A decade ago, digital-first was the Holy Grail for direct-to-consumer (DTC) brands. But as the retail landscape has evolved over time, what brands are focusing on to promote growth has also evolved.
With the influx of digitally native brands in every category and the proliferation of channels, DTC brands can no longer rely purely on ecommerce to drive revenue.
“If physical stores are perceived as a marketing channel, at what point do physical stores become a demand channel line item in DTC marketing plans?” —Nate Poulin, Consultant at Digitally Native
Why are DTC brands opening stores?
As deep-pocketed retailers swooped into the digital realm in recent years, the price of social media ads have skyrocketed. The once cost-effective acquisition model is now a challenge for more early-stage DTC brands with less money to spend.
Once digitally native brands figured the DTC model could become a velocity barrier, they started testing the waters with brick-and-mortar stores. Soon, we witnessed a mass shift to omnichannel selling.
“The acronym ‘DTC’ also includes sales through stores that you own. What few consider is that customer acquisition costs are typically lower in owned, physical footprints. But for it to work, the brand must be strong. And no Facebook ad can buy a strong brand.” —Web Smith, Founder of 2PM
Moving forward, omnichannel will be a prerequisite for future growth for any DTC business. Let’s look at a few reasons why more DTC brands are moving from URL to IRL.
The rise of CAC
The writing is on the wall: customer acquisition costs (CAC) remained stubbornly high for a few years. Data from Profitwell shows that CAC has risen more than 60% over the last five years.
Image source: Profitwell
Faced with the reality that they can’t rely on paid social media ads to grow forever, digitally native brands started expanding into physical retail as a way to lower their CAC. The old axiom “CAC is the new rent,” switched to “rent is the new CAC.”
In other words: The proliferation of channels, the rise of CAC, and increasing digital saturation have made DTC brands rethink their digital-only approach.
The road to experiential retail
When DTC brands entered the digital landscape, they reimagined online shopping. The focus on creating a seamless end-to-end ecommerce experience raised customer expectations for future online transactions.
Now, as they are entering the brick-and-mortar space, DTC brands are again setting standards for engaging experiences.
For forward-thinking DTC merchants, the brick-and-mortar store is more than just selling in person: by incorporating immersive experiences, they’ve been able to redefine the purpose of the store.
“I’m really excited for the future of retail…it’s going to be experiential and service-oriented.” —Stella Garber, Head of Marketing at Trello
As a result, when you enter a physical store from some of the top DTC brands like Warby Parker, Allbirds, Bonobos, and Glossier, you can spot right away that the focus is on customer engagement—not sales.
From magic mirrors and interactive displays to virtual reality and transforming stores into content studios, digitally native brands have taken retail to the next level.
Strengthening brand image
Opening a physical store also gives DTC retailers a tangible component that helps strengthen brand image. Aside from allowing customers to see, touch, and feel products in person, it creates an emotional connection between the customers and the brand.
In a world where everything is shifting to digital, adding a brick-and-mortar presence can help create a real-life, tactile retail experience that can become a major differentiator.
Building a community
Perhaps the most obvious advantage of moving into physical retail is the opportunity it presents to create a community.
Humans are inherently social beings. Even though speed and convenience are essential in today’s world, people still crave in-person gatherings and social activities.
Having a place where brands can welcome customers (no matter if it’s a 12,000-square-foot store or a small pop-up shop), retail store owners can leverage the power of a community with community-building in-store events and gatherings.
Ultimately, this approach helps strengthen customer relationships and loyalty through in-store interactions with staff.
What will the retail store of the future look like?
Physical retail stores are making a comeback. But this time, it comes with a twist: modern physical retail will be all about human interaction, providing better customer service, and creating a unique in-store experience.
Alternatively, some businesses are turning their physical stores into mini–distribution hubs.
The pandemic has shown how concepts like buy online, pick up in-store (BOPIS) can be a smart way to repurpose retail store space. Data shows that 59% of consumers are interested in BOPIS-type shopping options while 64% of BOPIS shoppers said they are opting for in-store pickup more often than before the pandemic.
“Thanks to BOPIS, curbside, and local delivery, stores are more relevant than ever in building lifetime customer value.” —Ricardo Belmar, founder of Retail Razor
And while some businesses are using stores to boost sales or transform them into fulfillment centers, others have a laser focus on the customer experience. The essence of this concept means minimizing inventory and embracing a showroom or pop-up-style retail experience.
