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Uniqlo Hits the Web, Spanx Hits the Bricks — What’s Happening to Retail?

Retail is being turned on its head as online stores such as Spanx open up bricks and mortar locations and bricks and mortar chains such as Uniqlo launch websites. These cross pollinating experiments are nothing new – internet stores have long sought to push their goods into physical locations, and most – if not all – brands have online shopping available (Uniqlo was a lone outlier).

But as the economic recovery enters its fourth year, retailers and brands are pushing to expand. For bricks and mortar retailers, the lesson from the recession was “not too much, not too fast.” Online is an attractive option for companies such as Abercrombie & Fitch, which has seen strong sales growth, but has also been closing stores.

For Uniqlo, which is trying to increase its market penetration but has a low physical presence outside of major coastal cities, online gives shoppers a chance to buy even when they’re not on the coast. It dovetails nicely with the firm’s retail strategy, which relies heavily on word of mouth and on attractive, interactive store design. Customers can visit a Uniqlo store in New York, then go home and order goods online.

The strategy is a precursor to rapid US expansion, according to Uniqlo USA CEO Shin Odake. The company plans to open up to 30 new stores a year.

15 – 20 year leases have trapped many bricks and mortar retailers into having more floor space than they need. Significant increases in online retail have only occurred in the last few years, wit the rise of smart phones. Firms such as Brookstone, which sells a variety of personal comfort items from mall locations, are moving away from retail and into more lucrative wholesale markets.

This push into wholesale was made easier because Brookstone built its brand through bricks and mortar stores. Its products are immediately recognizable to most consumers, regardless of their sales platform.

There is still a place for flagship stores, as Uniqlo’s model indicates. Warby Parker, an online glasses retailer, has two flagship locations in New York, despite doing the vast majority of its business online. The flagship stores allow people to get more of a feel for the product range, and creates a memorable experience.

Analysts also look to brands such as Carter’s and Levi’s, which made the move to having their own storefronts in pursuit of a less cluttered retail experience. The lesson from those brands (and others who have made the same leap) is that opening a storefront does not reduce sales at other stores that carry the brand.

As the retail market becomes more fluid, the distinction between an online brand, an in-store brand, and an active retailer is less fixed. No brand can afford to turn down a sale, whether it comes from clicks or bricks. The challenge facing retailers such as Target, Spanx, and Uniqlo, is what balance will maximize profits and minimize inventory and discounting.

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