. Wolff recalled that they really enjoyed the experience.

Shoppers, it turns out, like to try before they buy.

Bonobos in New York, Thursday, Sept. 17, 2009. (AP Photo/Kathy Willens)
Kathy Willens, APBonobos online trousers chairman and co-founder Brian Spaly and CEO and co-founder Andy Dunn pose at their company's headquarters in New York.

"There are some fundamental needs that shoppers have when shopping in some categories," says Patrick Spenner, managing director of the marketing practice at CEB. "It's a 'touch, see, feel' thing."

Bonobos knew that, but thought it had a viable workaround: free shipping both ways, which allows customers to try on clothes at home and send back what doesn't fit. But for some customers, there's simply no substitute for browsing in a store and trying on pants in a fitting room.

Warby Parker, which sells sunglasses and prescription eyeglasses, was another company initially convinced that it could make do without storefronts.

"Opening physical stores was never part of the original business plan," says Warby Parker co-founder David Gilboa. As a substitute, it offered a home-try on program that shipped customers up to five frames at a time to try them on, free of charge.

But the fledgling company had trouble keeping up with demand for try-on frames, so the founders set up an impromptu showroom in their apartment.

"We had strangers from all over Philadelphia come into our apartment, and we had frames on our dining room table," he recalls. "They loved that experience."

A Smarter Kind of Storefront

Warby Parker now has three proper stores, plus several store-within-store showrooms. Bonobos, meanwhile, has a half-dozen "Guideshops" in major cities.

I visited a couple of these stores in New York to see how the customer experience differed from your typical shop.

When I arrived at Bonobos' Guideshop, three things immediately struck me as different. One was that I couldn't just walk in off the street -- I had to make an appointment with a "guide." The second was that the store is small, about the size of a large living room. The third was that my guide offered me a beer to drink while I tried on pants.

There's a reason the Guideshop is so small: It only carries enough clothes for guests to try them on for fit. I could try on any style of pants in any available waist size, and see how they looked in each color. But once we'd determined my desired size, fit and color, I couldn't walk out with my chosen pants. Instead, my guide placed the order on Bonobos.com, using a laptop balanced atop a stack of pants.

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Offering a free beer to every customer seems mildly extravagant, but every other choice the company has made points to a desire to drive down costs. The appointment-only policy means that it can maintain a small real estate footprint without worrying about overcrowding. Limiting the stock of merchandise and eschewing a proper stockroom likewise keeps the rent low, as does the decision to locate it's shop on the fifth floor of an office building. And while costs are low, revenue is high -- the average order size at the Guideshops is about twice what it sees from website visitors.

While Bonobos has gone small, Warby Parker has gone big.

At one of the company's two SoHo locations, I found a large, open floor plan reminiscent of an Apple Store. Every frame could be tried on without asking permission of staff, who were ever-present but unobtrusive. Employees toting iPad Minis took down prescription and payment information.

"A typical optical shop is a cramped environment where you aren't able to touch and feel the product," says Gilboa. "We wanted to re-create the feel of walking into a public library."

And despite occupying a large retail space in a fabulously expensive area, the stores are profitable, says Gilboa.

Brand First, Bricks Second

The two companies may be pioneering a new model, where brands establish themselves online before making the jump to stores.

"There's a lot of benefit to launching online -- being able to generate [brand] awareness and attract capital and investors," says Gilboa. "Once it's a little more established, you can invest that into a store, and be more confident that the economics are going to work."

If Warby Parker had made a huge investment in a SoHo store without first having a significant following online, it's doubtful that it would have attracted enough foot traffic to turn a profit. Likewise, Bonobos knew from its sales data where its biggest fans were concentrated, and placed its Guideshops accordingly.

They aren't the only e-commerce companies invading the physical world. Online jewelry shop BaubleBar has opened locations in New York, and has a roadshow that is making its next stop in Boston -- at a Bonobos Guideshop, of course. Craft marketplace Etsy is putting shops inside Nordstrom stores. Amazon and Google have been the subject of persistent rumors suggesting that they'll set up showrooms to let people try out their gadgets. EBay is taking window shopping to the next level -- by letting you buy stuff online from store windows. And don't be surprised to see other online retailers realize that they need to get physical if they want to get your business.

"The online world will not drive bricks-and-mortar out of business, because we do need to see and touch certain things," says David Lichtenstein of the Lightstone Group, a commercial real estate investment firm. "There is going to be some happy medium."

That happy medium has already started to arrive -- albeit only in major cities, for now. But don't be surprised if the innovative approach these e-commerce companies are bringing to the retail world begins to influence shops at your local mall.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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