Regardless of approach, the bottom line is: physical stores as we know them are changing.
When looking at some of the most popular DTC brands, we expect nothing less than a top-notch digital experience. They’re now replicating those rich digital experiences into engaging physical presences.
11 DTC brands opening stores in 2021
We spoke to several retailers that made the leap into physical retail in 2021 to understand the why and how behind their decisions. Here’s what they had to say.
1. Mose Mary & Me
Mose Mary & Me, the popular online store for screen-printed candles, saw online success right from the get-go. As time passed, it sold over 10,000 candles on Shopify. Five years later, its success led it to open a brand-new brick-and-mortar store in May 2021.
“I’ve been selling more wholesale, and seeing the success of that definitely was a factor. I also have such a variety on my website, and all the stores that carry my products only get a select number of designs, so I thought it would be great to have all my designs in one place so people could get a variety from me directly.”
—Stephanie Kauffman, owner of Mose Mary & Me
Stephanie Kauffman, owner of Mose Mary & Me, says her home base of New Orleans has been a great city to grow her brand in, which made it a natural place to launch her first store.
After overhearing a customer looking at her candles at one of the stores she sells in say, “This is so New Orleans,” it clicked that having a store in the French Quarter made sense.
“If what I sell is so New Orleans, then let's make the store a reality,” Stephanie said to herself. As a result of her comfort with Shopify in the ecommerce setting, she chose Shopify POS for her store, too. This way, all inventory and sales are unified under one system.
Image source: Mose Mary & Me
2. Texas Tushies
Texas Tushies, the affordable cloth diapering items and kids’ accessories business, opened its first store in May.
Owner Kaylee Koch had her first child at 18 and had to provide for herself and her baby without any support or financial aid. Looking for a cost-friendly diaper option, she started buying cloth diapers on Amazon but found many flaws with them. This sparked a business idea: she would design her own cloth diapers with fun designs and sell them online.
In 2019, she opened her online store on Shopify, and today the business has a gross merchandise value of $500,000. Because of this, she decided to branch out to retail and continue growing her business with Shopify POS.
Image source: Texas Tushies
“Our retail space in Texas is 3,800 square feet, total, right in the middle of a thriving downtown retail district. The only thing I’m worried about is filling the space with products while ensuring it’s still easy to navigate, as many of my shoppers come with strollers in tow.”
—Kaylee Koch, owner of Texas Tushies
3. YGO Black Market
YGO Black Market is a very successful online business run via Shopify, and while plans to open up a brick-and-mortar store last year were put on hold because of the COVID-19 pandemic, YGO is finally opening its store in June of 2021.
The collaboration between YGO Black Market and Shopify started after TCGPlayer.com recommended the Shopify integration. Today, YGO is leveraging the benefits of using a powerful ecommerce platform that integrates with many helpful tools.
YGO Black Market is especially thankful for the Rewardify integration that helps manage store credit accounts for its customers in a central place that works across Shopify’s POS, in-store and online.
Image source: YGO Black Market
4. Heaven’s Market
Heaven’s Market, a Los Angeles–based wine shop and flower studio, launched in the middle of the pandemic.
Lindsay Cummins and Natalia MacAdams, the people behind Heaven's Market, are focused on unique florals and low-intervention natural wine. During the first six months of the pandemic, they only sold flowers online but have now been issued an alcohol license so they can sell wine as well.
To ensure consistency across online and offline channels, they’re now working with a Shopify Expert to build out the look and feel of their website and are focused on unifying their new retail store’s POS with their online store.
Image source: Heaven's Market Los Angeles
5. Kohara + Co
Kohara + Co. is an interior and exterior lighting store that focuses on quality home decor and is dedicated to helping customers discover their own design personalities.
The Canadian retailer is on the cusp of launching a new lighting store in Ontario, which will consolidate its already successful online brand and new business venture into one streamlined operation.
It decided to move ahead with Shopify POS because of its ease of use, as it’s the most versatile retail POS for unifying in-store and online sales.
