Online retailers turn back to bricks and mortar to boost sales | Retail ...

All retailers are aware of the potential revenue-eroding threat to their businesses from online giants such as Amazon thanks to ?showrooming? ? the consumer act of sizing up merchandise in a street-front store before going home to buy it for the cheapest possible price online.

But a budding trend for online retailers is to embrace just the opposite: when a seasoned online-only retailer wants to really grow and extend the business these days, it opens up a physical store.

Vancouver-based online retailer ClearlyContacts.ca, the world?s largest online retailer of contact lenses and eyeglasses, is the latest to embrace the idea, with plans to open a 1,000-square-foot boutique on the city?s bustling Robson Street retail strip on March 23.

Roger Hardy, chief executive of parent company Coastal Contacts Inc., says retail stores might still be the best way to reach some consumers who still prefer to buy certain categories ? whether it be glasses or shoes ? in a store first so they can try on the merchandise.

?ClearlyContacts.ca has a high-service [online] model,? Mr. Hardy explained in a recent interview en route from the Vancouver airport. ?We make it easy [to buy], returns are no problem, we pay for the return.?

And [while] the twentysomething demographic has no problem buying glasses online, it is some of the other segments ? we want to get them over the hump of trying on that first pair of glasses [in a store] and then realizing they can get a great pair of glasses online at an amazing price.?

Many successful manufacturers and brands have opened flagship stores in order to showcase the breadth of their merchandise in a physical setting ? successful Toronto home goods designer Umbra LLC opened just one location in the city in 2007 to be a form of advertising in itself, a catalogue come to life.

ClearlyContacts.ca?s move came after its parent opened five stores last year as a test in Sweden, a market where it had an established reputation as the online retailer LensWay.se.

While the overhead of a retail store would seem to add undue costs to an online business model which says it saves customers an average of about 20% on contact lenses and 50% to 70% on eyeglasses compared to bricks and mortar retailers, Mr. Hardy said the stores do not add a heavy cost burden to the company?s vertically integrated model.

Coastal designs and manufactures its own glasses, and sales at the Swedish boutiques have been strong. ?We have had quite a bit of success with the stores [in Sweden] ? we averaged $2,800 in sales per square foot in January ? and it made us look at expanding our footprint here as well,? he said.

?We put eye doctors in to do eye exams, so we started a bunch of different services, not just retailing. We found it was very complementary to what we are doing online. It gives us an opportunity to close the loop for customers.?

It also boosts brand awareness among different segments of consumers: eBay Inc. opened a pop-up store in London in 2011 that allowed passersby to look at 350 items from highly rated sellers and then buy the goods online.

The notion is gaining popularity as retailers of all types find that online and offline customers are not mutually exclusive groups.

Piperlime, an online-only clothing and accessories retailer owned by retail giant Gap Inc., opened a store in New York?s stylish SoHo district last fall, which sells goods from the retailer?s website and has kiosks allowing customers to buy additional products and sizes online at Piperlime.com.

Vancouver-based Indochino, an online retailer of tailor-made suits that opened in 2007 and guides new customers through video tutorials about how to measure themselves for custom-fitted suits and shirts, began opening pop-up ?Travelling Tailor? stores last year, offering the service with actual tailors at limited-time boutiques in key business districts of cities across North America. And Clearly Contacts? smaller U.S. rival, New York-based Warby Parker, began as a strictly online business but now showcases its chic frames at a number of showrooms across the U.S.

Last year, Canadian online pharmacy retailer Well.ca partnered with The Procter & Gamble Co. to offer consumers merchandise such as diapers and toothpaste using their phones at a virtual wall of goods on display in an underground pedestrian walkway adjacent to the city?s business district; Wal-Mart Stores Inc. later created a similar virtual pop-up store before Christmas to sell toys in partnership with Mattel Inc.

?Real retailers have to be serving customers in the manner in which they want to be served,? said Mr. Hardy, who founded ClearlyContacs.ca in 2000 and envisions putting a street-front location in every major Canadian city. While Coastal Contacts hit sales of $196-million in fiscal 2012, it still needs to grow ? heavy promotion costs helped lead to an annual loss of $4.9-million.

He cited a move by Best Buy Co. Inc. away from big-boxes and into smaller-footprint stores with a scaled-down selection and opportunities for customers to buy goods online. The electronics retailer also promised to match prices with its online competitors. ?They had to make a model that works for them online, but also works in the store.?

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Source: http://business.financialpost.com/2013/03/11/online-retailers-turn-back-to-bricks-and-mortar-to-boost-sales/

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