How important is opening a store for digital native brands?

According to research carried out by Amazon, Colorado State University and Dartmouth Collage, the retail experience is a core builder of trust with customers and a primary reason why pure-play, digital native retailers open stores.

The researchers examined the role of physical stores in selling “deep” products (i.e. high-emotional involvement considered purchases). They propose that products differ in the inspection depth customers require to purchase them. Deep (as opposed to shallow) products require in-depth and in-person inspection in order for the customer to make an informed decision.

One of the findings from transactional data involving 50,000 customers is that promotional strategies can move people from low-value to high-value states, this increasing average spending per trip by 40%. This means that long term sales increase by 20% and profitability increases by 22% Jonathan Zhang, a marketing professor at Colorado State University, said, in a statement, “The general lesson of our research is for retailers to create a concrete, tangible and multi-sensory experience for customers buying products that require this physical engagement.” The authors of the study put forward a number of strategies for driving such “experiential learning” in physical stores:

• Enhancing merchandising and training sales personnel to walk customers through a deep engagement experience can help customers try and use deep products in-store;
• When a customer is found buying deep products online but their spending is decreasing in value, providing a promotion for deep products in-store can increase customer value;
• A deep/offline onboarding strategy for new customers can be used to encourage first purchases to be deep/offline.

 

The findings of this research are not surprising – online-only, digital native brands are increasingly opening up physical retail stores to deliver a high-touch, high-value experience. Such retailers include Amazon and Warby Parker as well as cosmetics brands like Glossier. In the UK, even brands such as Dyson have rolled out their own branded flagship stores, such is the importance for shoppers to experience the products in-person.