Is ‘clicks-to-bricks’ retail world’s future?

BY LAYLAN COPELIN | Saturday, Nov. 30, 2013, 12:00 AM

At its new “Guideshop” in downtown Austin, Bonobos has jeans, sweaters, shirts, suits and its trademark chinos in every size and color that the online retailer sells.

But none of those items can be purchased at the shop.

A customer, either by appointment or as a walk-in, can get a custom fitting, make his selections, order online and have his choices shipped to him within two days.

Bonobos is a pioneer in the “clicks-to-bricks” trend in retailing, trying to capture the advantage of face-to-face commerce in the 1,500-square-foot space without the disadvantage of maintaining a large inventory with an expensive brick-and-mortar presence.

The e-commerce showroom, which opened in the 2nd Street District in August, is one of eight around the country and the experiment has been so successful that the online menswear company intends to expand to more cities.

“It’s an important part of our growth schedule,” said Erin Ersenkal, a company vice president. “We’re looking to double the store count by next year.”

Retailing is evolving as a few online-only merchants venture offline and brick-and-mortar retailers beef up their online efforts. Technology, particularly smart phones and tablets, is changing the competitive landscape and the shopping experience, but many analysts predict hybrid models are the future of shopping.

It’s easy to see why. The National Retail Foundation predicts overall holiday sales will rise 3.9 percent to $602.1 billion, but online sales could increase by 15 percent to $82 billion. Looking beyond this season, Frost & Sullivan, a global consulting firm, predicts online retail will capture almost 20 percent of worldwide sales by 2025.

It’s all about profit.

“When consumers engage with more than one channel, they tend to be more profitable” for the retailer, said Nikki Baird, managing partner with Retail Systems Research.

That has been Bonobos’ experience. Customers spend twice as much after visiting a Guideshop, according to the company.

One motivation for online merchants opening showrooms is building their brands.

“You can feel like a pretty big e-commerce company but you are still small in the big picture,” Baird said.

Warby Parker, which sells prescription eyeglasses online, has opened five stores, has nine stores-within-stores, and a traveling showroom in a retrofitted school bus. It had a store-within-a-store in Austin, but its retailing partner went out of business, and Warby Parker hasn’t found a replacement.

“We really see the future of retail as a blended approach,” said Julie Wiencek, a spokeswoman for Warby Parker. “It’s nice to bring them into a space where they can immerse themselves in the brand.”

Temporary stores — sometimes called pop-ups — are another strategy for online retailers.

Google this year has opened its first-ever “Winter Wonderlabs” in six U.S. cities to showcase its tablets, laptops and other gadgets. Customers can try out the products, but must buy them online. The showrooms will close at the end of the holiday season.

Even Amazon, the Internet nemesis to so many brick-and-mortar rivals, has been dogged by speculation that it might open stores.

Jeff Bezos denied it to CBS journalist Charlie Rose, saying, “We would love to, but only if we can have a truly differentiated idea. One of the things that we don’t do very well at Amazon is do a me-too product offering.”

So far Amazon has limited itself to lockers inside retailers where customers can pick up their deliveries or offers to split e-book sales with independent bookstores that sell Kindle e-readers and tablets.

Bonobos ventured into brick-and-mortar after its online customers literally demanded it.

“A lot of clients started showing up at the headquarters in New York City,” said Tara Pettinato, manager of the Austin store. “This model was created almost by accident.”

Andy Dunn, Bonobos co-founder and CEO, told CNBC that online will remain the “flagship store” but that brick-and-mortar has its place.

“In 2007, we started the company, and we said the whole world is going online only,” he said. “But what we’ve learned recently is that the offline experience of touching and feeling clothes isn’t going away.”

With Guideshops, Pettinato said a customer no longer orders two sizes of the same outfit online because he is not sure of his size. Baird, the retail consultant, said returns — particularly with free shipping both ways — can be expensive.

“We want the best of both worlds,” Pettinato said. “Someone is here helping you. We take out the guess work of shopping online.”

While Bonobosrepresents online merchants experimenting with brick-and-mortar retailing, Best Buy is an example of traditional retailers coming to grips with online competition.

Best Buy was once viewed as a poster child of “showrooming,” when customers shop at a store, only to buy the product cheaper online. But the big-box retailer has embraced the concept with its holiday theme: “Your Ultimate Holiday Showroom.”

The company is offering a price-match guarantee to counter the showrooming effect.

It also has invited major vendors — and sometimes their own employees — to promote their products in a store-in-a-store strategy. For example, Best Buy touts that it is the only place where shoppers can see, touch, compare and buy the five top tablet brands — Apple, Google, Kindle, Microsoft and Samsung.

For its online customers, Best Buy is offering free shipping if they purchase more than $25.

And it has its Geek Squad to offer services that its rivals don’t always have.

“A year ago, people said that showrooming would kill Best Buy,” Hubert Joly told The Wall Street Journal. “I think that Best Buy has killed showrooming.”

That may be overstating it, but Best Buy has changed the tone about its immediate future.

Long-term, analysts predict a move to smaller stores, more online shopping and greater connectivity within the stores through customers’ smartphones — digital wallets, for example.

PayPal, for one, has rolled out an app that allows a customer to order and pay without standing in line at participating stores.

“We think we’re going to see the end of standing in line within five years,” predicted Stacy General with PayPay.

In that future, the hybrid retailers will have to maintain the overhead to serve customers off- and online.

Whether a company is using its website and social media to drive customers to its brick-and-mortar store, or is using a physical showroom to increase online sales, a balance must be struck.

“Even when consumer comes to the store, then buys it online, ” Baird said, “it’s almost twice the cost of the sale.”

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