The most well-known of such brands is eyewear manufacturer Warby Parker, which gained popularity for user-driven stunts like customized video Twitter FAQs and the option to try on up to five different frames at home entirely for free. As of the very beginning of 2014, the brand has been valued at $500 million with only three proper retail stores (in addition to several third-party “showrooms”) open across the USA. It also brings its store experience around the country via the “Class Trip,” a roving pop-up activation that allows fans to interact with the brand in-person even if they don’t live in a key retail city.
Two direct-to-consumer, online-first labels to watch are Washington, D.C.’s Hugh and Crye and Williamsburg, Brooklyn’s Outlier. One is a haberdashery aimed at young professionals while the other makes technical apparel for the creative class, yet both have used the store as showroom model to great effect. Each of these brands also has a point of differentiation to use at their advantage. At Hugh and Crye, it’s a unique custom fit system designed to break outside the box of S, M and L. At Outlier, it’s truly product-centric innovation based on optimal movement in urban environments (the perfect pant to bike in, for example).
For Hugh and Crye, consumer feedback has informed a huge amount of the brand’s business decisions. “Cost and reach” dictated co-founders Philip Soriano and Pranav Vora’s decision to operate almost solely online. “It has gotten easy and inexpensive to put up an online store, and that’s why you see so many new ones starting up every day… We introduced a new sizing system, and being online allowed us to test our fits and improve them much more quickly than if we relied on foot traffic in a single geography.” By cutting out retail channels, the brand’s cofounders also believe that they gain more control of their brand despite a risk of losing mindshare. “Going direct to consumer allowed us to own the customer experience, and get more meaningful feedback from day one. [We built] a relationship with our customers, which informed our sizing system and new products. We would have relinquished that too early, if we had gone retail from the start.”
Outlier co-founder Tyler Clemens began on the web solely because “When we started we knew more about making websites than making clothes!” The brand quickly grew into a cult favorite and Clemens and co. chose to go all-in online and counter the inability to feel clothes in-person with “Open Studios,” a kind of office hours held by the Williamsburg-based manufacturer in its design headquarters as “a way for us to meet and talk to our customers. From a numbers standpoint it’s a blip of our business,” Clemens confirms. “But from a communication standpoint it’s huge. Ironically for an e-commerce company we put a huge amount of value on meeting people in the real world.”
Customer service is intrinsic to both brands’ online operations, especially since neither provide readily-accessible retail experiences. “We also want to try on clothing, or touch and feel it before we buy” reports Mr. Soriano of Hugh and Crye. “Our guys often just want to know more about the product, and feel a bit more comfortable about ordering it. We’re pretty accessible – our office landline forwards to our cell phones if no one answers, or after hours. We use phone, chat, email and even Skype/Facetime to help our customers.” At Outlier, Clemens seeks to entice the most tactile consumers with the best service possible. “We have a pretty generous return policy – 45 days for returns and for any reason you want, so that gives people a pretty easy and low risk way to try things out. But unfortunately we do cut out some customers who prefer a different way of shopping. We’d love to figure out a way to get to them, but only if it means we can keep delivering the value that we do to our existing customers.” Hugh and Crye is also planning to expand its Georgetown showroom into a full-fledged flagship location somewhere in Washington. “When we get to meet our customers in person, it becomes less about any particular transaction or product,” says the labels’ co-founders. “It’s just guys hanging out. And we love that.”
Innovative multi-channel distribution doesn’t always work out perfectly, however. Take into account the recent saga of LN-CC – a London-based online retailer that operates an appointment-only “space [that] acts as an evolving platform of curated ideas [encompassing] menswear, womenswear, music, and books.” Business appeared to be booming for the brand and its founder John Skelton, who has previously served as a buyer at Harrods, Oki-ni and Selfridges, with annual double-digit growth in revenue since its launch in 2010. Nonetheless, Skelton focused too heavily on buying newer and more progressive labels (which he would turn out to be unable to pay for on time) and became obsessed with international growth. Thus, the retailer went into administration in February of 2014 and was quickly scooped up by Milan-based e-commerce specialist The Level Group. From the Business of Fashion piece covering the deal:
“Skelton stressed that LN-CC’s core proposition would remain the same: ‘From the creative side, whether it’s output, product, ideas, I don’t think anything’s going to change. It just means that we will be backed by a slicker operation, a machine that works.’”
Despite LN-CC’s hiccup, online-centric solutions bolstered by retail doesn’t appear to be going out of style any time soon – and it’s not strictly a fashion trend. On the opposite side of the market spectrum, banks have been reducing a retail presence in favor of online checking and mobile photo check deposits. It’s been a tremendous way to reduce overhead and concurrently increase the efficiency of remote customer service. Indeed, local branches may soon become a thing of the past.
Looking to the future, it’s not unlikely that online-first and showroom as storefront business models could evolve into even more specific, hyper-local and easily customizable experiences. Mobile commerce in the U.S. is now mainstream commerce. How will web-only retailers evolve to optimize for social and mobile shopping experiences? Focus is key. At the end of the day, consumers live online. Brands that don’t get that could be left with some very big, very empty stores.