Online Brands – Don’t Be Missguided!

One of the most interesting evolutions to come out of the coronavirus pandemic is the accelerated growth of online retailing. Various analysts and commentators have comprehensively noted that lockdown has accelerated digital adoption to the tune of 5-10 years growth in the space of a few months. Although the online shopping phenomena is definitely here to stay, what is as equally as interesting is the percentage of retail shopping that has not gone online.  For example, in February 2020 the % of in-store sales stood at 80% yet in July 2020 (well beyond when the impact of lockdown was first seen), UK retail store sales still accounted for 71% of all sales (source: ONS).

A clear point emerges; one that the most switched on (and perhaps best funded) of online and retailers have already realised: online-only retailers ultimately cannot win.  No consumer is a single channel consumer, yes, they shop increasingly more online than they did before, but the vast majority of retail spend still comes from within physical stores.

To really ‘own’ their market and continue growth, the best online retailers will have to become fully agile, creating a 360 omni-channel approach.  This will include offering both physical shopping spaces and an enhanced consumer experience, whilst cross-selling and marketing across multiple digital channels.  Some thought leading brands are already on the journey; Peloton, Pure Scooters and Fenty are all in the midst of store openings; Britain’s latest unicorn Gymshark have overtly stated their aims to do the same.

Our plea to those online retailers considering their physical retail plans is simple:

don’t be Missguided!

The online fashion brand Missguided opened its first London store back in 2016 - an instagrammer’s ultimate delight!  At the time it was hailed as a prime example of the ‘future of retail,’ with a massive 20,000 square foot face designed to be big, bold, loud and picture-worthy, all whilst set in a prime Westfield London location.

Fast forward two years, and the store was closed due to generating “insufficient revenue to cover costs,” the brand posted a £49m loss in the same period.  Missguided has been forced to concede that it got physical retail wrong; too complex a structure, too many layers of management and ultimately too much cost.

Unfortunately, the Missguided experience has put a fair bit of trepidation into other online businesses considering a physical presence.  As many online retailers haven’t had the experience of running physical retail stores themselves the Missguided case study looks untenable. However, the key takeaway here for any other online or wholesale only players considering direct own brand retail is - don’t repeat the same mistakes!  Here are our top 3 things to consider when thinking about moving your online brand to the physical retailing world:

1. Really think about your real estate 

Retail has undergone seismic change and the ‘best’ locations to retail from are probably not what OR where you think they are. 

Today, the property landscape is totally different; the Westfield’s of the world are far less desirable, and phenomenally expensive, however with the right commercial strategy, and good partnerships with landlords the property terms can be much more favourably negotiated. 

Consumers are staying closer to home and want to shop locally, the traditional High St is changing, and we expect this shift to become much more permanent (source: KPMG, June 2020).  So, think about the value of urban high street locations on much shorter lease terms.

Not only would this have meant that Missguided, for the same investment, could probably have gained an impactful store presence in the top 30 cities in the UK, but would also have given much more flexibility to pivot and change if things didn’t work out. 

 2. Omnichannel is incredibly difficult 

Consumers are not simple beasts; sometimes they will want to come into your store just to have pictures taken with their mates; sometimes they’ll want to quickly buy something, sometimes they just want to pick up something they ordered online. 

The best store environments offer all the functional stuff that people need when they go to physical shops, mixed with additional modern complexities of click and collect, returns, and covid measures, yet brands still need to deliver a unique experience to cut through to consumers – it is at this point that you realise your store design and build is a complex beast. 

Don’t be misguided into thinking that 86 digital screens and 100 ‘instagrammable moments’ make a fine retail experience; on their own, they don’t! 

3. Retail used as a Marketing Tool and Showroom 

Much work has been done in recent years to appraise and understand the true value of physical retail stores, in particular by the researcher Dough Stephens.  Clearly, in an age of increasing online purchasing, the budgets and commercials of physical retail stores are harder to justify. 

If you are considering entering offline trading for the first time, start with this principle: you won’t make money – well not at first at least!  It is more important to have a holistic view of the value a retail store offers to your business; retail stores are part retail, part brand marketing and part affinity driving.  They can be used as experiential brand building tools whilst advertising and brand championing whilst additionally becoming mini fulfilment centres for online orders in and of themselves. 

Make sure the commercial model is sound going in and has a real appraisal of the value of your physical footprint. For example, we’d challenge businesses to measure the number of people that walk past, stop, and dwell at a window display (and compare that cost to sponsored digital or a TV ad impressions). Or look at the attribution of subsequent online orders that may have come from someone who first met the brand in a store. Or, introduce online fulfilment from your store backrooms to reduce the pressure and cost on warehouse picking. 

In summary, it’s a really exciting time to be an online retailer considering entering direct retail; the landscape right now favours the brave, and the commercial potential is better than it has been for decades. What is important is to construct a low risk, low commitment, low capital model that gives you the best chance of success and the maximum flexibility to adapt as you learn….and ultimately to make sure you’re not, well, misguided, like Missguided….