The Future of Retail Isn’t Direct-to-Consumer. How Brands Are Embracing Stores in 2023

Businesses that once thrived on e-commerce only are stepping into physical retail to keep shoppers loyal.

Direct-to-consumer brands are going omnichannel.

While e-commerce sales surged during the height of the pandemic, in-store shopping is officially back. Today, more than half (54 percent) of U.S. consumers say they prefer stores to websites, according to a May 2022 report by the customer engagement platform Emarsys, which polled 2,000 people. Brands have responded by rapidly increasing their in-person presence – there were nearly five times more store openings than closings in 2022 as of mid-December, according to the research report service The Daily on Retail. This year, experts anticipate that trend will continue.

“There’s obviously a lot of noise and chaos in the broader macroeconomic environment right now, but irrespective of that, people do want to experience brands in person,” says Amish Tolia, co-CEO and co-founder of Leap, a New York City-based retail platform that has helped launch brick-and-mortar locations for DTC companies, including sleepwear line Lunya, clothing brand Frank and Oak, and activewear brand Set Active. “There’s not going to be a slowdown in demand for retailers to continue investing in their brick-and-mortar channels, or even launching their brick-and-mortar channel for the first time.”

Store retail, he explains, is a key part of a brand’s omnichannel strategy, meaning that customers can engage with that brand through multiple touch points, both online and in-person. It’s not enough, however, for businesses to simply launch in person – they need to do so with strategy in mind. Here are the tactics that businesses are employing in 2023 to redefine brick-and-mortar for their brands.

Setting up shop in residential, walkable areas

While DTC may have once pushed for Main Street retail space in dense, urban locations, they’re increasingly moving to regional malls, says Tolia. And malls themselves are being transformed. “We’re seeing a number of large landlords, like Simon Property Group and Westfield, preprogramming their malls with contemporary brands and options that go above and beyond just shopping,” he explains. The ongoing retail boom in Florida’s Palm Beach County – which has seen DTC brands flock to outdoor malls – is one example of this trend.

But malls certainly aren’t the only locations with appeal; retail spaces that garner residential foot traffic have proved increasingly successful and appealing to brands. An October 2022 study by New York City’s Department of Transportation found that open streets – roadways newly closed off from motor vehicles as a result of a pandemic-era initiative – led to a surge in local business. Businesses located on open streets in one Brooklyn neighborhood saw sales increase 20 percent when compared with their pre-pandemic numbers.

There’s another benefit to setting up shop in a place where you’re more likely to get local customers: access to reliable shopper data. In March, New York City-based fashion designer Tanya Taylor plans to open the first store for her 10-year-old eponymous brand, in Manhattan’s residential Upper East Side neighborhood, after initially considering downtown locations such as SoHo. “I quickly realized that being on Madison Avenue would give us a consistent customer who lives there, so we’d get the most solid customer information,” she says. “In SoHo, I felt like we would have been more of a tourist destination.”

Bringing digital native businesses in person

Brands that launched online are increasingly seeing the value of physical retail – leading them to push for more retail partnerships. Yanghee Paik, co-founder and CEO of the Los Angeles-based menstrual product brand Rael, launched her business directly on Amazon in 2017, expanded into Target stores in 2019, and in 2022, launched in Walmart, CVS, and Walgreens. While she attributes a good deal of Rael’s early success to its placement on Amazon, today Rael’s menstrual pads are No. 1 in their category – Paik says that in-person retail holds the key to her business’s growth. “We’re investing more into our retail business because DTC isn’t really the future – omnichannel is,” she says. “I have no doubt that Amazon sales will remain strong, but there’s a lot more traffic around retail sales, and we want to be as accessible as possible.”

Paik adds that in-person shopping gives customers additional touch points for a brand: A shopper who sees a product online may then purchase it in-store, or vice versa. Renaldo Webb, founder of the New York City dog food brand PetPlate adds that omnichannel expands customer acquisition opportunities. “Right now, about 95 percent of our revenue is online subscription, and we’re really excited about growing the 5 percent,” he says. “Our retail initiative has been a big component of our customer education.” Today, PetPlate is sold in about 400 independent retail stores across the U.S., but Webb aims to expand that reach into the thousands.

Reimagining store design

“Historically speaking, especially for smaller retailers, a lot of store design was created in a way that was primarily gut-driven,” Tolia says. “We do believe there’s going to be more emphasis around being data-driven, to be in a better position to leverage analytics.” For a lot of brands, that may mean some experimentation to figure out what works or even trying new tactics altogether.

Paik, for instance, views Rael’s retail setup as an opportunity to expose customers to her brand’s products in a new way. Although Rael initially launched with menstrual products like pads and tampons, it has since expanded to beauty products, like hydrocolloidal pimple patches, that may be helpful to customers who experience hormonal acne through their menstrual cycle. While most big retailers organize beauty products separately from menstrual products, Paik has been successful in persuading some partners – mainly regional supermarkets – to display all of Rael’s products together. “Our dream is to have an end cap with beauty and feminine care together,” she says. “I’m hopeful that in the near future we can make these changes so we can really position ourselves as a holistic cycle care brand to consumers.”

Diving in deep on data

Taylor has long worked with retailers such as Bergdorf Goodman and Nordstrom to sell her designs wholesale, but she says that opening her own store gives her a better opportunity to conduct customer research. “When you sell through different stores and different regions of the U.S., it’s actually quite hard to know if a skirt is a good skirt,” she says. “It takes so much effort to figure out if it shipped late or if the retailer has another brand – there are so many nuances that you don’t have control over when wholesale is the way you’re learning from a customer.”

After hosting several pop-up shopping events in prime markets like Charleston, South Carolina, and Miami, Taylor and her team of just 35 employees have learned how to put in-person data into action. After each pop-up, they create a presentation of the event’s revenue goals, top-selling sales and sizes, and customer anecdotes – data that they use to inform future collections and customer outreach strategies. In her store, Taylor hopes to do the same – albeit on a more continual basis. “My dream is that I would live above the store and just be able to go down there,” she says. “The more firsthand information I have, the better I can lead a design team and make decisions for our company.”

This article was written by Rebecca Deczynski from Inc. and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].


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