Image source: Kohara + Co
6. Business & Pleasure Co
Australian retailer Business & Pleasure Co. has a range of vintage chic beach umbrellas, chairs, tents, beach coolers, beach bags, and all things beach accessories.
Its distinct eco-friendly craftsmanship and retro Californian style made it successful online, which led to various wholesale partnerships with brands like West Elm.
Over time, seeing the power of ecommerce through Shopify, the next step was to open up a branded storefront in North America, which will open in 2021.
Image source: Business & Pleasure Co
7. 5 Element Pet Food Therapy
5 Element Pet Food Therapy is a holistic food brand for dogs and cats. Sharon Tuggle, the founder, has been running this successful bakery through a digital store for years. Now, she’s finally decided to expand to brick-and-mortar.
Going through Stocky helped Sharon realize the importance of effective inventory management for a successful business. On one hand, selling out of in-demand products can be harmful to sales, but on the other hand, keeping too much inventory can drain resources. With proper inventory management, she’ll be able to maintain a fine balance between the two.
Image source: 5 Element Pet Food Therapy
Husband and wife design duo Cortney and Robert Novogratz designed and developed many unique properties in Manhattan, LA, and beyond for more than 20 years. Now, they’re opening a retail space of their own.
Located on Abbot Kinney Boulevard in Venice, California, House of Novogratz sits at the center of all things design, fashion, and art. This will be the first retail store that brings together the couple’s full offering of furniture, rugs, lighting, flooring, wall art, and chic decor pieces that reflect Novogratz’s offering of boutique styles at affordable prices.
“The new House of Novogratz on Abbot Kinney will give us the opportunity to expand the Novogratz brand footprint and to reach new audiences through partnerships, collaborations, and activations that happen instore and online.”
—John Frierson, President of The Novogratz
Image source: Novogratz
Before opening up soak spas—places people can come to unwind, hang with friends, or have space to think—in various cities, the team at Florens wanted to test out and get feedback on their latest sauna experience prototype by opening a small pop-up.
“We’re super focused on feedback and community right now. We want to co-create an incredible sauna experience with our customers, and that takes a ton of iteration and feedback. Nothing beats trying it out in-person, because a sauna is a deeply physical thing, and we think local pop-ups will help us get more feedback more quickly from more people.”
—Paul Mederos, Florens founder
Using this concept, they have two goals: the first is collecting fast feedback from potential customers. The second is getting to meet and build relationships with people who care about what they’re doing.
SITKA uses advanced design, technology, and fabrics to create gear systems that enhance hunting experiences.
In April 2021, SITKA opened its first flagship retail store in Bozeman, Montana. The 3,000-square-foot retail store, called SITKA Depot, offers a full brand experience, including seasonally themed educational seminars, community events, and a full lineup of the company’s performance-driven gear.
Visitors there have the opportunity to shop SITKA’s extensive product line, including technical hunting apparel designed for any hunting experience, as well as lifestyle gear designed for everyday use.
“SITKA is built on a commitment to enhance the full life experience of the hunter, and our first retail store is an opportunity to expand on that principle. Customers will not only have the opportunity to build custom systems that work for their style of hunting, but also connect with others who share the same passion for the hunting life.”
—Jonathan Hart, SITKA founder
Image source: SITKA
In November 2020, boho lifestyle brand BuddyLove outfitted the front of its fulfillment warehouse to function as a pop-up boutique. This gave it the ability to provide private in-person shopping experiences.
As a new year dawned in January 2021, it reevaluated its small pop-up and decided it was time to invest in a more progressive boutique experience for the brand. It’s planning to open an experience that caters to a hosted event, where friends and family can come together and shop their entire collection the day it drops online.
“We found that our customers are seeking an opportunity to interact with the brand from a more curated and personal experience, which includes personal styling, in-store pick-up, hosting brunches, wine tastings, girls’ nights out, charity gatherings, and so much more.”
—Buddy DiFonzo, co-founder of BuddyLove
The experience will include an immersive element, featuring local artists and Instagram-ready photoshoots, blogger style try-on hauls, and collaborations with local brands that provide services like balloon walls and decorative giftables for showers and parties.
Image source: BuddyLove
Ready to move from clicks to bricks, too?
There’s no hero or villain: both ecommerce and physical stores will be essential for DTC success when we think about the future of retail. One thing is for sure—that future is omnichannel.