Despite the dire warnings about the future of physical retail and the continuing pace of store closures, a number of direct-to-consumer brands have been flourishing in the traditional brick-and-mortar space. Digital stars Allbirds and Everlane established a successful store strategy, launching with pop-up shops and frequently converting them into permanent posts after experiencing positive responses.
Others have also taken note.
Today’s DTC store offerings are more strategic and stylized than their predecessors — and are often created in partnership with specialists. For instance, Naked Retail, a turnkey retail service, helps digitally native brands navigate the shopping channel that many of them once said they would never touch: the physical store.
“What a lot of brands, especially online-only brands, are realizing is that without the physical touchpoint, it becomes challenging to get a story across,” said Justin Kerzner, president and co-founder of Naked Retail Group. “That can be a story about quality, it can be about fit. It could just be a demonstration. Seeing something and actually experiencing it firsthand is super valuable.”
Overcoming Obstacles
The problems that plagued traditional stores — think high rents, e-commerce competitors, inventory constraints — still exist today, particularly in these newer formats that often skew smaller and are shorter in lease terms. That is where companies such as Naked Retail and Leap (also a turnkey service but for permanent stores) step in.
Part consultants and part creative designers, these platforms invite brands to establish and refine goals for the space as soon as they decide to partner on the project. The service then takes over location selection, designing and building the space and, in some cases, helping to staff it. At Leap, there is also the option for full-time store management.
“The approach to retail has shifted to incorporate more infrastructure partners, as the brands that are opening more stores are digital-first,” said Amish Tolia, co-CEO at Leap, which has worked with sneaker brand Koio to supplement its existing physical strategy and help it expand with lower risk. “They are inherently users of tools and platforms; these are the same brands that launched their e-commerce on platforms like Shopify. They know what they do best — great products, innovation, marketing and supply chain — and look to different partners, platforms and tools to help them drive growth.”
Both Leap and Naked Retail also give advice on how best to use a pop-up or permanent space, as many brands new to traditional retailing often lack on-the-ground know-how. Industry executives said they help brands not only sell items but focus on customer experience communicating what the brand is about, so that they can connect with consumers in memorable ways.
Naked Retail’s self-titled “exhibits” frequently don’t involve any revenue component at all, with brands instead offering giveaways and activations that are designed to be shared on social media and encourage return visits. Emphasis is placed on the “experiential” part of experiential retail.
“A great space in Soho, New York, for December is going to run anywhere from $25,000 to $60,000, depending on how big the store is,” said Kerzner. “To spend that kind of money just in rent, plus build, plus design, plus staff and so on — you need to fully maximize the experience. You need to photograph the hell out of it and bring as many editors, press people, consumers and influencers into the space to maximize value.”
For brands that want to test physical retail on a smaller scale, Naked Retail also runs a store in Soho and a flagship in Nolita, New York, where it showcases brands divided into a north and south component — north uses wood and warm tones, while south is monochromatic and minimal. There, brands can engage in pop-up activity in a more accessible way and leverage the other participants for mutual benefit.
“When you walk into a place like Louis Vuitton and you have San Pellegrino being offered, that’s collaboration at its nest, but it’s not being utilized properly,” said Kerzner. “They’re literally buying those bottles on a daily basis, spending thousands of dollars annually to do so — why is that experience not shared?”
Both Leap and Naked Retail believe that small-scale ventures into physical retail will lead to future expansion.
“A pop-up strategy is a great way to test and learn, build a community and dive into retail,” said Tolia. “The permanent and pop- up strategy can co-exist too as brands activate around new collections, explore new concepts and enter new markets. The more brands understand about retail and the customer, the better they are and the better we can deploy stores together.”
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