Consumer Growth and E-Commerce: The Case of Lulululemon and Lovesac in the USA and in the Rest of the World
Brian W. Nagel is a senior analyst on the consumer growth and e- commerce sector ateOpecky. The views in this commentary are his own, not of anyone else. There are more opinions on CNN.
For the past couple of decades, I’ve worked on Wall Street as a stock analyst covering consumer and retail, and an expansive collection of the most recognized and powerful companies within the sectors. I have argued that the demise of retail stores should not be taken as an indication of the future of brick-and- mortar stores, as it has been suggested in the past.
What’s more, physical retail stores serve as well-located billboards for retailers, helping to bolster awareness among shoppers and mitigate marketing expenses. Retail stores have become showrooms in the process of morphing into locations where people can see products and buy them.
For consumers, there are a number of benefits to omni-channel retail: the opportunity to shop both online and in stores; the ease in returning merchandise given the ability to do so in the store; and wider product selections, as retailers and brands broaden their merchandise offerings online. Consumers will likely continue to embrace optimal shopping experiences, which is what the omni-channel model brings.
The proliferation and success of buy online, pick up in store (BOPUS) serves as a key testament of consumers’ desire to continue to shop in stores, even while also embracing online commerce.
Home Depot and Lowe’s, among others, facilitate outsized growth of BOPUS-related sales with well-designed, content-heavy websites and in-store capabilities, such as product lockers, which make it easier for consumers to pick their items up in the store.
For instance, home furnishing brand and retailer Lovesac operates a chain of showrooms and kiosks located throughout the US. The showrooms carry virtually no “take with” product, and sales that occur within the locations are transacted via e-commerce, just as they would be if a consumer is purchasing a product online at home. The goal is to help showcase the company’s seating options and generate more profitable sales online.
Lululemon is expanding the reach of its product offering, in the US and in markets across the globe, by strategically opening new company-operated stores that can leverage e-commerce infrastructure. The stores and online capabilities work to showcase and sell expanded product offerings. This strategy is different from brands like Nike that have to dismantle wholesale partnerships to focus on e- commerce.
Five Below operates stores merchandised to serve primarily kids and teens and the adults who purchase products for them. An ongoing e-Commerce revolution is causing Five Below to continue being one of the most store focused models I know, as a result of the shift in power between landlords and retailers.
Wayfair continues to invest aggressively to develop a proprietary distribution infrastructure in order to solve overall Logistics and delivery challenges, but also is experimenting with company operated showrooms and strategic partnerships with existing physical retailers.
The Underperformance of Direct-To-Consumer Retail in the 21st Century: From Ooni to TikTok, War Paint, and Gymshark
To be clear, stores are shuttering, particularly as a larger portion of overall retail sales shift online. Black Friday online sales reached a new record of $9.12 billion, an increase of 2.3% compared to the previous year. Online sales are now Accounting for 18% of overall retail spending in the US, up from 10% 10 years ago, according to data compiled by the United States Census Bureau.
In the past decade, storied brands like meal-replacement Huel and men’s grooming company Harry’s built multibillion-dollar retail businesses by using social media and digital-first advertising to sell directly to consumers online, without the need for middlemen. These brands are examples of direct-to-consumer retail.
Many high-street stores were forced to close as a result of the global epidemic, and this trend is likely to continue. Some brands successfully navigated the transition, like outdoor pizza oven maker Ooni, whose sales exploded during lockdown, with annual revenue up from £13.7 million ($167 million) in 2019 to £52.7 million in 2020. Shoppers also adapted—around 60 percent purchased from a direct-to-consumer brand at least once in 2021.
There are many factors behind the under performance. The rebalancing of the economy, with inflation rising and squeezed supply chains, is piling the pressure on retailers. 70% of UK consumers say they’ve recently changed their shopping habits to buy cheaper brands in order to be less concerned about rising prices, according to a McKinsey report.
But other factors are at play in the recent crash of DTC brands. For instance, in 2021, Apple introduced a new transparency feature, which allowed users to opt out of app tracking, making it harder and more expensive for these brands to acquire new customers via paid social media advertising.
To adopt it, brands will need to be creative about how they tell their story on the different platforms. Consider the example of fitness apparel brand Gymshark, which in July opened a pop-up barbershop staffed with mental-health trained barbers to encourage men to open up about their problems while receiving a trim. War Paint is turning abandoned stores into showrooms for online buyers.
There is a lot of experimentation happening on social media platforms. TikTok Shopping gives her followers the ability to shop directly from her website on the platform, and is a new feature launched in partnership with Shopify. In the first quarter of 2020, orders on social media increased by more than four times.
This retail opportunity extends to YouTube. One of the UK’s popular YouTubers, named Gabriella, sells stationery to nearly 900,000 followers on her channel. United Stand, an unofficial Manchester United fan channel with 1.4 million followers, also sells merchandise to its community via YouTube and Shopify.
Source: https://www.wired.com/story/direct-to-consumer-business/
Web3-based Rewards: A Way to Connect with Consumers at the High Street, Online and off-the-wall Retail Stores (Extended Abstract)
Web3 is also creating new opportunities for brands to connect with consumers. You might even have a token or NFT in your digital wallet to unlock an exclusive offer online or a VIP experience on the high street. Starbucks is giving its customers exclusive perks with a Web3-based rewards program.