PitchBook Dealmakers Column
In the ever-evolving retail landscape, one thing is clear—the lines between channels are becoming, well, less clear than ever before. While major traditional retailers have been busy upgrading their digital selling platforms, their online-only counterparts have been dipping their toes into the brick-and-mortar pool. In JLL’s latest report, Screens to Stores, the firm took a look at 51 notable e-tailers that are jumping offline into high streets and shopping centers. It found that there are four key phases to their evolution:
1. Experimentation with Pop-Up Locations in Dense Urban Markets: Long-term leases can be a daunting commitment for an online-only retailer, so pop-up shops, which have short-term agreements ranging from a day to 12 months, provide the delicate balance e-tailers need. According to the report, a mere 14 percent of e-tailers studied are in this first phase.
2. A Handful of Permanent Stores: Post pop-up, it’s time to commit to a permanent storefront, which is typically a solo flagship or modest boutique that personifies the e-tailer’s best qualities and products. We found that about 60% of e-tailers opened their first permanent store in a prime urban corridor, with nearly one-third opening their first store in New York City.
3. Roll-Out: After testing out one physical location, the next step is to open up to 10 strategic stores. Primary markets typically take priority, but up-and-coming secondary markets, like Portland and Austin, are occasionally added to the mix.
4. Full-Fledged Fleet: The last phase for an e-tailer’s physical migration is a national roll-out of stores on high streets and shopping centers. One-quarter of the e-tailers we analyzed are at this stage, having 11 or more stores. Once this point has been achieved, the goal is to seamlessly integrate the online and store channels.
While there is definitely an added cost of operating physical stores, online retailers are starting to realize that nothing packs the marketing punch like a physical store in a strategic location. What we’ve seen so far is just the beginning.
To learn more about how e-tailers are successfully moving offline, the five online retail sectors opening storefronts and top cities for store openings, download JLL’s report.
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